As part of its 2022-2027 Strategic Plan, the AcSB committed to exploring scaling the Standards in the CPA Canada Handbook – Accounting (the Handbook) for non-listed entities to better meet the financial reporting needs of entities of all sizes. As a first step in carrying out this strategic initiative, the Board released the Consultation Paper I, “Exploring Scalability in Canada,” seeking broad input and data on the current key issues and potential solutions.
In contemplating potential solutions, the AcSB considered ways that other jurisdictions around the globe introduced aspects of scalability into their financial reporting frameworks. The Board is considering whether it may leverage some of the approaches used elsewhere when exploring scaling the standards in Canada.
Australia
The accounting framework applied by entities in Australia depends on whether an entity preparing general purpose financial statements is publicly accountable.
Australian Accounting Standards (AAS) – Tier 1
Publicly accountable enterprises are required to apply Tier 1. Non-publicly accountable enterprises and most not-for-profit organizations (NFPOs) can choose between Tier 1 and Tier 2. However, some not-for-profit entities (e.g., some public sector entities) may be required by legislation to apply Tier 1. This tier is effectively International Financial Reporting Standards (IFRS Accounting Standards) as issued by the International Accounting Standards Board (IASB).
AAS – Tier 2
Non-publicly accountable enterprises and most NFPOs can apply Tier 2. This tier retains the recognition and measurement requirements of IFRS Accounting Standards but with reduced disclosure requirements. The principles for determining the reduced disclosures are similar to those used for determining the disclosures prescribed in the IFRS for SMEs Standard.
AAS – Tier 3 (currently under development)
The objective of this proposed new tier is to provide simplified accounting requirements for smaller NFPOs.
Brazil
The accounting framework entities apply in Brazil depends on the entity’s size and if the entity is a listed entity or financial institution. An entity’s size classification is based on the entity’s total assets or gross annual revenue or both.
IFRS Accounting Standards
Listed entities and financial institutions are required to apply IFRS Accounting Standards. Non-publicly accountable enterprises can choose between IFRS Accounting Standards and Brazilian generally accepted accounting principles (GAAP).
Brazilian GAAP
Non-publicly accountable enterprises can apply this framework. Since 2010, Brazilian GAAP has been fully converged with IFRS Accounting Standards.
Brazilian equivalent of IFRS for SMEs Standard
Entities classified as small to medium-sized can apply this framework. This framework is effectively IFRS for SMEs Standard with some minor modifications.
Brazilian Federal Council of Accounting’s simplified set of accounting standards (ITG 1000)
Entities classified as small and micro-sized can apply this framework. It includes some simplified recognition and measurement requirements, and relief from the mandatory preparation of the statements of cash flows, changes in equity and other comprehensive income.
Germany
The accounting framework applied by entities in Germany depends on whether an entity’s securities are traded on a regulated market.
IFRS Accounting Standards
Entities with securities traded on a regulated market are required to apply IFRS Accounting Standards.
German GAAP
Entities that do not have securities traded on a regulated market apply German GAAP. Under German GAAP, entities are classified into one of four categories based on the entity’s size: micro, small, medium or large. This classification is based on an entity’s total assets, sales and employees. Some accounting and disclosure requirements in German GAAP vary depending on which category an entity falls under.
Japan
The accounting framework applied by entities in Japan depends on whether an entity is defined by the Financial Instruments Exchange Act as a public company. Public companies are listed companies and other companies that meet certain other criteria (e.g., exceeding a certain number of shareholders). Public companies in Japan can choose between IFRS Accounting Standards, Japan’s Modified International Standards (JMIS), Japanese GAAP or U.S. GAAP. Other stock corporations can choose between Japanese GAAP, the Guideline for the Accounting of SMEs, or the Accounting Guide for SMEs. Stock corporations above certain size thresholds are required to be audited, and it is customary for stock corporations subject to a financial statement audit to apply Japanese GAAP.
IFRS Accounting Standards
IFRS Accounting Standards as issued by the IASB.
Japan’s Modified International Standards
JMIS is essentially IFRS Accounting Standards with two targeted Modification Standards. The targeted Modification Standards are ASBJ Modification Standard No.1, Accounting for Goodwill and ASBJ Modification Standard No.2, Accounting for Other Comprehensive Income.
Japanese GAAP
This framework is Japan’s set of domestic standards. The Accounting Standards Board of Japan is working toward converging Japanese GAAP and IFRS Accounting Standards.
U.S. GAAP
This framework is U.S GAAP as issued by the Financial Accounting Standards Board (FASB).
Guideline for the Accounting of SMEs
This framework is a simplified version of Japanese GAAP.
Accounting Guide for SMEs
This framework prescribes guidance that is aligned with the Japanese Tax Code.
The Netherlands
The accounting framework applied by entities in the Netherlands depends on the entity’s size classification and if the entity is listed. The size classification is based on the entity’s revenue, total assets and employees.
IFRS-EU (including some parts of the Dutch Civil Code elaborated in the Dutch Accounting Standards for medium a nd large legal entities)
Listed entities are required to apply IFRS Accounting Standards. Non-listed entities can choose between IFRS Accounting Standards and another framework, subject to meeting certain size thresholds.
Dutch Accounting Standards for medium and large legal entities
Non-listed entities classified as medium and large can apply this framework. Entities classified as micro and small can choose to apply this framework.
Dutch Accounting Standards for micro and small legal entities
Non-listed entities classified as micro and small can choose to apply this framework.
Book 2 of the Dutch Civil Code combined with fiscal valuations principles
Non-listed entities classified as micro and small can choose to apply this framework.
New Zealand
The Statutory Financial Reporting Framework in New Zealand sets out which entities have a statutory requirement to apply the standards issued by the External Reporting Board. The framework that entities with statutory reporting requirements apply depends on a few factors, including whether the entity is :
- classified as a for-profit or a public benefit entity (PBE);
- considered to have public accountability; and
- classified as a large entity (based on the entity’s total expenses).
Entities are presumed to apply Tier 1 unless they elect to apply another tier.
Accounting tiers for for-profit entities
Tier 1 – NZ IFRS
Applicable to entities that have public accountability or are large public sector entities.
Tier 2 – NZ IFRS reduced disclosure regime
Applicable to entities that do not have public accountability and are not large public sector entities.
Accounting tiers for PBEs
Tier 1 – PBE standards
Applicable to PBEs that have public accountability or are large. This framework is primarily based on International Public Sector Accounting Standards.
Tier 2 – PBE standards reduced disclosure regime
Applicable to PBEs that do not have public accountability, are not classified as large and have total expenses greater than a stated threshold.
Tier 3 – PBE simple format reporting standard – accrual
Applicable to entities that do not have public accountability and have total expenses less than or equal to a stated threshold.
Tier 4 – PBE simple format reporting standard – cash
Applicable to entities that do not have public accountability and are permitted by law to report on a non-GAAP (i.e., cash) basis.
South Korea
The accounting framework applied by entities in South Korea depends on whether an entity is publicly listed and whether its financial statements are required to be audited. The requirement for an entity to be audited is based on the following size thresholds: total assets, total liabilities, revenue and employees.
K-IFRS
Listed entities and financial institutions are required to apply IFRS Accounting Standards as issued by the IASB. Unlisted companies that are required to be audited can choose between K-IFRS and Accounting Standards for Non-public Entities.
Accounting Standards for Non-Public Entities
Unlisted companies that are required to be audited can apply this framework.
SMEs Standard
Unlisted companies that are not required to be audited can apply this framework. The Commercial Act mandates the Minister of Justice set these standards in consultation with the Minister of SMEs and Startups and the Financial Services Commission.
Accounting Standards for Public Service Corporations
NFPOs that are defined by the Inheritance Tax and Gift Tax Act as Public Service Corporations are required to apply this framework. The Inheritance Tax and Gift Tax Act mandates the Minister of Economy and Finance to set these standards.
United Kingdom
The accounting framework applied by entities in the United Kingdom depends on several factors, including the type of financial statements (i.e., individual or group), size thresholds and entity type.
Adopted IFRS
Publicly listed companies are required to apply Adopted IFRS in the preparation of their group financial statements but may choose between Adopted IFRS and UK and Ireland GAAP for the preparation of their individual parent financial statements. Unlisted entities can choose to apply Adopted IFRS.
Financial Reporting Standard (FRS) 101, Reduced Disclosure Framework
Entities have the option to apply this framework to a member of a consolidated group, including the ultimate parent, where the parent prepares publicly available consolidated financial statements that are intended to give a true and fair view. Some types of entities, such as charities, are not eligible to apply this framework.
This framework includes recognition and measurement requirements of IFRS Accounting Standards, but with certain disclosure exemptions.
FRS 102, Financial Reporting Standards applicable in the UK and Republic of Ireland
This IFRS Accounting Standards –based framework applies to general purpose financial statements and financial reporting of entities including those that are not constituted as companies and those that are not-for-profit.
Paragraphs 1.8-1.13 of FRS 102, Reduced Disclosures
Entities have the option to apply this framework to a member of a consolidated group, including the ultimate parent, where the parent prepares publicly available consolidated financial statements that are intended to give a true and fair view.
This framework includes recognition and measurement requirements of FRS 102, but with certain disclosure exemptions.
FRS 102 – Section 1A Small Entities
This framework is applicable to entities that do not exceed certain size thresholds in terms of revenue, total assets and employees. Public companies and financial institutions are not eligible to apply this framework.
This framework includes recognition and measurement requirements that are generally the same as those set out in FRS 102. However, only the balance sheet and profit-and-loss statement are required (i.e., statement of changes in equity and cash flow statement are not required). There are only a limited number of mandatory disclosures. Judgment must be applied to determine what additional disclosures are necessary to provide a true and fair view.
FRS 105, The Financial Reporting Standard Applicable to the Micro-entities Regime
This framework is applicable to entities that do not exceed certain size thresholds in terms of revenue, total assets and employees. Some types of entities, such as charities and financial institutions, are not eligible to apply this framework.
This framework includes simplified recognition and measurement requirements (e.g., no assets remeasured at fair value and no deferred tax recognized). There are only a small number of mandatory disclosures, and a true and fair view is presumed for micro-entities that meet these requirements. Only the balance sheet and profit-and-loss statement are required under this framework (i.e., statement of changes in equity and cash flow statement are not required).