International Financial Reporting Standards
International Financial Reporting Standards (‘IFRSs’) is the set of reporting standards, which have been adopted by the Institute of Chartered Accountants of Barbados as the local Generally Accepted Accounting Principles.
IFRSs are seen as a single set of high quality, understandable and enforceable global principles-based standards.
Currently over 100 countries use or permit IFRS or a variant of IFRS either for statutory or reporting purposes by publicly listed companies or publicly accountable entities. In addition to this, many other countries are transitioning to a predominant IFRS framework in the near future (this process is expected to continue onwards to 2015) such as Argentina, Brazil, Chile, India, Japan and Korea.
Currently, the US Financial Accounting Standards Board (‘FASB’) and the International Accounting Standards Board (‘IASB’) are working towards a common objective. This objective is to pursue the convergence of US GAAP and IFRS to further promote a single set of globally accepted accounting standards.
As such, it is evident that IFRSs are the “way of the future” and in time it is expected that they will be fully adopted throughout the world. It is seen as a positive that Barbados has already adopted these standards.
Note that the International Accounting Standards Board (IASB) currently has projects under way which will have an impact on all companies which have either adopted IFRS or will be adopting in the future. Some of these projects involve changes to current standards, while others will result in the issuing of a new standard.
IFRS for Small and Medium Sized Entities (‘SMEs’)
IFRS for SMEs was issued by the IASB on July 9, 2009. It is a self-contained set of standards, incorporating accounting principles that are based on full IFRSs but that have been simplified to suit the entities within its scope. These new set of standards are applicable to small and medium sized entities which have no public accountability. It is up to individual jurisdictions to determine which entities will be allowed to use this particular set of standards.
The Institute of Chartered Accountants of Barbados has formally adopted these standards for use by companies as applicable to their circumstances. Many entities have taken advantage of this and opted to use these simplified standards.
All entities doing business in Barbados do not use IFRSs. For various reasons, many entities registered in Barbados report in accordance with another set of standards. More common ones are Canadian, UK, or US Generally Accepted Accounting Principles. In such cases, the local subsidiary is usually applying the same reporting framework as its parent company to allow for easier consolidation of results at the head office level.
However, as was noted earlier, more countries are moving towards a predominant IFRS framework and as such, in the future it is expected that all companies will be using IFRS or some variant of it.
Canadian Publicly Accountable Entities
It is now mandatory for all Canadian publicly accountable enterprises to use IFRS.
For most Canadian publicly accountable enterprises, January 1, 2010 began the transition year in their move to this new accounting language. An IFRS opening balance sheet was required to be prepared as at January 1, 2010, with December 31, 2010 being the last date for which Canadian GAAP financial statements could be prepared. The first annual financial statements in accordance with IFRS were required to be prepared as at December 31, 2011. The first interim IFRS financial statements with comparatives were required to be prepared for Q1 2011.
Canadian Private Entities
On December 15, 2009, the Canadian Accounting Standards Board released the final version of the Accounting Standards for Private Enterprises (‘AsPE’). These were effective for fiscal periods beginning on or after January 1, 2011, with earlier adoption permitted.
Currently there are no plans to adopt IFRS for SMEs in Canada in the foreseeable future and as such the AsPE which are based on existing Canadian GAAP, represent the “made in Canadaâ€ solution to provide a set of simplified accounting standards which can be used by private for profit enterprises. There is no size test for these standards and as such they can be applied by all private enterprises once they have no public accountability.
Upon the introduction of these standards, which were effective no later than for periods beginning on or after January 1, 2011, Canadian private enterprises that produced general purpose financial statements needed to make the decision on whether they adopted the AsPE or IFRS.
Based on the above events, entities operating in Barbados which are subsidiaries of Canadian entities saw a change in the applicable reporting framework.