Sec. 2.4 – Accounting Standards This Photo by Unknown Author is licensed under CC BY

GAAP – IFRS - APSE - Canadian Institute of Chartered Accountants (CICA) has historically established the standards for Canadian accountants - The Canadian Generally Accepted Accounting Principles (Canadian GAAP) - In recent times, the International Financial Reporting Standards (IFRS) has moved Canadian accounting to international standards to help Canadian businesses communicate globally. Over 100 countries are a part of IFRS - IFRS governs public enterprises while Accounting Standards for Private Enterprises (APSE) governs private businesses

Business Entity Concept A long-standing principle that keeps the accounting for a business organization separate from the personal affairs of its owner, or from any other business or organization This means that the owner of the business should not place any personal assets, such as family home or cottage, personal automobile on the business balance sheet This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA

Cost Principle Requires that accountants record the value of assets at their historical cost price We should not be concerned about the current market value This Photo by Unknown Author is licensed under CC BY-NC-ND

Continuing Concern Concept Assumes that a business will continue to operate unless it is known that it will not This assumption frees the reader of a balance sheet from worrying about the market values of assets and whether debts will have to be paid before they are due

Revaluation Model Contained with IFRS allows for modifications to the cost principle It outlines an accounting procedure that allows accountants to change the value of particular assets based on market conditions This Photo by Unknown Author is licensed under CC BY

Classified Balance Sheet (APSE) Current Assets Current Liabilities Long-Term Assets Long-Term Liabilities Equity

Statement of Financial Position (IFRS) Long-Term Assets Equity Current Assets Long-Term Liabilities Current Liabilities

Why Statement of Financial Position? On the Asset side, the inverted order reflects an emphasis on the long-term productive assets of a business, such as property, buildings, and equipment On the right side, the order stresses the sources of the funds that were used to purchase the assets. The sources of funds begins with the owner(s), followed by the creditors Most private businesses in Canada choose APSE rather than IFRS If you see a Statement of Financial Position, you are likely looking at the financial position of a public company

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