A manager of a medium-sized private company recently asked for your advice on the following: I’m very confused about whether I should continue to ...

A manager of a medium-sized private company recently asked for your advice on the following:
I’m very confused about whether I should continue to use ASPE or change to IFRS. I need to make a recommendation to the Board next week on what we should do. Our bank is a Canadian one and we have a debt-to-equity ratio. Our two major competitors in the market place are public companies. We have no desire to go public in the near future, but the owners have been talking about possibly selling the business within the next five years.

Required:

Respond to the manager’s concern, and be sure to provide support for both sides and a recommendation.

Expert Solution

The CPA Canada Handbook cites the objectives of general purpose financial statements as:

... to provide financial information ... that is useful to present and potential equity investors, lenders and other creditors in making decisions in their capacity as capital providers. Information that is decision-useful to capital providers may also be useful to other users of financial reporting who are not capital providers.

These objectives are very broad and applications of accounting standards can still be affected by the entity-specific objectives of financial reporting. The objectives of a private and public company can be different since private companies may have a more limited group of users and may be more interested in minimizing income taxes. However a large private compnay may have the same objectives as a public company. A summary follows:

Junaid answered 1 year ago

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