Stephen Warden, CPA, CA
Public Company Group &
Private Capital Markets
Association of Canada
As we grow wiser, we tend to see more grey
in two places: the mirror, and the world around us.
As your enterprise evolves, you would be wise
to recognize that there is plenty of grey in the criteria
to be used when deciding whether you should report
as a private company or a publicly accountable
Like life itself perhaps, it seems like it used to
be more black and white. That’s because it was,
at least before 2011. That’s when the Chartered
Professional Accountants of Canada adopted the
International Financial Reporting Standard (IFRS). It
doesn’t draw lines in the sand as much as it points
you to a qualified auditor for advice because it
demands a lot more professional judgment.
Yes, it has been a few years that this has been
in place. But I still meet sophisticated business
leaders who are under the impression that you need
only have more than 150 unit holders/shareholders
to be considered a public company for financial
For income tax purposes, that may be true in
some cases. Ditto for mutual fund trusts, which
have a similar “bright line” for establishing eligibility
for investment by registered accounts.
But for financial reporting purposes, there is
no one simple dividing line. Many people default to
using the 150-unit holder level as a proxy. But like
most assumptions – in a grey world – it is fraught
with risk and differing views.
If you’re wrong, you can be on the wrong side
of regulators. And in a hyper competitive world,
damage to your reputation can make the difference
between success and failure, which of course isn’t
a gray area at all.
Deciding whether to follow the IFRS for publicly
accountable entities, or Accounting Stands for Private
Entities (ASPE), can be a big deal for another reason.
Corner: New IFRS
For many private investment funds, under IFRS
they will apply fair value accounting (and related
disclosures) for their investments. Under ASPE,
they can account for investments at cost which can
be a big deal if there are subsidiaries or affiliates
which need not be consolidated, for example.
In the IFRS
under NI 45-106
By Stephen Warden