Difference in US GAAP and Canadian GAAP

Summary

This video compares the differences between U.S. GAAP and Canadian GAAP, highlighting key areas such as financial reporting frameworks, asset and liability measurement, revenue recognition, and inventory valuation. It emphasizes the ongoing convergence of Canadian GAAP with IFRS, reducing historical differences with U.S. GAAP. Key points also include sector-specific guidance and disclosure requirements, with a focus on how governmental accounting standards differ between the two countries. The video offers insights into the evolving nature of accounting standards in both countries, aiming for more global harmonization.

Takeaways

• 😀 U.S. GAAP and Canadian GAAP share similarities but have notable differences due to their different foundational frameworks.
• 😀 U.S. GAAP is issued by the Financial Accounting Standards Board (FASB), while Canadian GAAP is based on standards from the Accounting Standards Board (AcSB).
• 😀 Canada has been transitioning toward International Financial Reporting Standards (IFRS), which has led to a convergence of Canadian GAAP with global standards.
• 😀 One major difference is the revaluation of assets. Canadian GAAP allows revaluation of property, plant, and equipment to fair value, but U.S. GAAP generally does not permit this.
• 😀 Revenue recognition criteria have historically differed between U.S. GAAP and Canadian GAAP, but efforts have been made to align them, especially with the adoption of IFRS in Canada.
• 😀 Inventory valuation differs between the two: Canadian GAAP allowed the Last In, First Out (LIFO) method, while U.S. GAAP prohibits it.
• 😀 There are differences in governmental accounting standards between the U.S. and Canada.
• 😀 Each framework provides sector-specific guidance, which may vary based on industry practices and regulatory requirements in each country.
• 😀 There are differences in the specific disclosures required in financial statements under U.S. GAAP and Canadian GAAP.
• 😀 The convergence of Canadian GAAP with IFRS has helped reduce some of the historical differences with U.S. GAAP, aligning Canadian standards more closely with global accounting norms.

Q & A

What is the primary difference between US GAAP and Canadian GAAP?

The primary difference lies in the frameworks they follow. US GAAP is issued by the Financial Accounting Standards Board (FASB), while Canadian GAAP is primarily based on standards from the Accounting Standards Board (AcSB) of the Canadian Institute of Chartered Accountants (CICA). Additionally, Canada is transitioning towards adopting IFRS, which is different from US GAAP.

How has the transition to IFRS affected Canadian GAAP?

The transition to IFRS has significantly converged Canadian GAAP with IFRS, aligning Canada’s accounting standards more closely with global standards. This convergence has reduced some of the historical differences between US GAAP and Canadian GAAP.

How do US GAAP and Canadian GAAP differ in the measurement of assets and liabilities?

A notable difference is that Canadian GAAP traditionally allowed the revaluation of property, plant, and equipment to fair value, whereas US GAAP generally does not permit such revaluation.

What is the historical difference in revenue recognition under US GAAP and Canadian GAAP?

US GAAP and Canadian GAAP historically had different criteria for revenue recognition. However, efforts have been made to converge both frameworks towards a unified approach, especially with Canada's adoption of IFRS.

How does inventory valuation differ between US GAAP and Canadian GAAP?

Under Canadian GAAP, the **Last In, First Out (LIFO)** inventory valuation method was historically allowed. However, LIFO is prohibited under US GAAP.

Are there differences in the accounting standards for governmental entities between the US and Canada?

Yes, there are differences in the accounting standards applied to governmental entities in the US and Canada.

What role does sector-specific guidance play in US GAAP and Canadian GAAP?

Both frameworks provide sector-specific guidance that may differ depending on industry practices and regulatory requirements within each country.

Do the disclosure requirements in financial statements differ between US GAAP and Canadian GAAP?

Yes, there are differences in the specific disclosures required in financial statements under each framework.

Why is the convergence of Canadian GAAP with IFRS significant?

The convergence of Canadian GAAP with IFRS is significant because it aims to harmonize Canada’s accounting standards with global standards, reducing historical differences with US GAAP and providing a more unified global accounting framework.

What is the future outlook for the differences between US GAAP and Canadian GAAP?

With the continued convergence of Canadian GAAP with IFRS, the historical differences between US GAAP and Canadian GAAP are expected to further diminish, making both frameworks more aligned in the future.