Describing the Basis of Accounting

Each Part of the CPA Handbook represents a form of Canadian GAAP.  In order to distinguish between the various Parts of the CPA Handbook paragraph 1400.16 requires an enterprise following Part II of the CPA Handbook to state that the financial statements have been prepared in accordance with Canadian accounting standards for private enterprises (ASPE).

However, an enterprise may wish to refer to Canadian GAAP to meet contractual or legislative requirements. Therefore, in addition to stating that the financial statements have been prepared in accordance with ASPE, an enterprise may make an additional statement that the financial statements have also been prepared in accordance with Canadian GAAP but there is no requirement to do so.

Enterprises that wish to refer to Canadian GAAP must do so in a manner that clearly sets out the relationship between Canadian GAAP and the ASPE. For example, stating that the statements have been “prepared in accordance with Canadian GAAP and ASPE” may be confusing as it implies that the two are separate bases of accounting, when in fact they are not.

ASPE does not prescribe specific language with respect to the basis of presentation disclosure. The following are examples of acceptable disclosure; other wordings may be equally acceptable:

Illustration of ASPE as the basis of presentation:

These financial statements have been prepared in accordance with Canadian accounting standards for private enterprises.

Illustration of a separate reference to Canadian GAAP as the basis of presentation:

These financial statements have been prepared in accordance with Canadian accounting standards for private enterprises. Canadian accounting standards for private enterprises are part of Canadian GAAP.