Compare the Difference between IFRS and Canadian GAAP

Property, Plant and Equipment and Investment Property: IFRS vs. Canadian GAAP

Introduction

This paper is focus on one different area of Canadian GAAP and IFRS. The selected area is Property, Plant and Equipment and Investment Property in IFRS vs. Canadian GAAP.

As an international business participant is likely that we can compare financial position to the competitors, as well as facing other necessary problem that needed to solve. Accounting system is varying with countries. Although there are signs of integrating accounting standards which you encounter great differences between accounting requirements from the illustrations based on the different cultural legal and accounting background of the countries. Moreover the above concept is not enough to recognize that there are differences between reports to accounting system. First you have to understand the root or uses of different accounting principle. They are closely related to certain business practices used in a particular country. At the same time analyze formal differences and substantial differences in the content as well. In this particular article, to concise the kind of differences you have to face when analyzing financial reports of companies registered in different countries. It has to work according to the law guiding the affairs of the financial companies of that country or according to the requirements of IFRS (International Financial Reporting Standards) (International Accounting Standards, 12-19).

Property, Plant and Equipment and Investment Property in IFRS vs. Canadian GAAP

International Accounting Standard (IAS) 16, Property, Plant and Equipment, allows an entity to select its accounting policy for Property, Plant and Equipment (PP&E) from two alternate subsequent measurement attributes: the cost model and the revaluation model. The cost model approach is based on the historical cost model as adjusted for depreciation and impairment. Although this overall approach is similar to Canadian GAAP, the way in which depreciation and impairment are calculated differs significantly. The revaluation model allows entities to carry PP&E at fair value. Changes in fair value are recognized in equity (to the extent not previously recognized in the income statement), and subsequent depreciation is charged to the income statement. If an item is of PP&E is revalued, the entire class of assets to which that asset belongs should also be revalued. The revaluation model is clearly prohibited by Canadian GAAP(International Accounting Standards, 12-19)..

Canadian GAAP does not provide specific provisions regarding investment property. On the other hand, IFRS have a standard dedicated to investment property, IAS 41, Investment Property. This Standard allows IFRS preparers to use the “full fair value model,” with all changes in fair value entirely recognized in the income statement.

Under IFRS the general principle that is valid for initial measurement and recognition of PP&E and investment property is applicable to subsequent expenditures as well. In particular, if under the general recognition principle an entity recognizes in the carrying amount of an item of PP&E the cost of a replacement for part of the item (e.g., replacing the interior walls of a building), it should derecognize the carrying amount of the replaced ...