New accounting standards will have no direct impact on individuals
While accountants and businesses scramble to put together a plan for converting their financial accounting systems and statements from Canadian Generally Accepted Accounting Principles (GAAP) to the new International Financial Reporting Standards (IFRS), the good news is that IFRS shouldn't impact your personal tax situation -- at least not directly. IFRS is basically a set of accounting rules and principles designed to provide guidance to accountants and others to prepare financial statements. "There are not that many direct implications for individuals since individuals don't have personal financial statements with respect to themselves," said Stan Maj, a tax partner in the financial services group at Ernst and Young LLP in Toronto. However, IFRS might have an impact on public companies that will have to begin following International Accounting Standard 12 (IAS 12) on Income Taxes for fiscal periods beginning Jan. 1, 2011.
While IAS 12 is similar to current Canadian GAAP, the International Accounting Standards Board released an exposure draft on income tax in March 2009 that would effectively replace IAS 12. Included are proposals on the treatment of uncertain tax amounts, which might have an impact on how corporate taxes will be disclosed on financial statements. If the draft is adopted, financial statements would be expected to reflect a probability-weighted average of all possible outcomes under the assumption that the tax authority (i. e. the Canada Revenue Agency) has "full knowledge of all relevant information." "The [corporate] veil is being lifted more than it currently is," Mr. Maj said. "The transition to IFRS is more than a technical accounting exercise -- it's a major change-management project that will take some focus, planning and advice to prepare for."