Posted by & filed under Accounting Principles, Fraud Accounting, IFRS.

Canada is in the midst of a seismic shift in accounting standards— one that will tie the country more tightly to international commerce, but might also result in investors being taken for a ride. Starting this year, Canadian public companies will issue financial statements using international financial reporting standards (IFRS) instead of the generally accepted accounting principles (GAAP) that have been in place for decades.

 Many countries have unique accounting standards that are difficult to reconcile. In part to remedy this, the European Union began to implement IFRS to harmonize reporting among member countries.

 (The U.S., meanwhile, is incorporating aspects of the international standards over the next few years, but wholesale adoption is still in debate.)

The primary benefit of a common set of accounting principles is the increased comparability between companies around the world, which ultimately reduces the cost of capital. “If you want to operate in a global economy, then having unique standards will not find favour,” he says. Or so the argument goes. “This is a matter of tight rules versus shitty rules,” argues Toronto based forensic accountant Al Rosen. IFRS is a major step back from Canadian GAAP, he says, and will permit unethical managers to hide, massage and choose numbers to make their companies look good. “This is a Ponzi scheme in progress,” he says. Investors, who are supposed to benefit through increased comparability, could end up the victims of unfair accounting. A key difference under IFRS is that managers have more choice in how they report certain information.

Take revenue recognition. Canadian accounting standards had stringent criteria around when and how a company could record revenue on goods and services. Under IFRS, the guidelines are more vague, potentially permitting unscrupulous managers to pump up revenue or mask bad debt.

Al Rosen is also fuming about related-party transactions. IFRS does away with fair market valuation of self-dealings—for instance, if a private company owned by a couple of executives sells an asset to the public company employing them—meaning investors have little to no assurance the goods and services are transacted at legitimate prices.

Supporters of IFRS will agree there is more leeway in reporting in some areas, but trust auditors to exercise their professional judgment to prevent accounting shenanigans from occurring.

 The areas in which IFRS allow for greater choice reflect a more complex business world in which no two transactions are exactly alike.  Managers will have to justify their accounting decisions in financial statements under IFRS, as well, giving investors more information to chew over. In some cases, these disclosures are more rigorous than what existed under Canadian GAAP.

Ron Salole, a director of the AcSB argues no standards, however stringent, will stop unethical executives from manipulating financial statements. In any event, there is no turning back,

Discussion Questions:

  1. Do you think with IFRS we are back to where we started from: will financial  manipulation ever end?
  2. Should each country have kept their own individual country GAAP and not embark with common IFRS rules?
  3. In the end, do you agree that no standards will stop unethical behaviour?

 For more information , read the Canadian Business Magazine article by Joe Castaldo “accounting for trouble? As Canada moves from GAAP to IFRS, some see it as a licence to swindle

Posted by & filed under Accounting Careers, Taxation & Planning.

Accountants are always keeping up to date on tax related issues.


Here are a few tax planning ideas to consider before 2010  and changes for 2011:

1.Federal Small business rate remains at 11% for Federal tax purposes

2.New Avoidance Transaction rules, must be reported after 2010.

3.Quebec Sales Tax Rate: Increasing from 7.5% to 8.5% on January 1, 2011 and to 9.5% on January 1, 2012.

Financial Statement Reporting:

  1. “Publicly accountable enterprises” must adopt International Financial Reporting Standards (IFRS)
  2. Private Enterprises, must either adopt IFRS or “Accounting Standards for Private Enterprises”  (ASPE).

Owner Managed Business:

  1. Salaries to family members: accrue a reasonable salary to a spouse or child who is in a lower tax bracket.
  2. Consider maximizing discretionary deductions such as Capital Cost Allowance (CCA)
  3. Mandatory e-filing of corporate tax returns if annual gross revenue exceed $1 million.
  4. Exemption for qualified small business corporation shares is $750,000.


Environmental Incentives:

  1. Be aware that Federal and Provincial environmental incentives are available for your company to help you go green and save money.


  1. Education and textbook tax credits- Claim these credits if you attend post-secondary school.
  2. Scholarships: Exclude from income the full scholarship but be aware that new rules pertaining to post-secondary scholarships, fellowships and bursaries commence in 2010.
  3. Unused and unclaimed tax credits may be transferred to your parents, spouse or grandparents.

 Tax planning is an important component of what an Accountant does, most accountants make it a career to specialize in taxation, which is definitely a rewarding endeavour.

Discussion Questions:

  1. In Quebec PST increases from 7.5% to 8.5% on Jan. 1, 2010, what tax planning feature should you be considering?
  2. In your opinion why do governments provide Tax Incentives?
  3. Why is tax knowledge important to you as an Accountant?


For more information visit PricewaterHouseCoopers: where more information is provided on numerous topics

Link to Year-End Tax Planning-2010: from PWC


Posted by & filed under Accounting Careers, Advanced Accounting, Auditing, Financial Accounting, Fraud Accounting, IFRS.

Audit Committee Evolving Issues  focuses on communicating to

stakeholders about the impact of adopting IFRS.

Today’s changing business and economic conditions

provide an opportunity for the audit committee to reassess its priorities and

refocus its agenda. The purpose of the Audit Committee is to strengthen the integrity of the financial reporting process and the quality of the corporate governance process.

When considering their 2010 agendas, audit committees should consider at least the following:

1. The challenges of the economic downturn (access to capital, cash flow,

liquidity, counterparty risks, impairments, etc.) have dominated audit

committee agendas.

2. Understand how the changeover to IFRS will affect the organization and

its stakeholders, and remember that the board and the compensation

committee must also understand the implications of this change. Closely

monitor the enterprise’s progress in its conversion plan and whether work

needs to be accelerated to meet key milestones.

3. Many companies have engaged in cost cutting as the economy declined.

Every board and audit committee should now be asking whether the

company’s delivery model has been changed permanently, and whether a

‘cost-reduced’ business model can be sustained. Did we cut too much?

What are the implications for our IFRS conversion project? How quickly

can we restore critical infrastructure such as IT and sales force? How far

have we extended the organization through outsourcing and offshoring?

 4. The tremendous focus on risk today provides an opportunity for the board

to reassess the oversight role of the audit committee, the full board, and

the other standing committees such as the risk committee. Does the

audit committee have the expertise and time to deal with strategic,

operational, and other risks?

5. Be vigilant. The economic downturn has placed tremendous pressure on

management to achieve operating results; at the same time, cost cutting

and workforce reductions have exacerbated the pressure on these

programs. How has the company treated its employees? How do they

think they have been treated? A comprehensive review of the company’s

anti-fraud and compliance programs may be in order. The right tone at the

top and throughout the organization is critical.

Discussion Questions:

  1. Do you think that Audit Committees have the time to manage all of the above complex issues?
  2. What required expertise should  Audit Committee members have proficiency in?
  3. In your opinion who is often elected to be member of an Audit Committee?


To read more visit: KPMG LLP

Posted by & filed under Accounting Careers, Canadian Economy, Fraud Accounting, Managerial Accounting.

Have you ever wondered what is the fundamental purpose of a Corporation: You are correct in assuming “To Make a Profit”. Henry Ford once said ” A Business that makes nothing but money is a poor kind of business”. Let us put ourselves into perspective and see what we are referring to.

Looking back a few years ago, the financial turmoil caused our most senior world leaders to rethink the fundamentals of our financial system. BP’s deep water drilling off the coast of Mexico caused the death of 11 oil rig workers and untold damages to our environment and ecosystem.

Assessing Risk:

When we think of Risk assessment, we often think of the internal controls to prevent and detect fraud. We should also consider the Operational Risk. In the BP scenario, what safety procedures were in place to avert a disaster, in the financial markets what processes are in place to ensure that a second financial meltdown does not occur,again.

What processes are in place to ensure that another European Country does not fall into financial difficulty, similar to Greece. If we look into Agricultural, how do we ensure that our Corporations that mass produce our food, will have enough water to irrigate their crops? What process is in place to ensure that our Cities will survive and continue to have enough energy to warm or cool our homes?

Our Present Culture:

Focuses on legal compliance rather than safety, we seem to follow the rules and respect the government policies, but as we can see we are having more and more problems with our food source, where products are recalled  for Listeria or other deadly diseases. We live in a fast paced world where there is little room for complacency, the reality is that in a rapidly changing environment the profile of Risk also changes.

What Should we Look Forward to?

We cannot eliminate Risk and it would not be practical to do so, but we can change our business culture. We should no longer consider making large sums of money at the detriment of our environment and society. We should consider putting in place Risk assessment programs, that ensure sustainability of our resources, protection of our waters and to be forward looking to adapt and manage developing risks.

Discussion Questions:

1. Do you think the time has come to rethink,” Corporate Profits at any Cost”

2. From this article, if a culture of Risk Assessment was put in place, “Could we have avoided the BP disaster”

3. Using a Risk Assessment approach, should we continue to drill in deep waters?

Read more on Risk: upload the At Risk magazine from KPMG Fall 2010 issue

Visit Canadian Business Dec. 6, 2010 issue : Read the opinion from Steve Maich “What BP and Lehman Bros. have in common”


Posted by & filed under Accounting Careers, Auditing, Corporate Restructuring, Financial Statement Analysis, International Accounting.

General Motors started trading on the Toronto Stock Exchange on Thursday, a day after its IPO raised US$20 billion. From a starting price of US$33 a share it rose as high as $35.95 in intraday trading before settling at $34.01. It closed at $34.19 on the New York Stock Exchange, a gain of 3.61% in its first day, where 456,071,375 shares changed hands.


The process taken by management was to:

 1. Reduce labour rates and reduce the labour force

2. Shut down non productive manufacturing plants

3. Reduce the number of products

4. Reduce dealerships

5. Increase incentives to purchase a GM vehicle

6. Eliminate Leasing

GM video link:

Discussion Questions:

1. How many shares would you have to own to have “Significance Influence”?

2. Do you think GM stock will increase to $60 per share in a years’ time?

3. What steps would you have taken to turn GM around , from bankruptcy to a successful company?

Posted by & filed under Canadian Economy, Corporate Restructuring, Financial Accounting, Financial Statement Analysis.

What is an IPO?

An initial public offering, or IPO, is the first sale of a corporation’s common shares to investors on a public stock exchange. The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, being listed on a stock exchange comes with heavy regulatory compliance and reporting requirements.

The term IPO only refers to the first public issuance of a company’s shares. It assumes a company is big enough, successful enough, and has the required track record to raise capital in the public equity market. If a company later sells newly issued shares again to the market, it is called a seasoned equity offering. When a shareholder sells shares, it is called a secondary offering and the shareholder, not the company that originally issued the shares, retains the proceeds of the offering. These terms are often confused and only a company which issues shares can make a primary offering or IPO. Secondary offerings occur on the secondary market, where shareholders (not the issuing company) buy and sell shares from and to each other.

General Motors executives are playing up three bright spots in the company’s future as they try to persuade investors to buy GM stock: a better lineup of cars and trucks, potential for global growth and a new cost structure that enables the company to make money even when the economy dips.

GM emerged from a government-organized bankrupcty just 16 months ago, the re-organization has erased debt and lowered labor costs. The re-organization has left the old stockholders with nothing.

Today GM is owned by both the Canadian and US govenment, the total IPO being presently issued by GM is $10 billion, demand is so hight that brokers have taken orders for as much as $60 billion US worth of shares.

Discussion Questions:

1. Do your own research on IPO’s, why is there such a demand?

2. Due to the hight demand, do you think GM will increase the IPO to $60 billion?

3. Why do you think the GM shares are in such high demand?

 Find out More!

GM IPO 6 times oversubscribed: reports

Reasons to sit out GM’s initial stock offering

Posted by & filed under Accounting Careers, Uncategorized.

Walmart CEO SalaryIn the past 12 years, there’s been a 444 per cent salary increase for Canada’s top CEOs. The top 10 earners collected a total of $60.7 million in 1995—by 2007, that number had jumped to $330.3 million. For example, Paul Desmarais, CEO of  Power Corp, made more than $5 million in 1995; in 2007, his take-home was more than $29 million. 

Here’s a breakdown of the take-home pay the top  10 of Canada’s top CEOs—in 1995 and in 2007. Read ‘em and weep. 

2007, total take home for the year: 

  1. Michael Lazaridis, Research in Motion Ltd. $51, 515, 518
  2. Gordon Nixon, Royal Bank of Canada. $44, 270, 084
  3. Robert A. Milton, ACE Aviation Holdings Inc. $42, 928, 122
  4. James Balsillie, Research in Motion Ltd., $32, 053, 959
  5. Paul Desmarais Jr., Power Corp. of Canada. $29, 292, 829
  6. Andre Desmarais, Power Corp. of Canada. $28, 675, 763
  7. Bruce Flatt, Brookfield Asset Management Inc. $27, 164, 707
  8. J.M. Lipton, Nova Chemicals Corp. $25, 639, 972
  9. Raymond McFeerors, Great-West Lifeco Inc. $24, 759, 648
  10. William Doyle, Potash Corp. of Saskatchewan. $24, 020, 161

The Canadian Centre for Policy Alternatives reports that amidst the worldwide recession, Canada’s top 100 CEOs were paid an average of $7.3 million in 2008. 

Walmart CEO Pay: More in an Hour Than Workers Get All Year?

Read more: See the Digital Journal 

Walmart CEO Salary

Discussion Questions:

1. Should CEO’s be earnings such high salaries?

2. Would you consider being a CEO?

3. Why do you suppose, CEO’s earn such lucrative compensation packages?

Posted by & filed under Financial Reporting and Analysis, Financial Statement Analysis, Uncategorized.

Students and investors wishing to know more about our Canadian Public companies, should know about the SEDAR web site. Financial information is provided , such as:

1. Annual Financial statements  issued quarterly and year end

2.MD&A ( Management Discussion and Analysis reports)

3. Press Releases,  provide the most recent and up-to-date corporate disclosures is the official site that provides access to most public securities documents and information filed by public companies and investment funds with the Canadian Securities Administrators (CSA) in the SEDAR filing system.

The statutory objective in making public this filed information is to enhance investor awareness of the business and affairs of public companies and investment funds and to promote confidence in the transparent operation of capital markets in Canada.

 Achieving this objective relies heavily on the provision of accurate information on market participants.

The System for Electronic Document Analysis and Retrieval (SEDAR) is a filing system developed for the Canadian Securities Administrators to:

  • facilitate the electronic filing of securities information as required by the securities regulatory agencies in Canada;
  • allow for the public dissemination of Canadian securities information collected in the securities filing process; and
  • provide electronic communication between electronic filers, agents and the Canadian securities regulatory agencies

For more information visit:

Discussion Questions:

1. Visit SEDAR.COM,  select your favorite Canadian Public Company: Review the most recent Press Release, MD&A and Annual Report: Did you find this site useful?

2.Would you consider this site for any future equity investments?

3. Is this site only useful for investors?






Posted by & filed under Accounting Principles, Fraud Accounting, IFRS.

The chair person of the Ontario Securities Commission noted that companies and their auditors “stretch the interpretation of accounting standards beyond all reasonable limits. In many cases, the reasoning to support positions is weak or nonexistent. In other cases, it is clear that conclusions are based on narrow interpretations of a few words in a standard without regard to their broader context.
Too often, we see an approach that treats standards like narrowly written rules rather than broad principles requiring the exercise of sound professional judgment in their application. “Too frequently, it seems that Generally Accepted Accounting Principles [GAAP] have become very elastic.”
Danger of not having a National Canadian Regulator
But in the decade since, an abysmal string of swindles and scams has offered proof that Canada still hasn’t gotten serious about protecting investors and clamping down on accounting shenanigans. Without a national securities regulator in Canada similar to the U.S. Securities and Exchange Commission (SEC), no one has a voice in this country loud enough to alert Canadians to the danger.
The Ontario Securities Commission
The OSC stands back while authorities in other jurisdictions expose the questionable behaviour of Canadian companies. It happened again in 2006, when U.S. authorities investigated more than 130 companies, including Apple and Dell, for the backdating of stock options awarded to their executives. In the U.S., the crackdown resulted in the dismissal of more than 50 executives and directors. In Canada, the OSC found good evidence that at least 35 Canadian companies had likely engaged in the practice. But the commission charged only one company.
In Canada a lot more room for Fraud
“The attitude in Canada,” explained Michael Watson, “is that there is a lot more room for compassion and understanding and rehabilitation.” And a lot more room for fraud, as well. The OSC’s lack of interest in accounting issues, its unwillingness to make examples out of companies in order to correct broad market misbehaviour, and its refusal to get tough on white-collar crime, will place investors in even greater jeopardy when Canada replaces GAAP with International Financial Reporting Standards on Jan. 1, 2011.
Read the complete article in: Canadian Business magazine, page 38, “A Nation of Swindler ” by Al Rosen
Discussion Questions:
1. Why is it that in Canada, we do not have National Regulator, whereas the US has the SEC (Securities and Exchange Commission)?
2. Perfomr an internet search on Livent and Nortel: have you noted any financial restatement or fraud in your research?
3. Would a National Canadian Regulator protect investors from swindlers?
4. Knowing that GAAP is principle based and IFRS is even more principle based, will a change in accounting principles protect the Canadian Public?

Posted by & filed under Accounting Principles, Financial Accounting, IFRS, Intermediate Accounting.

Despite a reliance on umpteen pages of principles and prescriptive rules for the preparation of financial statements, much depends on professional judgment and corporate governance. That’s why the quality of the company’s reported earnings is such an important consideration for analysts and investors.


The question of when to recognize revenue is quite straightforward for some

industries (e.g., clothing retailers like H&M). Revenue is recognized when the customer

buys the goods in the store. Normally customers pay cash or use a debit or credit card,

which means that the collection of cash for the sale is not an issue.

For other industries, the decision is not as

clearly defined. For a manufacturing company such as Bombardier (a maker of trains

and airplanes), contracts are signed, merchandise such as a rail car is manufactured, the

merchandise is delivered, money is collected from the customer (usually some time

after delivery), and warranty services are provided on the merchandise sold. When

should such a company recognize revenue: when the contract is signed, when the goods

are delivered, when the cash is collected, or when the warranty period expires and all

obligations related to the sale have been satisfied?


Revenue recognition criteria

have been developed within IFRS (IAS 18) to

resolve this conflict and to produce a measure of performance that is intended

to balance the need for timely information with the need for reliable information.



1.The probable inflow of economic benefits to the company.

a. The performance has been achieved.

b. The risks and rewards are transferred and/or the earnings process is

substantially complete with respect to the sale.

2. The amount earned can be measured.

Can audit committees deliver?

The accounting scandals of the past decade have put the audit committee at the forefront of the battle against fraudulent financial reporting.

 Regulations regarding audit committee composition and responsibility have been enacted to improve the quality of financial information and

strengthen investor confidence in the quality of financial reporting and financial markets. 

Discussion Questions:

1. Should the audit committee have the responsibility to ensure that management, presents fairly their financial statement earnings?

2. Do you agree with the basic revenue recognition criteria?

3. When should earnings be recognized for a company such as bombardier? When the contract is signed or the product delivered?

 Read more about : Earnings Recognition, 

Earnings Quality Not Necessarily Impacted by GAAP Effect, CGA magazine.