ASPE Overview

ASPE stands for Accounting Standards for Private Enterprises. It is Part II of the CPA Canada Handbook and is the most common Canadian GAAP framework used by private corporations, including owner-managed CCPCs in BC and across Canada. It has applied to fiscal years beginning on or after January 1, 2011, when the Handbook's single set of Canadian GAAP was replaced by IFRS (Part I) for publicly accountable enterprises and separate parts for private enterprises, not-for-profit organizations and pension plans. ASPE is a stand-alone Canadian framework: its starting point was the Canadian GAAP that applied before 2011, simplified for the realities of private company reporting, such as a narrower user base and lower disclosure expectations. It is not IFRS for SMEs, which is a separate international standard.

A private corporation can choose ASPE or full IFRS. ASPE offers private-enterprise reporting options, but the appropriate basis and assurance level depend on applicable law, users and lender agreements.

Should a private corporation use ASPE or IFRS?

The choice is not trivial. It influences the cost of preparation, disclosure depth, deferred-tax complexity, lease accounting, and the comparability of the statements to international peers.

A BC consulting CCPC with $200,000 in revenue, one owner, one computer, no debt, and no outside investors could assess ASPE against its users' requirements:

• The T2 does not require a particular framework. The GIFI schedules take ASPE statements as they are. GIFI's other comprehensive income items (7000 to 7020, and item 3580 on the balance sheet) exist for corporations reporting under IFRS, because ASPE has no other comprehensive income.
• Check the lender's required accounting framework and level of accountant involvement, from a compilation up to a review or an audit (see compilation, review or audit).
• Deferred tax accounting is avoided via the taxes-payable method, saving preparer time each year-end.
• Assess any lease under ASPE 3065; operating or capital classification depends on the agreement.

The same CCPC might consider IFRS if it starts raising capital from a foreign investor that requires group IFRS reporting, prepares for a public listing, or becomes a subsidiary of a public entity.

How ASPE and IFRS differ on the points that matter

How ASPE is organized

ASPE is organized into numbered sections. The high-level structure is:

• 1000 series: conceptual framework and general presentation, including Section 1000 Financial Statement Concepts, Section 1100 Generally Accepted Accounting Principles, Section 1400 General Standards of Financial Statement Presentation, Section 1500 First-time Adoption and Section 1506 Accounting Changes.
• 3000 series: specific balance sheet, income statement and disclosure topics, for example property, plant and equipment (3061), leases (3065), revenue (3400), income taxes (3465), related party transactions (3840) and financial instruments (3856).
• AcG (Accounting Guidelines): interpretive guidance that supplements the main sections, such as AcG-20 on cloud computing arrangements.

Key concepts in Sections 1000 and 1400 include relevance, reliability, comparability, going concern, the accrual basis, and the definitions of assets, liabilities, equity, revenue, and expenses.

The policy choices a one-person corporation usually makes

Illustrative policies to assess for a BC consulting corporation include:

• Revenue recognition based on the engagement facts under ASPE 3400. Completed contract is not an unrestricted alternative to percentage of completion.
• Property and equipment at cost, amortized on declining balance (ASPE 3061).
• Taxes-payable method for income taxes (ASPE 3465), avoiding deferred tax calculations.
• Cost method for investments in subsidiaries (ASPE 1591). If the owner's holding company prepares its own statements, it can carry its shares of the operating company at cost rather than consolidating.
• Operating lease payments expensed on a straight-line basis over the lease term, with the future minimum lease payments disclosed (ASPE 3065).

These choices are documented in the significant accounting policies note, which also names the framework. Once a policy is elected it must be applied consistently.

What ASPE still requires of a small corporation

• All four primary statements plus notes: a balance sheet, an income statement, a statement of retained earnings and a cash flow statement, even for a one-person CCPC.
• Related party disclosures under ASPE 3840. Owner salary, owner rent, and shareholder loans are almost always disclosable.
• A statement of the framework used, in the significant accounting policies note (often Note 2).

Switching frameworks

Once selected, the framework must be applied consistently. A switch between ASPE and IFRS is not an ordinary change in accounting policy under ASPE 1506; it is a first-time adoption with its own transition rules:

• Moving to IFRS: IFRS 1 First-time Adoption of International Financial Reporting Standards.
• Moving to ASPE: ASPE Section 1500 First-time Adoption. An enterprise that applied ASPE before, left it, and comes back may either apply Section 1500 again or apply Section 1506 as if it had never stopped applying ASPE.
• Prepare the first annual statements under the new framework using its transition requirements, including applicable comparative information and exemptions.
• On the T2, Schedule 141 (line 265) asks whether an amount was included in opening retained earnings or equity to correct an error, recognize a change in accounting policy, or adopt a new accounting standard. If the answer is yes, the corporation has to keep a separate reconciliation.

Common mistakes

• Defaulting to IFRS because it sounds more "professional" without costing the actual preparer and auditor hours.
• Ignoring the disclosure load of IFRS: an IFRS set for a small CCPC is much longer than the ASPE equivalent, mainly because of deferred tax, lease and financial instrument disclosures.
• Mixing recognition and measurement rules from different frameworks. A statement title alone does not determine compliance.
• Defaulting to deferred tax accounting when the corporation has elected the taxes-payable method. Once elected, the policy must be applied consistently.
• Treating a small CCPC's statements as exempt from the four-statement, notes, related party and framework requirements above. Size does not remove any of them.
• Treating a framework switch as a routine policy change without checking first-time-adoption requirements.
• Assuming all IFRS updates flow into ASPE. The frameworks diverge over time.

Related concepts

ASPE is one of two mainstream Canadian GAAP choices; see IFRS overview. Changes in accounting policy under ASPE follow ASPE 1506, and estimate updates are handled prospectively under the estimate-change rules. Compiled information describes its actual basis in a note; it need not be full ASPE, and should not claim ASPE compliance without meeting it; see Notice to Reader (Compilation Engagement). The balance sheet reaches CRA through Schedule 100.