ASPE, or Accounting Standards for Private Enterprises, is a relatively new concept designed to make accounting simpler for small to medium-sized business owners.
While some small business owners choose to stick to IFRS (International Financial Reporting Standards), switching over to ASPE is in the best interest of most small businesses. Let’s take a closer look at Accounting Standards for Private Enterprises and the difference between IFRS.
What are Accounting Standards?
Before we dive into the details of Accounting Standards for Private Enterprises, why don’t we first create a definition for Accounting Standards on their own?
Accounting standards are a set of authoritative standards set for financial reporting and are the primary source of GAAP (Generally Accepted Accounting Principles).
These transactions dictate how you go about making reports on your financial statements. They tell you how transactions are to be measured, reported, and disclosed in your statements. This information is then available to lenders, investors, and other contributors to make crucial decisions regarding the company at hand.
In Canada, all accounting standards are set out by the Accounting Standards Board (AcSB).
What are Accounting Standards for Private Enterprises?
Accounting Standards for Private Enterprises are exactly what they sound like – standards that dictate how Private Enterprises go about making reports on financial statements. The goal behind ASPE is to simplify accounting procedures for Private Enterprises.
In this case, private enterprises constitute any business owned by private individuals and is not traded on the stock market. Larger corporations or companies that are traded publicly are not allowed to apply for ASPE.
With that being said, most small businesses in Canada do qualify as a “private enterprise and are therefore eligible to apply for ASPE.
What Principles are covered by ASPE?
The ASPE covers a variety of principles for private enterprise owners to follow. It covers what information you need to include on your financial statements, how you prepare opening balance sheets, and how to correct accounting changes and errors. The ASPE also lines out disclosure standards, as well as how to present current assets and liabilities.
Of course, these are just a few of the many principles discussed within the ASPE guidelines. You can find an extensive list on the Canaidan Centre of Financial Reporting website.
ASPE vs. IFRS
As an owner of a private enterprise, you do have the option of selecting between ASPE and IFRS guidelines. Both of these guidelines can help you create a standardized look at your financial situation, making it easy for accounting and finance purposes. Most small business owners, however, do find ASPE standards simpler, and less complicated and demanding.
With that being said, some small business owners do choose to use IFRS, especially if they plan on going public in the future. Private enterprises whose main competitors are public may also choose to use IFRS to help facilitate financial comparisons.
In conclusion, if you are a small business owner and your company is not public, you could probably benefit from Accounting Standards for Private Enterprises. These standards keep things as simplistic as possible, making your accounting and financial reporting much simpler for you.