Adoption of IFRS in Canada: Financial Reporting Dilemma for Canadian Companies Cross-Listed in the United States

Abstract

The Accounting Standards Board of the Canadian Institute of Chartered Accountants required all
publicly accountable enterprises in Canada to report in accordance with International Financial
Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2011. US Securities
and Exchange Commission (SEC) registrants, however, are still allowed to use their financial
statements in compliance with US Generally Accepted Accounting Principles (US GAAP) for
domestic purposes, including filing with Canadian securities regulators. The primary objective of
this study is to classify and analyze the 2011 annual reports filed with the SEC by Canadian
companies cross-listed on the New York Stock Exchange (NYSE). This is done in an attempt to
explain Canadian managers’ financial reporting choices vis-à-vis the SEC’s indecision about
incorporating IFRS into the US financial reporting system. This study provides valuable
evidence on the competition between IFRS and US GAAP called for in academic and
professional circles. The findings indicate that the majority of Canadian companies listed on the
NYSE: (1) provided an explicit and unreserved statement of compliance with IFRS, as issued by
the International Accounting Standards Board (IASB), and (2) filed their annual report on Form
40-F, which is especially designated for certain Canadian private issuers. But there were also
companies making different standard and form choices. This study highlights their decisions and
explores their rationales.