IFRS Part 2: Changes in Financial Statement Terminology

IFRS Part 2: Changes in Financial Statement Terminology

We are discussing some things investors should be aware of in regards to the changeover to International Financial Reporting Standards (IFRS) in Canada.

If you read our first blog post Introduction to IFRS for investors, you will know that Canadian Generally Accepted Accounting Principles (Canadian GAAP) for public companies transitioned to IFRS beginning January 1, 2011.

IFRS will apply to most Canadian public companies for financial years beginning on or after January 1, 2011. You will see changes from the conversion to IFRS in first quarter financial reports of these companies.

You may have also seen discussion of expected changes in the management discussion and analysis (MD&A) of these companies over the past few years.

In this post, we simply summarize some of the terminology changes you may encounter in financial statements after the IFRS changeover.

As you can see from the examples in the chart below, it is important for you to familiarize yourself with new IFRS terminology because some companies may use it in their financial statements. You should also be aware that some companies may carryover old Canadian GAAP language (like balance sheet) to their IFRS statements.

Old Canadian GAAP term            Equivalent IFRS term
balance sheet statement of financial position
earnings / net earnings / income / net income profit or loss (as appropriate)
income statement statement of comprehensive income
interim financial statements interim financial report
results of operations financial performance
measurement currency functional currency
statement of retained earnings statement of changes in equity
shareholders’ equity equity

As we said in our last post, if you are someone who does not feel you have sufficient information or you do not understand the information in the financial statements, you have options:

  • Ask your advisor to discuss your questions with you
  • Ask another trusted professional (your accountant, for example) to discuss your questions with you
  • Submit your question in writing to the company
  • Ask your question(s) at the company’s annual general meeting

Finally, we have a section on financial statements in the informed investing section of our website. Most public companies have their financial statements and MD&A available on their website.

We have also updated our InvestRight glossary to help you understand some IFRS terms.