As the old saying goes, numbers never lie, but in the world of accounting, you can present numbers in a wide range of ways, and one option is ASPE. Short for Accounting Standards for Private Enterprises, ASPE refers to a set of accounting standards for small and medium Canadian businesses. If your business’s stocks aren’t traded on a public stock exchange, you are considered to be a private company, and you can use the ASPE when drafting your financial statements.
When you use these standards to create your income statements, profit-and-loss reports, and other financial documents, you create a standardized look at your financial situation that can be understood by anyone in the finance or accounting sector. Because of that, you can use these statements when applying for loans, presenting information to investors, or proving your financial strength to vendors.
Private Canadian businesses started using the ASPE in 2011, and at the same time, publicly traded companies began using the International Financial Reporting Standards. While public companies must use the IFRS, private companies can choose one or the other. As a general rule of thumb, the ASPE is simpler and less demanding than the IFRS, and as a result, it makes sense for private businesses to use the ASPE. That said, if you plan to go public in the near future, you may want to switch to the IFRS. Additionally, you may want to use IFRS if your parent company or your competitors use it.
Created by The Accounting Standards Board, the ASPE are detailed in the CPA Canada Handbook. As a small business owner, you don’t necessarily need to know all the tenets of the ASPE. Instead, you need accounting software that allows you to make statements based on these standards, or you need an accounting professional who can help you. With these elements in place, ASPE understanding and compliance become easy.