Canada’s Accounting Standards Board’s recent decision not to require the funding status of retirement plans to be recognized on the balance sheet shows that Canada is committed to adopting International Financial Reporting Standards as Canada’s generally accepted accounting principles, says Moody’s Investors Service in a new report.

Earlier in the year AcSB had drafted a requirement that would have adopted the US GAAP practice of including underfunded pension liabilities on the balance sheet, it reports.

However, the AcSB concluded that Canadian companies should focus on adopting IFRS, as it targets the start of 2011 as the date all Canadian publicly accountable enterprises must be in compliance with IFRS. Currently international standards do not require underfunded pension plans to be recognized on the balance sheet.

Canadian public companies may well adopt IFRS before the 2011 deadline, Moody’s says, now that the SEC has proposed eliminating a requirement to reconcile financial statements to US GAAP for those companies reporting in accordance with IFRS.

“The final decision of the AcSB was a surprise to us as exposure drafts are typically adopted,” says Moody’s vice president and senior accounting specialist Waylon Iserhoff. “Nevertheless we understand the decision, as it reflects Canada’s commitment to migrate towards IFRS, and this action is an important concrete demonstration of that commitment.”

Because Moody’s already adjusts financial statements to reflect pension underfunding as debt, the decision either way would not have affected credit ratings, it adds.

“We support efforts to develop a single body of high quality global GAAP, uniformly applied in all major markets,” says Moody’s Iserhoff.