What does financial literacy mean? According to the Canadian Securities Administrators, financial literacy includes “the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are reasonably comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.” 

Maintaining financial literacy in the Canadian financial reporting environment is currently challenged by several factors. Publicly accountable entities are in the process of migrating from Canadian generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS). Directors’ responsibilities also now encompass such matters as evaluating the adequacy of internal controls, the reasonableness of fair values attributed to assets and liabilities, and the appropriate use of non-GAAP performance measures. It would also be logical to consider the financial literacy of chief executive officers (“CEOs”), chief financial officers (“CFOs”) and others that participate in the financial reporting and internal control certification processes that are required by regulation.

Deloitte’s assessment questionnaire is focused on the general elements of financial literacy including an understanding of: 

• The basic principles of financial accounting and reporting practices under current Canadian GAAP
• The important elements of IFRS
• The internal controls over the processes used in constructing quarterly and annual financial statements and in preparing other disclosed financial information 
• The perspective of users of financial statements, including an understanding of investment analysis and corporate finance

A few final words of advice before you get started: We encourage all interested users to undertake this test regardless of their sense of financial literacy. If as a consequence of taking the test, you desire further information on financial reporting  there are many readily accessible sources of additional insight that can be used to develop greater understanding of the issues. We encourage you to seek advice, for example, from your management team or from the Canadian Institute of Chartered Accountants (“CICA”) Audit Committee Resource website (www.cica.ca/auditcommittees). You can also tap into Deloitte’s knowledge, using the resources listed on the back cover; for e-learning modules, current insights on IFRS and additional background material on financial reporting matters we would direct you to two particular Deloitte websites: www.corpgov.deloitte.com and www.IASPlus.com.  

Start now! Out of 100: What’s your degree of financial literacy?

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