Accounting Standards Board
March 22-23, 2016
This summary of Accounting Standards Board (AcSB) decisions has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussion on projects, which may change after further deliberations by the AcSB. Decisions to publish Handbook material are final only after a formal ballot process.
International Financial Reporting Standards
Disclosure Initiative – Materiality
The AcSB discussed the current deliberations of the IASB and the FASB on the definition of materiality. The AcSB directed staff to continue to monitor the Boards’ deliberations and reassess the need for a legal opinion on the interpretation of materiality in regulations and by courts in Canada, if any changes to or conflicts with the IFRS and U.S. GAAP definitions are identified.
IASB Agenda Consultation
The AcSB discussed the feedback the IASB received on its Request for Views, “2015 Agenda Consultation.” As well, Board members advised the AcSB Chair on points to raise with the IASB at the April 2016 meeting of the Accounting Standards Advisory Forum (see the Forum’s Agenda Papers 1-1B). No decisions were made.
IFRS Discussion Group
The AcSB considered the limited research that it directed the staff to undertake on the issue, “IAS 21: Determining Functional Currency.” The AcSB noted that this issue was not widespread among Canadian entities and decided not to raise it internationally because it would not meet the IFRS Interpretations Committee’s agenda criteria. The AcSB noted that certain aspects of the Group’s discussion on this issue require further consideration. The AcSB directed the staff to determine next steps.
The AcSB considered the results of the Group’s December 2015 meeting to determine whether to refer the issue, “IAS 32 and 39: Changes to Convertible Debt,” to the IASB or IFRS Interpretations Committee. The AcSB observed that while this issue may highlight potential improvements to the requirements in IFRS 9 Financial Instruments, the fact pattern discussed is not resulting in significant diversity in practice. The AcSB decided not to raise this issue internationally because it would not meet the IFRS Interpretations Committee’s agenda criteria. The AcSB directed the staff to continue monitoring for other potential application issues related to modification or exchange of debt instruments.
The AcSB also considered a status update on the Group’s various topics that are being monitored.
Applying IFRS 9 with IFRS 4
The AcSB discussed the latest developments in the IASB’s Insurance Contracts project and the feedback the IASB received to its Exposure Draft, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.” Board members advised the AcSB Chair on points to raise with the IASB at the April 2016 meeting of the Accounting Standards Advisory Forum (see the Forum’s Agenda Papers 6-6C). No decisions were made.
The AcSB discussed the IASB staff’s illustrative example in order to advise the AcSB Chair on points to raise with the IASB at the April 2016 meeting of the Accounting Standards Advisory Forum (see the Forum’s Agenda Paper 03). No decisions were made.
Standards for Private Enterprises
Redeemable Preferred Shares Issued in a Tax Planning Arrangement
The AcSB received a summary of the additional analysis conducted relating to the scope of the classification exception and the characteristics of tax planning arrangements, as well as feedback from the Private Enterprise Advisory Committee on that analysis. In addition, the AcSB discussed alternative bases under which a classification exception might be considered. In that regard, the AcSB directed the staff to further explore the viability of a classification exception on the basis of retention of control over the enterprise, as advised by the Committee.
Subsidiaries and Interests in Joint Arrangements
The AcSB discussed some narrow-scope amendments to Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, that have been proposed by its Private Enterprise Advisory Committee, in response to stakeholder feedback. The AcSB agreed to issue an exposure draft to make the following clarifications:
- Transitional provisions
The transitional provisions in Section 1591 and Section 3056 were developed to provide relief only on transition to the new standards and when an enterprise prepares its first financial statements using accounting standards for private enterprises. The amendment will clarify that the transition provisions may not be applied when an enterprise changes its accounting policy choice to consolidate its subsidiaries at any time in the future.
- Subsidiaries – Accounting for a subsidiary controlled through a combination of contractual arrangements and voting interest
The AcSB agreed to clarify how the voting interest, if any, that an investor holds in a subsidiary controlled through a combination of voting rights and contractual arrangements should be accounted for when using the cost method.
- Subsidiaries – Evaluating contractual arrangements for control: Enterprises electing not to consolidate
The AcSB agreed to clarify that an enterprise is not required to assess whether contractual arrangements give rise to control when subsidiaries are not consolidated.
Sections 1591 and 3056 are effective for fiscal years beginning on or after January 1, 2016. Therefore, the AcSB decided that the amendments should be exposed as soon as possible. The AcSB expects to issue an exposure draft in the second quarter of 2016 for a 60-day comment period.
After deliberating the feedback received, the final amendments are expected to be included in Part II of the Handbook in the fourth quarter of 2016. The amendments would be effective for fiscal years beginning on or after January 1, 2017. Earlier application would be permitted.
In addition, the AcSB will solicit input and raise awareness of the clarifications through a variety of communication vehicles.
Subsidiaries and Investments
The AcSB considered responses from stakeholders to its Exposure Draft, “Subsidiaries and Investments,” and advice from its Private Enterprise Advisory Committee on what changes should be made to the proposals based on that feedback.
The AcSB decided to make some limited changes to improve the clarity of the proposals, which include:
- adding references to Section 1582, Business Combinations, in Section 1591, Subsidiaries, when doing so provides beneficial guidance;
- removing paragraph 1591.26A(h), which states that Section 1582 shall be applied for any other aspects of the initial measurement of an interest in a subsidiary not otherwise addressed in paragraph 1591.26A; and
- adding disclosure requirements in respect of the initial and subsequent measurement of provisional amounts.
The AcSB also decided that:
- an accounting policy choice for the recognition of bargain purchase gains and the accounting for step acquisitions should not be permitted;
- the amendments should apply to all subsidiaries regardless of whether the subsidiary meets the definition of a business; and
- the rationale for these decisions could be better explained in the forthcoming Basis for Conclusions document.
The AcSB requested the Committee to provide further input on whether to:
- add a requirement to expense acquisition-related costs for investments subject to significant influence when the equity method is applied;
- provide additional clarity to the scope out of common control transactions;
- amend the transition provisions to provide clarity on how the amendments apply when there is outstanding contingent consideration or the initial accounting for the subsidiary is incomplete at the end of the reporting period;
- amend the transition provisions in Section 1500, First-time Adoption, so that the amendments apply from the date of transition; and
- amend the transition provisions in Sections 1506, Accounting Changes, and 1582 to not permit prospective treatment of the consequential amendments to those Sections.
The Private Enterprise Advisory Committee will discuss these issues at its April 2016 meeting. The AcSB’s discussion will continue at its May 2016 meeting. The AcSB plans to issue the final amendments in the fourth quarter of 2016. The amendments will be effective for years beginning on or after January 1, 2018, with earlier application permitted.
Standards for Not-for-Profit Organizations
Accounting Standards Improvements
The AcSB considered the input from its Not-for-Profit Advisory Committee and decided that an exposure draft of accounting standards improvements will include proposals that require a not-for-profit organization (NFPO) to do the following:
- Apply accounting standards for private enterprises in Part II of the Handbook to report the capitalization, amortization and disposal of tangible assets and continue to apply the existing Part III standards for intangible assets.
- Recognize write-downs to reflect a partial loss of service potential of tangible and intangible assets still in use. The net carrying value of the tangible and intangible assets would be written down to their replacement cost or fair value.
- Continue to apply the existing standards in Part III for works of art, historical treasures and similar items that are not part of a collection.
The AcSB also requested that the staff undertake further work and consult with the Committee on proposals to be included in the exposure draft relating to collections held by NFPOs and transitional provisions for partial write-downs of tangible and intangible assets. The Committee will discuss these issues at its June meeting.
The AcSB expects to issue the exposure draft for comment in the third quarter of 2016.
The AcSB also considered the Not-for-Profit Advisory Committee’s feedback on the scope and timing of projects subsequent to the Accounting Standards Improvements Project. The AcSB agreed to assess at a future meeting:
- the timing of subsequent projects on reporting controlled and related entities by NFPOs, and contributions;
- initiating future projects on related party transactions and combinations between NFPOs; and
- the need to conduct a post implementation review of Section 4470, Disclosure of Allocated Expenses by Not-for-Profit Organizations.
Governance and Planning
AcSB Activities and Surveys of AcSB Members and Other Volunteers
The AcSB staff reported back on the progress made to implement process improvements to enhance their efficiency and effectiveness. The AcSB also discussed the results of a self-assessment of its members and surveys of other volunteers on the performance of the AcSB and its related committees in 2015-2016. The AcSB discussed ways of improving the efficiency and effectiveness of its internal operations.
AcSB Advisory Committee
The AcSB received feedback on discussions at the recent meeting of its Private Enterprise Advisory Committee.
AcSB Strategic Plan
The AcSB approved its 2016-2021 Strategic Plan for publication online at www.frascanada.ca by April 1, 2016.
AcSB Annual Plan
The AcSB approved its 2016-2017 Annual Plan for the operating year commencing April 1, 2016 after considering input from AcSOC on a preliminary draft. The AcSB plans to post the annual plan online at www.frascanada.ca in April 2016.
AcSB Not-for-Profit Advisory Committee
Taking into account feedback from its Not-for-Profit Advisory Committee, the AcSB discussed changes to the Committee’s Statement of Operating Procedures, which will be ratified at a subsequent meeting.
Note: All of the AcSB’s responses to documents for comment issued by the IASB and the IFRS Interpretations Committee are available on the IASB’s website at www.ifrs.org.