Accounting Standards Board
March 20-21, 2018
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.
IFRS® Discussion Group
The Board discussed the Group’s recommendation from its January 2018 meeting to consider whether to refer two additional issues to the International Accounting Standards Board (IASB) or the IFRS® Interpretations Committee.
The Board decided to refer the issue, “Cloud Computing Arrangements,” to the IFRS Interpretations Committee.
The Board also decided to refer the issue, “Cryptocurrencies,” to the IASB by sharing the Group’s discussion at the April 2018 meeting of the Accounting Standards Advisory Forum when the topic of commodity loans and related transactions is discussed (see the Forum’s meeting page). Specifically, the Board will share the challenges identified by the Group as to determining the appropriate accounting model to apply from a holder’s perspective. The Board is committed to helping the IASB obtain the facts and information needed to make evidence-based decisions when assessing the need for a project and providing guidance on this topic.
The Board was advised of the following IASB February 2018 tentative decisions relating to the accounting model being developed for activities subject to defined rate regulation:
- The incremental rights and obligations arising from a regulatory agreement meet the definitions of an asset and a liability in the forthcoming revised Conceptual Framework for Financial Reporting (Conceptual Framework).
- The unit of account in the accounting model will be the individual timing differences that create those incremental rights and obligations.
The Board will continue to monitor the progress of the IASB’s Rate-regulated Activities project.
Standards for Private Enterprises
Retractable or Mandatorily Redeemable Preferred Shares Issued in a Tax Planning Arrangement
The Board began deliberating comments received from stakeholders and recommendations from its Private Enterprise Advisory Committee on how to proceed with the proposals given the feedback received to its Exposure Draft “Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (Proposed amendments to Sections 1591, 3252 and 3856).” The Board decided to:
- revise “Condition 2 – Redemption schedule” by replacing reference to “explicit or implicit arrangements” in proposed paragraph 3856.23 (c) with “written or oral arrangements”, consistent with the language in the Exposure Draft, “Accounting for Related Party Financial Instruments and Significant Risk Disclosures (Proposed amendments to Financial Instruments, Section 3856”;
- update “Condition 3 – No consideration other than shares exchanged” to clarify that this condition can apply to transactions that involve more than one class of shares;
- include in Section 3856, Financial Instruments, the illustrative example relating to joint control that had been provided in the Exposure Draft’s Basis for Conclusions; and
- provide an option to classify the shares as a financial liability even if all the conditions for the classification exception could be met.
The Board also discussed whether:
- guidance was necessary to assess the related party unit of account;
- stock dividends should be within the scope of the classification exception; and
- an option to present the effect of liability classification to retained earnings should be provided.
The Board further considered the Committee’s comments on whether transitional provisions were necessary in circumstances when information about a tax planning arrangement could not be obtained.
The Board will continue deliberating this topic in its May 2018 meeting. It plans to issue the final amendments no later than the fourth quarter of 2018.
Financial Instruments – Narrow-scope Amendments
The Board began deliberating stakeholders’ comments and the Private Enterprise Advisory Committee’s recommendations on how to proceed with the proposals given the feedback received on its initial measurement of related party financial instruments and significant risk disclosure proposals.
The Board instructed the staff to draft wording clarifying various aspects of the Exposure Draft, ”Accounting for Related Party Financial Instruments and Significant Risk Disclosures (Proposed amendments to Financial Instruments, Section 3856),” for discussion at its May 2018 meeting, including:
- how an enterprise accounts for the various elements in a related party transaction that includes both financial and non-financial assets and liabilities;
- updating and adding illustrative examples to help stakeholders apply the proposals;
- accounting for the transfer of impaired related party financial assets between related parties; and
- the initial measurement of financial instruments with variable or contingent consideration.
The Board will also consider stakeholders’ comments on the subsequent measurement of related party financial instruments, including indexed related party financial liabilities.
The Board decided that it would provide authoritative guidance on entity-specific disclosures.
The Board will continue deliberating this topic in its May 2018 meeting and plans to issue the final amendments no later than the fourth quarter of 2018.
The Board considered the feedback received from fatal-flaw reviews and field testing the draft exposure draft of Section 3041, Agriculture. This feedback included input from members of its Agriculture Advisory Group and Private Enterprise Advisory Committee, as well as from practitioners in the agriculture industry and agricultural producers.
The Board directed the staff to clarify the proposals in the exposure draft regarding:
- the point at which an enterprise ceases to apply proposed Section 3041, Agriculture, and applies another standard (such as Section 3031, Inventories);
- agricultural inventories growing on land or in waters that an enterprise does not own or control;
- the elements of input costs;
- the condition that agricultural inventories must be available for immediate delivery to be measured at net realizable value; and
- the rebuttable presumption that a biological asset is agricultural inventory on initial recognition if it is not used in a productive capacity.
The Board further directed the staff to prepare materials illustrating key concepts to accompany the Exposure Draft when it is published no later than the third quarter of 2018.
Amendments to Other Frameworks and 2019 Annual Improvements
As part of its due process, the Board considers whether amendments made to accounting frameworks in other jurisdictions would significantly improve accounting standards for private enterprises. At this meeting, the Board discussed the Private Enterprise Advisory Committee’s recommendations on recent amendments made to the following accounting frameworks:
- Standards under U.S. GAAP issued by the U.S. Financial Accounting Standards Board (FASB) since October 2016, particularly amendments specific to private companies; and
- IFRS® Standards the IASB issued or amended since December 2016.
The Board decided that:
- either the FASB amendments to the definition of a business or the pending IASB amendments would be considered as input in developing a narrow-scope amendment; and
- the guidance in IFRIC 23 Uncertainty over Income Tax Treatments, would be helpful for private enterprises in Canada given the increasing complexity of taxes as a topic and should be considered for a future project.
The Board also considered the Committee’s advice relating to issues raised by stakeholders through its outreach activities and decided:
- to expose for public comment the proposals to delete as narrow-scope amendments:
- the example in Section 3465, Income Taxes, that is no longer applicable given recent changes to the Income Tax Act (Canada) and
- the requirement to segregate future tax assets and liabilities into current and non-current portions when the future tax method is applied;
- to add to the Board’s priorities for Part II of the CPA Handbook – Accounting, consideration of whether Section 1500, First-time Adoption, should be clarified relating to a parent’s use of some or all of the exemptions even though that may change the values of subsidiary’s assets and liabilities;
- to consider a 2019 annual improvement process to clarify the scope in Section 3051, Investments, when the cost method is used to account for an interest in a jointly controlled enterprise; and
- to consider whether issues regarding the classification of interests in joint arrangements could be incorporated into a post-implementation review for Section 3056, Interests in Joint Arrangements.
Standards for Private Enterprises and Not-for-Profit Organizations (NFPOs)
Financial Statement Concepts
The Board continued its discussions on the interaction of its research activities with Section 1000, Financial Statement Concepts, and Section 1001, Financial Statement Concepts for Not-for-Profit Organizations. The Board decided to consider updates to its financial statement concepts, in conjunction with its research on priority topics for Parts II and III of the Handbook.
Standards for NFPOs
Amendments to Other Frameworks
As part of its due process, the Board considers whether amendments made to accounting frameworks in other jurisdictions would significantly improve accounting standards for NFPOs. The Board discussed its Not-for-Profit Advisory Committee’s recommendations on amendments made since August 2016 to the following accounting frameworks:
- U.S. GAAP issued by the U.S. FASB relating to NFPOs.
- Financial Reporting Standards (FRS) 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland, issued by the Financial Reporting Council (FRC) in the U.K.
- Australian Accounting Standards issued by the Australian Accounting Standards Board.
- New Zealand Accounting Standards issued by the External Reporting Board.
- The IFRS for Small and Medium-sized Entities issued by the IASB.
The Board agreed with the Committee’s recommendation to consider amendments made to standards issued by the Dutch Accounting Standards Board and the FRC’s FRS 105, The Financial Reporting Standard applicable to the Micro-entities Regime, in future reviews of jurisdictional changes.
The Board directed the staff to consider, as part of the contributions research project, amendments made in other jurisdictions relating to contributions, including financial statement presentation and measurement of endowments.
The Board also agreed with the Committee’s recommendation that no further work is necessary at this time on the remaining amendments.
Pre-changeover Accounting Standards (Part V of the Handbook)
Withdrawal of Part V
The Board discussed factors to consider in planning the withdrawal of Part V, and directed the staff to:
- prepare an inventory of the Background Information and Basis for Conclusions documents for the pre-changeover accounting standards in Part V that are relevant to an understanding of Part II standards; and
- develop recommendations on the specific steps to take to withdraw Part V, based on due process.
AcSB Annual Plan
The Board approved its 2018-2019 Annual Plan for the operating year commencing April 1, 2018, after considering feedback from the Accounting Standards Oversight Council (AcSOC). The Board has issued the Annual Plan.
AcSB Member and Volunteer Self-Assessment Surveys
The Board discussed the results of a self-assessment of its members and surveys of other volunteers on the performance of the Board and its related committees in 2017-2018. The Board discussed ways of improving the efficiency and effectiveness of its operations.
AcSB’s Standard-Setting Due Process
The Board approved its revised AcSB Standard-Setting Due Process Manual after considering AcSOC’s input. Following translation into French, the Board will publish the Manual in April 2018.
Read about Board recommendations made to influence the development of IFRS® Standards and enhance the global comparability of financial reporting outcomes, including U.S. GAAP, in the Board’s Responses to IASB® Documents for Comment and Responses to Other Documents for Comment.