The AcSB’s due process is described in its comprehensive AcSB Due Process procedures document and also summarized below.
The Accounting Standards Board (AcSB) follows a rigorous set of procedures, known as due process, in developing and adopting standards. The due process procedures are critical in maintaining the objectivity of the standard-setting process and the quality of the output. The basic ingredients of due process are research, discussion and consultation.
The AcSB’s process is intended to be as transparent as possible. The AcSB posts its meeting agendas on its website in advance. It posts a Decision Summary shortly after each meeting to advise the public of decisions taken. Whereas the full-time members of the IASB and the US Financial Accounting Standards Board (FASB) meet and vote in public, the AcSB discussions and voting are held in private. The AcSB’s longstanding practice in this regard is associated with its volunteer membership. Confidentiality is intended to protect members from undue outside influence by allowing them to debate freely as individuals and vote without concern for the personal consequences in their relationships with clients, employers or business associates.
Decisions to commence a new project, issue proposals for comment or issue a final standard require the affirmative vote of six of the nine AcSB members. Members are required to vote according to their own beliefs rather than the views of their firm or organization.
The IASB has a detailed due process that it follows in developing new standards, which includes reporting to the IFRS Foundation Trustees’ Due Process Oversight Committee.
For issues related to publicly accountable enterprises, a topic is added to the AcSB's agenda when a project is activated by the IASB, and work proceeds in parallel with the IASB. The AcSB and its staff follow the IASB deliberations on each project and provide their input on an ongoing basis, as well as responding to all documents issued for comment by the IASB. When the IASB issues proposals for comment, the AcSB seeks the input of Canadian stakeholders by issuing its own exposure draft of the IASB proposals, together with a document directed to Canadian stakeholders highlighting key elements of the IASB proposals.
The AcSB will normally also consult with its User Advisory Council and Academic Advisory Council, as well as directly with stakeholders through public roundtables or other means. Stakeholders are also encouraged to respond directly to the IASB on documents issued for comment. Any changes to IFRSs must be approved by the AcSB before they become part of Canadian GAAP.
However, since the AcSB’s policy is to adopt IFRSs as they are issued by the IASB and not to modify them, it would be a significant decision not to approve a final IFRS after it has been issued by the IASB. In adopting new or amended IFRSs, the AcSB is placing reliance on the IASB, including the institutional arrangements that ensure its independence, competence and adherence to due process.
Issues related to private enterprises are first discussed by the Private Enterprise Advisory Committee, which makes recommendations to the AcSB on potential changes to accounting standards for private enterprises. Issues may be raised by committee members, AcSB members or by members of the public. The staff also notifies the committee of relevant developments in other jurisdictions. The AcSB has requested the committee to review each new IFRS to consider whether incorporating some or all of its provisions in the accounting standards for private enterprises would represent a significant benefit and meet a cost/benefit test.
Issues related to not-for-profit organizations may arise from a number of sources. Issues may arise from proposed changes to accounting standards for private enterprises that also apply to not-for-profit organizations. Issues may also be raised by the AcSB/PSAB Joint Not-for-Profit Task Force or its members, AcSB members or by members of the public.
Issues related to pension plans may be raised by AcSB members or by members of the public.
Following the addition of a topic to the AcSB’s agenda, the staff undertakes a process of research, with regular reviews with the related advisory committee or task force and the AcSB. The knowledge gained by research must be analyzed and processed so that decisions can be made. The touchstone against which all potential decisions are tested is the conceptual framework. Standard-setting decisions of the AcSB are generally not finalized until it has undertaken public consultations based on published proposals.
For each project, an exposure draft is issued that seeks input on a complete draft of the proposed new or revised standard, as the AcSB expects to issue it. The exposure process allows the AcSB to obtain input from all interested parties, and also gives stakeholders advance notice of impending changes and additions to Canadian accounting standards. The AcSB’s exposure drafts are published on its website with a highlights summary, explanatory material and a general invitation to comment that also poses specific questions on matters of particular interest to the AcSB.
Published consultation documents are generally accompanied by additional processes designed to encourage maximum public input. Such processes include webinars, presentations in courses and conferences and notices in various publications, including the AcSB’s FYI Newsletter, to make readers aware of proposals and solicit comment. While the AcSB’s published proposals ask for written input, some stakeholders find it easier to comment orally. To obtain this input, the AcSB may organize public roundtable meetings and hold meetings with representatives of major stakeholder groups on projects of widespread interest.
A record of documents issued for comment is included in the Standards Digest, and documents for comment are posted on the AcSB website. Those interested in notification of the issue of all exposure drafts are urged to subscribe (free of charge) to the automatic notification of new postings. Subscribers will automatically receive an electronic message informing them of the posting of an exposure draft and other related activities.
After the deadline for comment on documents for comment has passed, the AcSB considers all of the comments received with the aid of a staff-prepared summary and analysis. All of the pending decisions are reviewed in light of the input gathered so that the AcSB can test its preliminary conclusions against the input provided by stakeholders. New information and fresh lines of reasoning may be persuasive in changing preliminary conclusions, regardless of who provided the input or how many commentators raised a particular point. The exposure process is not a popularity contest but negative reactions to proposals can help the AcSB in identifying stakeholder concerns that it needs to address in subsequent communication activities when it is not persuaded to change its position.
Most published proposals undergo at least some modification in light of comments received. After making all of the changes considered appropriate, the AcSB then determines whether there has been a significant change from the published proposals. If there has been a significant change, the AcSB will expose the revised material for public comment unless at least six of its nine members agree to forgo re-exposure for a stated reason. If there has not been a significant change, the AcSB proceeds to publication.
The publication process includes a thorough review of the Handbook to ensure that all necessary amendments consequential to the adoption of the new or revised standard are made to other standards to maintain internal consistency. Final approval and issuance of new Handbook material requires the affirmative votes of at least six of the nine AcSB members, in writing.
The AcSB is empowered to act without public consultation when it is convinced of the need to do so in the public interest or when exposure would serve no purpose (such as deferring the effective date of a new standard). Such occurrences are infrequent.
The AcSB normally includes one other component in its due process — the publication of a Background Information and Basis for Conclusions (Basis for Conclusions) document. An initial Basis for Conclusions is generally provided with exposure drafts to assist readers in understanding the proposals and improving the comment process. The Basis for Conclusions explains the objective of a new or revised standard, the reasons for changing GAAP and the rationale for the significant decisions underlying the standard. It highlights the relevant accounting concepts, explains alternative treatments considered and those rejected. A final Basis for Conclusions published with a new standard also summarizes the results of the public exposure process including the disposition of significant comments received. A Basis for Conclusions is not part of a standard; accordingly, it does not include explanations of requirements or application guidance that properly belong in the Handbook. AcSB members must approve a Basis for Conclusions by the same majority as a standard.
In addition to the published Basis for Conclusions document, a public file of materials relating to completed projects is kept by the AcSB staff so that any member of the public can achieve a fuller understanding of the development of a new standard.
The entire process takes some time to complete. The AcSB does not have a set target for completing projects in general, but does start each project with a proposed timeline and monitors progress as milestones are reached.