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, and are documented in the AcSB Due Process Handbook. The due process is built on the following principles:
The AcSB publicizes its contact information and encourages stakeholders to communicate with it at every stage of the standard-setting process. The AcSB maintains a communications plan for outreach to the public and carries out specific activities in accordance with that plan to achieve transparency of its standard-setting activities. For example, the AcSB posts its meeting agendas on its website in advance, and posts a Decision Summary shortly after each meeting to advise the public of decisions taken.
Whereas the full-time members of the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) meet and vote in public, the AcSB discussions and voting are held in private. The AcSB’s long-standing 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.
The AcSB operates on the principle that wide consultation with interested and affected parties enhances the quality of financial reporting standards. Consultation is carried out through various means including consulting directly with affected stakeholders and with AcSB committees, issuing documents for comment by stakeholders and holding public meetings.
The AcSB analyzes the potential effects of its proposals and explains the rationale for why it made the decisions it reached in developing or changing a standard in material published with exposure drafts and final standards. The AcSB is directly accountable to the Accounting Standards Oversight Council (AcSOC) for its performance in fulfilling its mandate, including its adherence to due process as set out in the AcSB Due Process Handbook. AcSOC is an independent body that serves the public interest by overseeing and providing input to the activities of the AcSB.
Different Sets of Standards
The AcSB has issued separate accounting standards for publicly accountable enterprises, private enterprises, private sector not-for-profit organizations and pension plans. This approach facilitates standards that best suit the needs of the users of financial statements of each type of entity, having due regard to the benefits and costs of the standards.
International Financial Reporting Standards (IFRSs), as set out in Part I of the CPA Canada Handbook – Accounting, are required to be applied by publicly accountable enterprises and may be applied by private enterprises and not-for-profit organizations. The AcSB has different due process procedures for IFRSs from the procedures for other standards because IFRSs are not developed by the AcSB.
Due Process for IFRSs
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. In adopting new or amended IFRSs, the AcSB places reliance on the IASB’s due process, including the institutional arrangements that ensure its independence, competence and adherence to due process. In addition, the AcSB monitors the IASB’s compliance with its due process.
Provide Input to IASB Projects
For issues related to publicly accountable enterprises, a topic is added to the AcSB's agenda when a project is activated by the IASB. The AcSB and its staff follow the IASB’s deliberations on each project and provide their input as appropriate.
When the IASB issues proposals for comment, the AcSB:
- seeks the input of Canadian stakeholders by issuing its own exposure draft of the IASB’s proposals;
- consults with stakeholders through public roundtables or other means and with its User Advisory Council and Academic Advisory Council, as appropriate; and
- generally responds to documents issued for comment by the IASB.
Canadian stakeholders are also encouraged to respond directly to the IASB.
The AcSB also provides input to the IASB through its participation in the Accounting Standards Advisory Forum and the International Forum of Accounting Standard Setters, as well as through other ongoing communications.
Adopt IFRSs as Canadian GAAP
Any changes to IFRSs must be approved by an affirmative vote of two-thirds of the AcSB’s voting members before they become part of Canadian GAAP. Get more information on when a newly issued or amended IFRS becomes effective in Canada from the AcSB’s Staff Commentary – Newly Issued IFRSs: Early Adoption and Advance Disclosure Issues.
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.
Due Process for Other Standards
The AcSB’s procedures for developing standards other than IFRSs consist of the following:
Standards for Private Enterprises — 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 these types of organizations. Issues may be raised by committee members, AcSB members or by members of the public. The AcSB staff also notifies the committee of relevant developments in other jurisdictions.
Standards for Not-for-Profit Organizations — Issues may be raised by the AcSB’s Not-for-Profit Advisory Committee or its members, AcSB members or by members of the public. In addition, issues may arise as a result of proposed changes to accounting standards for private enterprises that also apply to not-for-profit organizations.
Standards for Pension Plans — Issues related to pension plans may be raised by AcSB members or by members of the public.
Develop a New Project
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 amended standard, as the AcSB expects to issue it. The exposure process provides:
- the AcSB with the opportunity to obtain input from all interested parties; and
- stakeholders with advance notice of impending changes and additions to Canadian accounting standards.
The AcSB’s exposure drafts are available online 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. For some projects, the AcSB may also issue other documents for comment, such as a discussion paper.
Documents for comment are accompanied by additional communication efforts to encourage maximum public input. Such efforts may include webinars, email communications, articles in publications and enewsletters, media releases, and presentations at conferences.
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.
Consider the Comments
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 proposals in a document for comment 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.
Most published proposals undergo at least some modification in light of comments received. After making all of the changes to an exposure draft, 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 two-thirds of its voting members agree to forgo re-exposure for a stated reason. If there has not been a significant change, the AcSB proceeds to publication.
Approve and Publish the Standard
The publication process includes a thorough review of the CPA Canada Handbook – Accounting to ensure that all necessary amendments consequential to the adoption of the new or amended 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 two-thirds of the AcSB’s voting 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.
Publish the Basis for Conclusions Document
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.
Explanatory information is included as part of exposure drafts to assist readers in understanding the proposals and improving the comment process. This material explains the objective of a new or amended 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.
The 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 Basis for Conclusions, 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. Contact the AcSB to receive a public file.