Strategic Planning – Accounting Standards for Private Enterprises
The planning and consultation process the Accounting Standards Board (AcSB) followed to develop its strategic direction for private enterprises is summarized below.
For current activities, visit the Standards for Private Enterprises area of the website.
2011 Standards become effective
- Accounting Standards for Private Enterprises (ASPE are mandatory for Canadian private enterprises for years beginning on or after January 1, 2011.
- These enterprises may apply ASPE in the CICA Handbook – Accounting (Part II) or International Financial Reporting Standards (IFRSs) in the Handbook (Part I). Earlier application is permitted.
2010 Approve and issue standards into Canadian GAAP
- In September, the AcSB approves the standards.
- In December, ASPE are issued as Part II of the CICA Handbook – Accounting. Section 1500, First-time Adoption, requires ASPE to be adopted retrospectively, but also provides alternatives for specific situations when that may not meet a cost/benefit test.
2009 Expose standards
- The Private Enterprise Advisory Committee continues to meet extensively and provide recommendations to the AcSB.
- In April, the Exposure Draft, “Generally Accepted Accounting Principles for Private Enterprises,” is issued.
2008 Decide to develop made-in-Canada standards
- In May, the AcSB decides to develop a set of made-in-Canada financial reporting standards for private enterprises. The Private Enterprise Advisory Committee – consisting of preparers, auditors and users involved with private enterprises – is created to aid in the development of these standards.
- The Advisory Committee meets extensively and provides recommendations to the AcSB.
2007 Solicit views on best approach to develop standards
- In May, the AcSB publishes an Invitation to Comment and accompanying Discussion Paper, “Financial Reporting by Private Enterprises,” to solicit stakeholders’ views as to the best approach for developing such standards.
- The Invitation to Comment and Discussion Paper identify three possible approaches to developing private enterprise GAAP:
- A top-down approach based on public enterprise GAAP (i.e., IFRSs) but providing for differences on a number of topics;
- adoption of the proposed IFRS for Small and Medium-sized Entities standard when finalized, possibly with some modification; and
- an independently developed set of standards.
- The AcSB begins discussing the responses to these documents for comment and other input.
2006 Approve new strategic plan
- The AcSB approves a strategic plan to govern its activities in the next few years.
- In the Strategic Plan, “Accounting Standards in Canada: New Directions,” the AcSB notes that “one size does not fit all” and decides to pursue separate financial reporting strategies for publicly accountable enterprises, private enterprises and not-for-profit organizations.
- The AcSB begins research on what the reporting strategy could be for private enterprises.
2005 Consult on tentative conclusions
- After considering the input received, the AcSB presents its tentative conclusions to Accounting Standards Oversight Council (AcSOC) at its February public meeting.
- The AcSB’s tentative conclusion is that separate strategies for each of the distinct categories of reporting entity should be developed (i.e., publicly accountable enterprises, private enterprises and not-for-profit organizations).
- In March, the AcSB issues an Invitation to Comment on its Draft Strategic Plan after considering the advice received from the AcSOC. The AcSB proposes to undertake a comprehensive examination of the needs of the users of private enterprises’ financial statements and then determine the most appropriate financial reporting model to meet those needs.
- In September, the AcSB begins its review of the comments received in response to the Draft Strategic Plan. Overall, the responses are supportive of the strategies that had been proposed.
- At its October public meeting, AcSOC reviews the comments and concurs with the AcSB’s tentative conclusion that it had a basis for proceeding to finalize a plan.
2004 Begin consultations on future direction of accounting standards
- The AcSB embarks on a process to develop a new five-year plan for the period 2006-2011 to reconsider its previous strategies of harmonizing with U.S. GAAP while working to support the international convergence of accounting standards.
- In May, the AcSB seeks public input through its Invitation to Comment, “Accounting Standards in Canada: Future Directions,” and a series of public roundtable meetings and other consultations with stakeholders.
- The Invitation to Comment asked whether Canada should:
- maintain its own standard-setting capability;
- maintain its own GAAP or adopt either US GAAP or IFRSs;
- continue with the twin objectives of harmonization and convergence; and
- consider modifying current Canadian GAAP requirements to provide better information to the users of financial statements of various different types of entities through, for example, a wider application of differential reporting.
- A wide range of interested parties provide considerable feedback to the AcSB with Invitation to Comment responses.
The following approach was taken in developing the standards:
- the standards would result in general purpose financial statements that meet the needs of external users (i.e., they will be GAAP);
- the standards or IFRSs can be used by any private enterprise — there is no size restriction or other requirement such as unanimous consent;
- the standards are more principles-based and encourage the use of professional judgment;
- the pre-changeover standards in the CICA Handbook – Accounting (Part V) were used as a starting point;
- issues in the pre-changeover standards that caused significant concern to private enterprises were reconsidered, based on cost/benefit considerations; however, the majority of the recognition and measurement requirements in Part V were left unchanged as they did not raise significant concerns and were well understood;
- standards and guidelines that were generally irrelevant for the sector were eliminated; and
- all disclosure requirements were re-evaluated from the viewpoint of the needs of users of financial statements of private enterprises.
Key Differences – ASPE vs. Previous Canadian GAAP
ASPE differ from previous Canadian GAAP as follows:
- recognition, measurement and presentation requirements have been simplified in the following areas:
- financial instruments;
- asset retirement obligations;
- employee future benefits;
- goodwill and other intangible assets;
- income taxes;
- stock-based compensation;
- investments; and
- joint ventures;
- disclosures that are appropriate for private enterprises and meet the needs of users have been reduced by about half; and
- former Emerging Issues Committee (EIC) Abstract guidance that was important to this sector was embedded in the standards.
Changes from the Exposure Draft Proposals
ASPE include the following significant changes from the Exposure Draft proposals:
- Financial Instruments
- A fair value option was added permitting an enterprise to elect fair value measurement for any instrument. This election will be made on initial recognition and is irrevocable.
- Enterprises should capitalize transaction costs for financial instruments measured at amortized cost (but not for those measured at fair value).
- Employee Future Benefits
- The scope of the simplified approach for defined benefit plans was widened to include all defined benefit plans.
- Enterprises adopting the simplified approach must use this approach for all defined benefit plans.
- EIC Abstracts
- Principles in several EIC Abstracts relating to financial instruments, revenue, income taxes and related party transactions were incorporated into the standards.
- Requirements to disclose management compensation and amounts of government remittances in arrears were deleted.
- Changes were also made to certain other disclosure requirements.
The AcSB also clarified or modified other Exposure Draft proposals in light of comments received.
Resources – Strategic Direction for Private Enterprises
- “Accounting Standards in Canada: New Directions” (January 4, 2006)
- Extracts from AcSB Decision Summaries concerning planning discussions (updated following AcSB meetings)
- Invitation to Comment, “Accounting Standards in Canada: Future Directions — Draft Strategic Plan” (March 31, 2005)
- “Comparison of Canadian GAAP and IFRSs” (April 28, 2005)
- “Implications of Moving to IFRSs for Existing Canada/US GAAP Differences” (May 19, 2005)
- Invitation to Comment, “Accounting Standards in Canada: Future Directions” (May 31, 2004)
- Discussion Paper, with links to background information (June 24, 2004)
- Summary of comments received from roundtable meetings (October 28, 2004)
- Accounting Standards Board Plan 2003-2005 (August 2003)
Documents for Comment
- Exposure Draft, “Generally Accepted Accounting Principles for Private Enterprises” (April 2009)
- Invitation to Comment and accompanying Discussion Paper, “Financial Reporting by Private Enterprises” (May 2007)
- FYI Newsletter
- “Accounting Standards – Moving Forward” (March 2010)
- “Private Enterprises – A New Journey Begins” (August 2010)
- “Private Enterprises – Adopting the New Standards” (October 2010)
- “Private Enterprises – Moving Time” (Special Edition 2010)
- “Private Enterprise GAAP — A Huge Step In The Right Direction!” (April 2009)
Comparisons of Canadian GAAP to Other Standards
Background Information and Basis for Conclusions
- “Accounting Standards for Private Enterprises” (June 2010)
Need more information? Contact the AcSB.