Accounting Standards Improvements for Not-for-Profit Organizations

Current Status Next Steps

Final Handbook material approved.

Second quarter of 2018 – Final Handbook material to be issued.

BACKGROUND

This project is being undertaken in response to the feedback from private sector stakeholders to the April 2013 AcSB/PSAB joint Statement of Principles, “Improvements to Not-for-Profit Standards.”

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This project will address the proposals that a not-for-profit organization (NFPO):

  • applies the referenced accounting standards for private enterprises in Part II of the Handbook to report the capitalization, amortization and disposal of tangible assets and recognize write-downs to reflect a partial loss of service potential of a tangible asset still in use (Principle 5);
  • continues to apply the existing Part III standards for intangible assets and add a requirement to Part III of the Handbook to recognize write-downs to reflect a partial loss of service potential of an intangible asset still in use (Principle 6);
  • continues to apply the existing Part III standards for collections and add a requirement to Part III to recognize collections at either cost or nominal value (Principle 8); and
  • maintains the existing standards in Part III for:
    • works of art, historical treasures and similar items that are not part of a collection (Principle 9);
    • related party transactions (Principle 12); and
    • allocated expenses (related to fundraising and general support costs) (Principle 15).

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PROJECT NEWS & DECISION SUMMARIES

Webinar – Not-for-Profit Accounting Update
December 11, 2017. Do you represent or advise a Canadian not-for-profit organization, or are you a user of not-for-profit entities’ financial reports? If so, get to know the latest financial reporting developments that may change your financial statements. Tune in on January 23 (English) or January 24 (French).

AcSB Decision Summary – September 20-21, 2017
The Board considered responses from stakeholders to its Exposure Draft, “Accounting Standards Improvements for Not-for-Profit Organizations,” and the recommendations from its Not-for-Profit Advisory Committee on how to proceed with the proposals based on that feedback.

The Board approved the issuance of the following new standards, subject to final drafting and a written ballot:

  • Section 4433, to replace Section 4431, Tangible Capital Assets Held by Not-for-Profit Organizations;
  • Section 4434, to replace Section 4432, Intangible Assets Held by Not-for-Profit Organizations; and
  • Section 4441, to replace Section 4440, Collections Held by Not-for-Profit Organizations.

The Board decided to:

  • clarify the guidance on identifying and measuring impairment in Sections 4433 and 4434;
  • modify Section 4441 to allow an NFPO that has multiple collections and elects to measure collections at cost to measure some collections at a nominal amount when cost cannot be reasonably determined for such collections; and
  • clarify that when an NFPO has integrated assets, it may assess impairment of those assets under Sections 4433 and 4434 on the combined group of integrated assets and not at the individual asset level.

The Board considered all of the feedback received and agreed that, other than drafting improvements, no other changes to the Exposure Draft proposals are required.

The Board expects to issue the final standards in the second quarter of 2018. The amendments will be effective for fiscal years beginning on or after January 1, 2019, with earlier application permitted.

Not-for-Profit Advisory Committee Notes – February 22, 2017
May 4, 2017. These meeting notes provide a summary of discussions held.

FYI Article – Change Is Coming to Accounting Standards for Not-for-Profit Organizations!
February 17, 2017. This article outlines the AcSB’s Exposure Draft and urges you to respond by May 31, 2017.

Webinar – AcSB Exposure Draft for Private Sector Not-for-Profits
February 10, 2017. Tune in to this webinar on April 12, 2017 (English) or April 19, 2017 (French) to learn about the AcSB’s Exposure Draft. We outline the proposals that focus on tangible capital assets, intangible assets and collections held by these entities.

AcSB Exposure Draft – Accounting Standards Improvements for Not-for-Profit Organizations
February 1, 2017. The AcSB has issued an Exposure Draft proposing to revise and replace Section 4431, Tangible Capital Assets held by Not-for-Profit Organizations, Section 4432, Intangible Assets held by Not-for-Profit Organizations, and Section 4440, Collections held by Not-for-Profit Organizations. Stakeholders are encouraged to submit their comments by May 31, 2017.

AcSB Decision Summary – December 15, 2016
The AcSB discussed the comment period deadline for the upcoming exposure draft and decided to provide a longer comment period of 120 days.  The AcSB plans to issue the exposure draft in early February 2017 with a May 31, 2017 comment deadline.

The AcSB also discussed the extent and type of consultations needed to obtain input on the exposure draft proposals. The AcSB emphasized the importance of receiving feedback from the not-for-profit sector and directed the staff to offer stakeholders different ways to provide input on the proposals.

Not-for-Profit Advisory Committee Notes – November 17, 2016
December 20, 2016. These meeting notes provide a summary of discussions held.

AcSB Decision Summary – October 13, 2016
The AcSB completed its deliberations of the feedback received from the fatal flaw review of the upcoming exposure draft.  The AcSB decided to clarify its proposals including those on how to account for gains and losses on proceeds of disposal of items from collections.

The AcSB expects to issue the exposure draft in the first quarter of 2017.

AcSB Decision Summary – September 21-22, 2016
The AcSB discussed the effective date of the new Sections proposed in the upcoming exposure draft and the timing of incorporating the proposed new Sections into Part III of the Handbook.  The AcSB decided to propose an effective date of January 1, 2019 in the exposure draft.  The AcSB also considered whether using an alternative effective date of April 1 for changes to Part III on an ongoing basis would be preferable and decided to seek input on that proposal in the exposure draft.

The AcSB also discussed concerns raised so far from the fatal flaw review of the exposure draft.  The AcSB will continue to consider feedback received from the fatal flaw review and will discuss the need to revise the proposals at a future meeting, if necessary.

Not-for-Profit Advisory Committee Notes – June 21, 2016
September 23, 2016. These meeting notes provide a summary of discussions held.

AcSB Decision Summary – July 20, 2016
The AcSB considered the input from its Not-for-Profit Advisory Committee and decided that, in addition to proposals approved in March 2016, the exposure draft will include proposals that require a not-for-profit organization (NFPO) to:

  • recognize collections held by NFPOs on the statement of financial position at either cost or nominal value;
  • recognize write-downs to reflect a partial loss of service potential of a collection (i.e., the cost of the collection would be written down to its replacement cost or fair value);
  • choose whether to apply the proposals relating to collections retrospectively and use transition relief to measure the cost of collections in a practical manner; and
  • apply the proposals for write-downs of tangible and intangible assets prospectively.

The AcSB decided to ask stakeholders about the effects of applying the guidance in Section 3061, Property, Plant and Equipment, on componentization.

The AcSB also directed the staff to request the Committee and other stakeholders to conduct a fatal flaw review of the exposure draft prior to issuing it. In light of this additional review, the AcSB is examining when the exposure draft will be issued.

AcSB Decision Summary – April 20, 2016
The AcSB discussed presentations that were made at recent meetings of the Accounting Standards Oversight Council and the International Forum of Accounting Standard Setters, on domestic and international developments relating to not-for-profit organizations.

AcSB Decision Summary – March 22-23, 2016
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.

Not-for-Profit Advisory Committee Notes – January 6, 2016
February 29, 2016. These meeting notes provide a summary of discussions held.

AcSB Decision Summary – May 25-26, 2015
The AcSB reaffirmed its commitment to continue:

  • to maintain a separate set of standards for not-for-profit organizations in the private sector that addresses transactions and circumstances unique to this sector;
  • with the improvements process to review the standards in Part III of the Handbook and update the standards as necessary; and
  • to work in collaboration with the Public Sector Accounting Board (PSAB), with the objective of achieving consistency between private and public sector standards for not-for-profit organizations when appropriate.

The AcSB approved the creation of a standing not-for-profit organizations advisory committee to assist the Board with its standards improvements initiatives, as well as providing input on other standard- setting matters of interest to private sector not-for-profit organizations.  An invitation soliciting interest will be posted shortly at www.frascanada.ca.

The AcSB approved the following projects to address all of the Principles relating to private sector standards that were proposed in the April 2013 joint AcSB/PSAB Statement of Principles, "Improvements to Not-for-Profit Standards."

Accounting Standards Improvements
The AcSB decided to conduct an accounting standards improvements project in two phases.  The first phase of the project will address whether and how to amend the standards regarding the accounting for capital assets other than the size exemption, but including collections of works of arts and historical treasures and the disclosure of related party transactions and allocated expenses (Principles 5, 6, 8, 9, 12 and 15).

The second phase of the project will address whether and how to amend Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, regarding how to account for controlled not-for-profit organizations and profit-oriented enterprises (Principles 10 and 11).  This phase of the project would also address the proposals related to the presentation and disclosure of expenses (Principle 14).

Contributions – Revenue Recognition and Related Matters
The AcSB approved a project to conduct further research on the recognition of revenue from contributions (Principles 1 to 4).  This project will also address the implications of the deliberations relating to the size exemption for capital assets (Principle 7) and financial statement presentation (Principle 13).

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.