Private Enterprise Advisory Committee
December 1, 2016
The Private Enterprise Advisory Committee’s purpose is to assist the Accounting Standards Board (AcSB) in maintaining and improving accounting standards for private enterprises (ASPE) in Part II of the CPA Canada Handbook – Accounting and in identifying the need for non-authoritative guidance about the standards. The Committee makes recommendations to the AcSB but is not authorized to interpret or provide authoritative guidance on ASPE.
This document has been prepared by the staff of the AcSB and is based on discussions during the Committee’s meeting. The meeting notes do not necessarily represent the views of the AcSB and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of ASPE. Only the AcSB can make such a determination.
Redeemable Preferred Shares Issued in a Tax Planning Arrangement
The Committee discussed the status of ongoing field testing to assess the viability of applying “retention of control of an enterprise” as a condition for a classification exception. The Committee also reviewed details of one of the tax planning arrangements being analyzed by the field testing participants. Committee members provided input on the arrangement.
Committee members provided further input into an analysis of the following issues:
- other conditions that should be met in order for the classification exception to be permitted, in addition to retention of control of the enterprise; and
- reclassification considerations.
Review of Recently Issued Standards under Other Accounting Frameworks
The Committee’s mandate includes reviewing recently issued standards issued by other standard setters to consider whether some or all of the new accounting in those standards would provide significant benefit to Canadian private enterprise reporting. The Committee discussed the following:
- new or amended standards under U.S. GAAP issued by the U.S. Financial Accounting Standards Board since February 2014, particularly amendments specific to private companies;
- International Financial Reporting Standards (IFRSs) issued or amended by the International Accounting Standards Board (IASB) since December 2015; and
- the IFRS for SMEs amended by the IASB in 2015.
The Committee considered a number of topics and agreed to advise the AcSB to include these topics in its consideration of priorities for private enterprises:
- the benefit of amortizing goodwill and providing relief from the recognition of intangible assets on business combinations similar to the approaches taken by the FASB or IFRS for SMEs;
- the merits of the presentation requirements of current and non-current deferred tax assets and liabilities; and
- The prescriptive nature of the guidance for push-down accounting in comparison to other frameworks.
After some discussion, the Committee also agreed to continue to monitor the following additional topics:
- simplification of accounting for replacement of items of property, plant and equipment;
- recognition of cloud computing fees;
- IFRS and U.S. GAAP standards on leasing; and
- a revaluation model for property, plant and equipment.
Consultation on Project Priorities
To carry out its plan to consult with stakeholders about relative priorities for ASPE, the AcSB is focusing its consultation on specific topics of concern at this time. The Committee discussed issues relating to the following topics:
The Committee discussed challenges in applying the principles of the revenue standard in its current form. Committee members highlighted the increasing need to refer to other frameworks for additional guidance. In particular, the following types of transactions were highlighted and discussed further:
- construction contracts;
- multiple-element arrangements;
- up-front, non-refundable fees;
- loyalty programs;
- bill-and-hold arrangements; and
- subscription sales and modification of contracts.
Related Party Transactions
The Committee discussed various challenges with the application of Section 3840, Related Party Transactions. In particular, Committee members highlighted:
- interaction of Section 3840 with other Sections in Part II;
- challenges with determining the carrying amount in some circumstances; and
- presentation and disclosure considerations.
Financial Statement Concepts
The Committee discussed the use of Section 1000, Financial Statement Concepts, in practice, and the situations in which stakeholders refer to this Section. The Committee also acknowledged the potential for changes to financial statement concepts in other frameworks and the impact of these changes on Part II.
Transaction Price Allocation
The Committee discussed the relevance to Part II to a transaction price allocation issue raised at the September 2016 IFRS Discussion Group meeting. The issue relates to how the total cost of a purchase should be allocated to individual assets and liabilities when a group of assets acquired is not a business and includes both financial instruments and non-financial items.
As the guidance in Part II and IFRSs is similar and the AcSB referred the issue to the IFRS Interpretation Committee (IFRIC), the Committee agreed to defer further discussion on the issue until a response was received from IFRIC.
The Committee discussed amendments to its Terms of Reference and Statement of Operating Procedures.
The Committee supported the amendments to its Terms of Reference and approved the Statement of Operating Procedures for ratification by the AcSB.