Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (formerly Redeemable Preferred Shares Issued in a Tax Planning Arrangement)

The Accounting Standards Board (AcSB) had been active in consulting stakeholders on the topic of retractable or mandatorily redeemable shares issued in a tax planning arrangement.

The AcSB considers a successful standard-setting process to be one in which stakeholders of different types and geographical location can participate. In order to raise the level of stakeholder awareness and engagement in our process and activities, we will look for ways to increase our transparency.

The following information is an overview of the AcSB’s stakeholder consultations for Retractable or Mandatorily Redeemable Shares in a Tax Planning Arrangement project.

    

   

Since first Exposure Draft

September  2017 – Exposure Draft

June 2016 to Current – Private Enterprise Advisory Committee Consultations

The AcSB continues to regularly consult with the Private Enterprise Advisory Committee on various issues related to an amended classification exception for Financial Instruments, paragraph 3856.23.

February 2017 to April 2017 – Additional User Consultations

The AcSB performed additional consultations with 10 users on the risks they encounter when dealing with tax planning arrangements. The users consulted consisted of lenders from national financial institutions and included personnel from front-line lending as well as head office.

July 2016 to January 2017 – Field Testing

The AcSB engaged in field testing with a group of tax and assurance professionals from firms of varying sizes. The purpose of the field testing was to determine whether existing guidance for control in Section 1591, Subsidiaries, sufficiently addressed the characteristics of tax planning arrangements. The testing was also to confirm the AcSB's preliminary views about whether conditions, in addition to control, were necessary in its newly proposed model for a classification exception.

The AcSB and participating firms analyzed tax planning arrangements, which included estate freezes, asset rollovers, management compensation transactions and stock dividends.  

January 2016 to March 2016 – Additional Stakeholder Outreach

The AcSB and its staff conducted additional outreach with stakeholders consisting of small to large firm practitioners and tax professionals to discuss characteristics of tax planning arrangements. These consultations were conducted with technical advisors and working groups and with assurance, tax and advisory professionals from firms across Canada.

September 2015 – Webinar

On September 18, 2015, the AcSB hosted a webinar to update stakeholders on the progress of the Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (formerly Redeemable Preferred Shares issued in a tax planning arrangement) project.

During Exposure period

October 2014 to February 2015 – Round Table Discussions   

The AcSB and its staff heard from 90 stakeholders via nine roundtables held across Canada. The participants at the roundtables included 79 practitioners, 18 users and 2 academics.

Two of these roundtables were held specifically with users which included lenders from several national and local institutions and a commercial leasing company. 

The focus of the roundtables was to seek the views of stakeholders on the AcSB’s proposals in the Exposure Draft and what, if any improvements were necessary to the proposals.   

October 2014 to January 2015 – Comment Letters

73 comment letters were received on the Exposure Draft. The responses were from practitioners, one preparer, one user and four professional associations/committees.

November 2014 – Webinar

On November 20, 2014, the AcSB hosted a webinar to communicate the Exposure Draft for Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (formerly Redeemable Preferred Shares issued in a tax planning arrangement). The webinar which was broadcast in both English and French had approximately 5,000 attendees. 

Period to first Exposure Draft

October 2014 to Exposure Draft Approved

The AcSB issued an Exposure Draft that proposed to remove Financial Instruments, paragraph 3856.23.

April 2013 to April 2014 – Private Enterprise Advisory Committee Consultations

The AcSB consulted regularly with the Private Enterprise Advisory Committee on various issues related to the changes being proposed, such as cost/benefit considerations, transition implications and disclosure guidance. 

April 2013 to February 2014 – User Consultations

The AcSB consulted with 16 lenders which included local and national lenders from across Canada.  The consultations focused on understanding how retractable or mandatorily redeemable shares issued in a tax planning arrangement are viewed by lenders and the cost/benefit of equity classification for these shares.

September to November 2013 – Tax Consultations

The AcSB staff consulted with tax personnel at CPA Canada to discuss the characteristics of tax planning arrangements for example, estate freezes, asset rollovers, management compensation, stock dividends and financing arrangements, and the potential tax implications of changing the standard.

May 2013 – Large Firm Consultation

The AcSB’s staff consulted with the ASPE Large Firm Technical Professionals Group to discuss topics such as cost/benefit considerations of changing the Financial Instruments, paragraph 3856.23 (“the standard”) and current use of the standard.

March 2013 – Project Approval

In March 2013, the AcSB approved a project to undertake a re-examination of Financial Instruments, paragraph 3856.23.