|Current Status||Next Steps|
Exposure Draft is being developed.
The AcSB plans to issue the Exposure Draft in the third quarter of 2018.
This project will clarify that the guidance relating to the cost method in Section 3051 also applies to interests in jointly controlled enterprises accounted for using the cost method.
In December 2016, paragraph 3051.07A was added to Part II of the CPA Canada Handbook – Accounting. The paragraph describes how to apply the cost method to an investment subject to significant influence to determine the initial measurement of an investment. Section 3056, Interests in Joint Arrangements, permits an investor with an interest in a jointly controlled enterprise to account for its interest using either the equity method or cost method, as defined in Section 3051. Questions have arisen as to whether paragraph 3051.07A also applies to interests in jointly controlled enterprises.
PROJECT NEWS & DECISION SUMMARIES
AcSB Decision Summary – June 19, 2018
The Board considered the advice of its Private Enterprise Advisory Committee to clarify the applicability of the cost-method guidance in Section 3051, Investments. The Board decided to propose that paragraph 3051.07A should be applied to interests in jointly controlled enterprises that are accounted for using the cost method.
The Board also considered a communication plan for the forthcoming exposure draft and decided on its outreach activities with stakeholders. The Board directed staff to begin the balloting process for the proposals and plans to issue an exposure draft in September 2018 with comments due in December 2018.
AcSB Decision Summary – March 20-21, 2018
The Board also considered the Committee’s advice relating to issues raised by stakeholders through its outreach activities and decided:
- to consider a 2019 annual improvement process to clarify the scope in Section 3051, Investments, when the cost method is used to account for an interest in a jointly controlled enterprise; and
- to consider whether issues regarding the classification of interests in joint arrangements could be incorporated into a post-implementation review for Section 3056, Interests in Joint Arrangements.
Private Enterprise Advisory Committee Notes – May 3, 2018
Application of the Cost Method
The Committee discussed a proposal to clarify whether cost-method guidance in Section 3051, Investments, applies to jointly controlled enterprises. The issue arises because paragraph 3051.07A refers only to investments subject to significant influence while Section 3056, Interests in Joint Arrangements, directs stakeholders to Section 3051 when the cost method is used.
Committee members considered whether cost-method guidance should be included in Section 3056 or whether paragraph 3051.07A should be amended to specify that it also applies to jointly controlled enterprises. The Committee advised the Board to include a reference to jointly controlled enterprises within paragraph 3051.07A to maintain consistency within the standard.
Private Enterprise Advisory Committee Notes – November 7, 2017
Accounting for Interests in Joint Arrangements
The Committee considered whether additional guidance or illustrative examples would clarify the accounting for joint arrangements as jointly controlled enterprises or operations in line with Section 3056. The additional guidance or illustrative examples would assist when assessing whether the joint arrangement is a jointly controlled enterprise or operation when the investee is a partnership. The Committee agreed to recommend to the Board that further clarification was needed before considering additional illustrative examples. However, the Committee advised that this clarification may change current practice and, therefore, thought this item was outside the scope of an annual improvement.
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.