Subsidiaries and Interests in Joint Arrangements

BACKGROUND

Clarifications will be made to Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, in response to stakeholder feedback.

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The amendments will clarify:

  • that the transition provisions may not be applied when an enterprise changes its accounting policy choice to consolidate its subsidiaries at any time in the future;
  • how the voting interest, if any, that an investor holds in a subsidiary controlled through a combination of voting rights and contractual arrangements should be accounted for when using the cost method; and
  • that an enterprise is not required to assess whether contractual arrangements give rise to control when subsidiaries are not consolidated.

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PROJECT NEWS

Basis for Conclusions – Clarifications to Sections 1591 and 3056
December 8, 2016. This document sets out how the AcSB reached its conclusions. As well, it sets out significant matters arising from comments received in response to its Exposure Draft and indicates how the Board dealt with the issues raised.

AcSB Decision Summary – September 21-22, 2016
The AcSB approved the issuance of narrow-scope amendments to Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, subject to final drafting and a written ballot. 

In order to coincide with the effective date of amendments to be issued as a result of its Subsidiaries and Investments project, the AcSB decided that the amendments to clarify the accounting for a subsidiary controlled through a combination of contractual arrangements and voting interests will be effective for fiscal years beginning on or after January 1, 2018.

The amendments to clarify that the transition provisions may not be applied when an enterprise changes its accounting policy choice to consolidate its subsidiaries at any time in the future, and that an enterprise preparing non-consolidated financial statements is not required to assess whether contractual arrangements give rise to control, will be effective for fiscal years beginning on or after January 1, 2017, with earlier application permitted.

The AcSB also agreed that, other than drafting improvements, no other changes to the Exposure Draft proposals are required as a result of the feedback received from stakeholders.  The AcSB expects to issue the amendments to Sections 1591 and 3056 in December 2016.

FYI Article – Subsidiaries and Interests in Joint Arrangements: Take Advantage of the Transitional Provisions in 2016
August 16, 2016.  This article highlights the availability of transitional provisions on initial transition to Sections 1591 and 3056.

AcSB Decision Summary – July 20, 2016
The AcSB was informed of two additional issues relating to the transition provisions raised by stakeholders. No decisions were made.  Rather, the AcSB will consider these issues when deliberating the comments received from the Exposure Draft, “Clarifications to Sections 1591 and 3056.”

AcSB Exposure Draft – Clarifications to Sections 1591 and 3056
May 25, 2016. The AcSB is proposing clarifications to Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, in response to stakeholder feedback. Stakeholders are encouraged to submit their comments by August 2, 2016.

Private Enterprise Advisory Committee Notes – April 14, 2016
The Committee was advised of the AcSB’s decision to issue an exposure draft to propose several clarifications to Sections 1591 and 3056, as recommended by the Committee.  

Committee members discussed the proposals and made recommendations relating to some minor issues.

AcSB Decision Summary – March 22-23, 2016
The AcSB discussed some narrow-scope amendments to Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, that have been proposed by its Private Enterprise Advisory Committee, in response to stakeholder feedback. The AcSB agreed to issue an exposure draft to make the following clarifications:

  • Transitional provisions
    The transitional provisions in Section 1591 and Section 3056 were developed to provide relief only on transition to the new Standards and when an enterprise prepares its first financial statements using accounting standards for private enterprises. The amendment will clarify that the transition provisions may not be applied when an enterprise changes its accounting policy choice to consolidate its subsidiaries at any time in the future.
  • Subsidiaries – Accounting for a subsidiary controlled through a combination of contractual arrangements and voting interest
    The AcSB agreed to clarify how the voting interest, if any, that an investor holds in a subsidiary controlled through a combination of voting rights and contractual arrangements should be accounted for when using the cost method.
  • Subsidiaries – Evaluating contractual arrangements for control: Enterprises electing not to consolidate
    The AcSB agreed to clarify that an enterprise is not required to assess whether contractual arrangements give rise to control when subsidiaries are not consolidated.

Sections 1591 and 3056 are effective for fiscal years beginning on or after January 1, 2016. Therefore, the AcSB decided that the amendments should be exposed as soon as possible.  The AcSB expects to issue an exposure draft in the second quarter of 2016 for a 60-day comment period.

After deliberating the feedback received, the final amendments are expected to be included in Part II of the Handbook in the fourth quarter of 2016.  The amendments would be effective for fiscal years beginning on or after January 1, 2017. Earlier application would be permitted.

In addition, the AcSB will solicit input and raise awareness of the clarifications through a variety of communication vehicles.

 

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.