FYI Article – 2015 Annual Improvements: Proposed Clarifications to the Standards
The Accounting Standards Board (AcSB) recently issued an exposure draft of 2015 annual improvements. Annual improvements consist of limited amendments to accounting standards for private enterprises in Part II of the CPA Canada Handbook – Accounting to clarify guidance or wording, or correct relatively minor unintended consequences, conflicts or oversights. The focus of annual improvements is to help stakeholders apply the standards, rather than introduce significant change.
Annual Improvements Process
The process for identifying annual improvements starts with a stakeholder submitting an issue that meets the Annual Improvements Criteria. The AcSB established the Private Enterprise Advisory Committee to assist the AcSB in maintaining and improving accounting standards in Part II. With input from this Committee, the AcSB deliberates the issue and decides whether it should be addressed in the annual improvements process.
Do the 2015 Annual Improvements Affect You?
The Exposure Draft, “2015 Annual Improvements to Accounting Standards for Private Enterprises,” proposes changes to:
- the disclosures in Section 1582, Business Combinations;
- the disclosures in Section 3051, Investments, and Section 3065, Leases; and
- the measurement of a defined benefit plan obligation in Section 3462, Employee Future Benefits.
If you acquired a business through the acquisition of an asset or group of assets, this Exposure Draft may affect you. The proposed amendments clarify the disclosure requirements in this situation, specifically to require the disclosure of the amounts recognized at the acquisition date for each major class of assets acquired and liabilities assumed.
Investments and Leases
If you recorded an impairment loss or a reversal of an impairment loss in accordance with Section 3051 or Section 3065, this Exposure Draft may affect you. The proposed amendments clarify that disclosure of the amount of any impairment loss or reversal of a previously recognized impairment loss is required, which would be consistent with the disclosure requirement in Financial Instruments, paragraph 3856.52(e).
Employee Future Benefits
If you have a defined benefit plan, this Exposure Draft may affect you. The proposed 2015 amendments are consistent with the principle proposed in the 2014 annual improvements that the option to use a funding valuation for an unfunded plan can only be applied by entities that have at least one funded defined benefit plan. As a result of concerns raised by stakeholders about the clarity of the 2014 proposed amendments, the relevant paragraphs have been redrafted to make them easier to understand and a decision tree is proposed to be added to the Section. The 2015 proposed amendments also clarify that an actuarial valuation for funding purposes is one that is required to be prepared in order to comply with pension legislation or regulation.
Timing of Adoption and Transitional Provisions
The AcSB expects to issue the final amendments in the fourth quarter of 2015. The amendments will be effective for years beginning on or after January 1, 2016. Earlier application would be permitted. The AcSB intends that the amendments be applied retrospectively.
Do You Agree with the Proposals?
Provide your input by sending us a written response to the Exposure Draft by May 26, 2015. You can use this Response Questionnaire to give us your feedback.
Stay Informed of Future Developments
Further information about this project can be found on the supporting project page.
We Are Always Open to Hearing Your Issues
Help us to help you. Do you have an issue that should be considered as an annual improvement? The AcSB relies on stakeholders to inform it of the issues that need attention, as stakeholders are the ones using the standards. If you have an issue – here’s how you can let us know.
Davina Tam, CPA, CA
Principal, Accounting Standards Board
Phone: +1 (416) 204-3514