FYI Article – 2015 Annual Improvements: Clarifying the Standards
In October 2015, the Accounting Standards Board (AcSB) issued the 2015 annual improvements, including the Basis for Conclusions. 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.
About the 2015 Annual Improvements
Several standards have been amended as a result of the 2015 annual improvements.
Section 1582, Business Combinations – Disclosures
The amendments clarify the disclosure requirements when a business combination is achieved through the acquisition of an asset or group of assets. Specifically, disclosure of the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed is also required.
Section 3051, Investments, and Section 3065, Leases – Disclosures
Sections 3051 and 3065 previously required the recognition of the amount of any impairment loss and the reversal of a previously recognized impairment loss, but not the related disclosure. The amendments clarify that such disclosure is required for subsidiaries, investments and interests in joint arrangements accounted for using the cost or equity method, and lease assets.
Section 3061, Property, Plant and Equipment – Disclosures
Section 3061 was modified to remove the words “an item of” from specific disclosure requirements. This change aligns the text with how the requirements are being applied in practice and was not part of the exposure draft of 2015 annual improvements for the reasons stated in paragraph 28 of the Basis for Conclusions.
Section 3462, Employee Future Benefits – Use of a Funding Valuation
Section 3462 permits the use of a funding valuation in place of an accounting valuation in measuring the defined benefit obligation for a defined benefit plan. The amendments clarify when an enterprise can use a funding valuation and add a decision tree for determining eligibility for using that funding valuation. A funding valuation, as clarified by the amendments, is one that is required to be prepared in order to comply with legislative, regulatory or contractual requirements — in addition to the existing criteria that a funding valuation does not include a valuation prepared using a solvency, wind-up or similar valuation basis.
The above amendments are effective for annual financial statements relating to fiscal years beginning on or after January 1, 2016, with earlier application permitted.
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