Not-for-Profit Advisory Committee Meeting Notes – September 10, 2018

The Not-for-Profit Advisory Committee’s purpose is to assist the Accounting Standards Board (AcSB) on maintaining and improving the accounting standards for not-for-profit organizations (NFPOs) in Part III of the CPA Canada Handbook – Accounting and in identifying the need for non-authoritative guidance about the standards. The Committee makes recommendations to the AcSB but is not authorized to interpret or provide authoritative guidance on accounting standards for NFPOs.

This document has been prepared by the staff of the AcSB and is based on discussions during the Committee’s meeting. The meeting notes do not necessarily represent the views of the AcSB and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of accounting standards for NFPOs. Only the AcSB can make such a determination.                                             


Contributions – Revenue Recognition and Related Matters

The Committee agreed with the information on a chart that staff provided, summarizing the types of contributions and their characteristics commonly seen in practice. The Committee gave the staff some editorial suggestions. The AcSB will be discussing this chart at its September meeting. This information will be used to develop further the proposed alternative for the AcSB’s consideration.


The staff presented the Committee with, and requested input on, proposed criteria and other indicators for determining if a combination of two or more NFPOs or an NFPO with a for-profit enterprise may be accounted for as a merger.

Committee members thought that the staff’s proposed criteria and other indicators were a good starting point and made recommendations for how the criteria and other indicators may be described. Two members suggested using the notion of primary and secondary indicators rather than required criteria and other possible indicators. One member also suggested that a merger should be defined and that a basic principle describing when a combination is a merger should be provided. This would enhance consistency when applying the criteria and other indicators to determine if the combination may be accounted for as a merger.


The staff presented the Committee with a brief verbal update on the AcSB’s July 2018 approval of a project on Section 3400, Revenue, in Part II of the Handbook and the next steps. NFPOs apply Section 3400 for sales of goods and services, which can be significant for some types of NFPOs. The staff also requested the Committee’s input off-line on the proposed solutions to address stakeholders’ issues about insufficient guidance on accounting for revenue, as well as requested input on the project milestones relevant to the Committee.


The staff requested the Committee’s input on the types of hedging relationships used by NFPOs and whether expanding the scope of qualifying hedging relationships will result in increased use of hedge accounting by NFPOs. The staff also requested input on how to increase the usefulness of the hedge accounting guidance in Section 3856, Financial Instruments, for NFPOs without adding undue complexity. The Committee agreed that the most common types of hedging items for NFPOs are foreign currency hedges and interest rate swaps. The Committee observed that the primary reason NFPOs do not use hedge accounting is due to the complexity of the guidance. A few Committee members commented that another reason that hedge accounting is not used is that the critical terms in the hedging relationship do not match. For example, the maturity date of the hedging item is often more than two weeks from the maturity date of the hedged item. The Committee advised that the AcSB consider ways to simplify the guidance for hedge accounting. The Committee also suggested that the AcSB consider what, if any, additional qualifying relationships are needed to be added to the guidance.