The Private Enterprise Advisory Committee assists the Accounting Standards Board (AcSB) with maintaining and improving accounting standards for private enterprises (ASPE) in Part II of the CPA Canada Handbook – Accounting and with 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 ASPE.
The AcSB staff has prepared this document based on discussions held during the Committee’s meeting. The meeting notes do not necessarily represent the AcSB’s views, and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of ASPE. Only the AcSB can make such a determination.
Related Party Combinations
The Private Enterprise Advisory Committee received an update on the Related Party Combinations project and discussed a proposal to widen the scope of Related Party Transactions, paragraph 3840.44, to reference all related party business combinations.
Some Committee members supported the proposal and indicated that it would simplify the current accounting for related party combinations.
Other Committee members noted that the proposal would result in more combination transactions being captured within paragraph 3840.44(b), and that the current requirement to restate the comparatives in the financial statements of the combined enterprise may prove more burdensome. A few Committee members indicated that, in some instances, it is more cost efficient to obtain independent fair value estimates for the acquired assets and liabilities.
The Committee discussed whether relief from the requirement in paragraph 3840.44(b) to restate comparatives would address the challenges raised. The Committee also discussed whether an accounting policy choice should be explored as an option to accommodate circumstances where the carrying values of the acquired assets and liabilities are impracticable to obtain. Some members expressed concern that an accounting policy choice may lead to additional diversity in practice.
The AcSB will consider the Committee’s feedback at the February 2022 Board meeting.
Annual Plan – ASPE Project Priorities
The Committee discussed topics the AcSB previously identified as future priorities. If the Board’s next annual plan has capacity, the Committee advised the Board to consider projects on relief from recognition of intangibles and amortization of goodwill, measurement of investments in a related party transaction, and accounting for onerous contracts.
The AcSB will consider the Committee’s feedback at the March 2022 Board meeting as part of finalizing its 2022-2023 Annual Plan.
The Committee received an update on the status of the AcSB’s 2022-2027 Strategic Plan, which is being finalized and will be issued by March 31, 2022. With the Board’s core strategies now confirmed, Committee members were informed of the Board’s preliminary research on the strategic initiatives relating to the Preface and scalability of the standards.
The Committee provided feedback on several questions relating to these two strategic initiatives:
- The current Preface does not clearly define which types of entities should apply each framework, resulting in entities with similar characteristics applying different frameworks.
- In some circumstances, certain generally accepted accounting principles requirements do not meet users’ needs. This can result in audit qualifications most seen in the accounting for intangible assets, leases, pensions, revenue, and financial instruments.
- Examples of differential reporting options commonly applied by entities when differential reporting was an option under Part V of the Handbook include:
- proportionate consolidation of subsidiaries;
- accounting for income tax using the taxes payable method; and
- preferred shares classified as equity.
The Committee also provided feedback based on their experience with the newly effective compilation standard (Canadian Standard on Related Services 4200, Compilation Engagements), statutory reporting requirements, and the most common boilerplate disclosure areas seen in practice.
The AcSB will consider the Committee’s comments when preparing its document for comment and project outreach plan.