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.
The Private Enterprise Advisory Committee discussed implementation of recent amendments to Section 3400, Revenue, regarding the accounting for upfront non-refundable fees or payments. The Committee discussed stakeholder feedback that the amendments may result in a change to how private member clubs were previously accounting for upfront initiation fees using Part III of the CPA Canada Handbook – Accounting. Committee members highlighted that some private clubs applying Part II of the Handbook could experience a similar change in their accounting for revenue as a result of the amendments.
The AcSB will consider the Committee’s feedback at its meeting on May 18, 2022.
Cloud Computing Arrangements
The Private Enterprise Advisory Committee received an update on the AcSB’s discussions regarding the proposals in the Exposure Draft, “Customer’s Accounting for Cloud Computing Arrangements.” The Exposure Draft is currently open for comments, with a comment period ending June 20, 2022.
The Committee provided feedback for the AcSB to consider on the fact pattern and related analysis of the illustrative examples included in the Exposure Draft. The Committee thought that the examples were helpful to illustrate the application of the Accounting Guideline when an enterprise:
- chooses to apply the simplification approach to expense as incurred all intangible elements in a cloud computing arrangement; and
- chooses not to apply the approach and, instead, chooses to capitalize qualifying expenditures on implementation activities when the arrangement is a software service.
The Committee recommended adding more examples to illustrate some of the complexities found in other cloud computing arrangements. For example, cloud vendors often provide access to the software before completing implementation activities. Implementation may also be completed in stages where additional modules are provided later. Furthermore, some cloud software implementation may involve three parties: the customer, the software developer, and an implementation consultant. The Committee also suggested that the illustrative examples show the impact on the balance sheet and income statement, as it would be helpful to users and preparers.
Regarding the availability of pricing information to allocate arrangement consideration, the Committee observed that such information is likely part of vendor quotations or can be requested by the customer. However, the Committee noted that sometimes the pricing may not always represent the value received. Therefore, further consideration of allocating the price to each element in the arrangement may be necessary.
The AcSB will consider feedback from its Private Enterprise Advisory Committee’s feedback, its Not-for-Profit Advisory Committee, and other stakeholders on its Exposure Draft, at its July 2022 meeting after the comment period ends.
Related Party Combinations
The Private Enterprise Advisory Committee received an update on the Related Party Combinations project. The Committee discussed which issues in accounting for combinations between businesses under common control are a high priority. The Committee also discussed whether the AcSB should consider a phased approach to expedite standard setting, addressing some issues now and other issues at a later time.
Committee members supported the proposal to amend Related Party Transactions, paragraph 3840.44(a), to remove reference to the exchange amount to clarify that business combinations under common control meeting the criteria in paragraph 3840.29 would only be subject to requirements in Section 1582, Business Combinations. Committee members agreed that this proposal is unlikely to change current practice as the exchange amount in business combinations under common control approximates the fair value.
Some Committee members suggested that additional guidance regarding business combinations between related companies that are not under common control would be useful to preparers.
Several Committee members indicated that addressing the requirement in paragraph 3840.44(b) to retroactively restate comparatives is a high priority item. Providing optionality over the retroactive restatement would allow entities to meet user needs and provide relief from added reporting.
The AcSB will consider the Committee’s feedback at the July 2022 Board meeting.
ASPE Project Priorities – Post-implementation Reviews
The Private Enterprise Advisory Committee discussed Section 1591, Subsidiaries, and Section 3056, Interests in Joint Arrangements, including whether there are issues in practice with applying the guidance, and whether a post-implementation review of either standard is needed. A Committee member noted that in the past there were challenges in applying the guidance to different legal structures such as when a bare trust exists. However, no other significant issues were noted in applying the guidance. The Committee advised that post-implementation reviews of Sections 1591 and 3056 are not needed at this time.
The AcSB will consider the Committee’s comments at a future meeting.
The Private Enterprise Advisory Committee discussed the amendments to Section 3856, Financial Instruments, relating to retractable or mandatorily redeemable shares issued in a tax planning arrangement and accounting for related party financial instruments. Committee members advised that they been able to apply the amendments in practice using the existing guidance and resources available. Committee members also noted that the AcSB’s Domestic Accounting Standards Update webinar, held in February 2022 and available on demand, was helpful in providing guidance on applying judgment when implementing the amendments.
One member noted that they have started to receive application questions with regards to the implementation of Section, 3041, Agriculture (see the Agriculture project page) effective January 1, 2022, which may require time to discuss at a future Committee meeting.
The AcSB will consider the Committee’s comments at its meeting on May 18, 2022.