AcSB

Private Enterprise Advisory Committee Notes – November 27, 2018

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.

Revenue

The Committee provided feedback to the Board on specific aspects of the staff’s proposed amendments to Section 3400, Revenue. It also gave input on the applicability of the proposed illustrative examples to private enterprises.

The Board will consider this input at its December 2018 meeting.

Consultation on Project Priorities – Related Party Transactions

The Committee discussed the potential scope of a project targeting improvements to related party business combination guidance. It advised the Board that such a project would be complex due to the various structures involved in related party business combinations. The Committee also recommended that further data be obtained to scope such a project.

The Committee addressed the challenges with the application of the fundamental measurement concepts of carrying value and exchange amount. It advised the Board that these concepts generally work well in practice, but issues arise when complex, tax-driven transactions are undertaken.

The Board will consider this input at its January 2019 meeting.

Consultation on Project Priorities – Financial Instruments – Hedging

The Committee considered options for enhancing the usefulness of the hedge accounting guidance in Section 3856, Financial Instruments. It considered the use of derivatives in hedging relationships that do not qualify for hedge accounting under the current guidance. Specifically, Committee members discussed whether enterprises engaging in more complex relationships to manage risk would benefit from an option to apply a different framework for hedge accounting, such as IFRS 9, Financial Instruments.

The Committee generally agreed that an option permitting more complex hedging relationships to qualify for hedge accounting would enhance the usefulness and application of the guidance. It also agreed that referring enterprises to another framework for hedge accounting guidance would be a more practical approach, than incorporating guidance from another framework into Section 3856. They recommended that the Board consider whether enterprises should have the option to refer to another framework, such as IFRS 9:

  • solely for determining whether a relationship qualifies for hedge accounting; or
  • to determine whether a relationship qualifies for hedge accounting, and to account for the hedging relationship, including any hedge ineffectiveness.

The Committee observed that hedge accounting guidance in IFRS 9 includes some elements, such as Other Comprehensive Income, for which there is no equivalent in Part II of the CPA Canada Handbook – Accounting. The Committee also agreed that, if enterprises have the option to account for hedging relationships under a different framework, such as IFRS 9, the Board should consider requiring that option be applied consistently for all of the enterprise’s hedging relationships.

The Board will consider this input in March 2019.

Withdrawal of Part V

The Committee received an update on the Board’s decisions regarding withdrawing Part V from the Handbook. It also discussed an inventory of the Background Information and Basis for Conclusions documents for the pre-changeover accounting standards in Part V and their relevance to understanding Part II standards. 

Agriculture

The Committee received an update of the feedback received on the AcSB’s Exposure Draft, “Agriculture”, including key issues that the Board will discuss at its December 2018 meeting.

Consultation of Project Priorities – Financial Statement Concepts

The Committee discussed the effects of adopting the International Accounting Standards Board’s Financial Statement Concepts for the definition of an asset and a liability. The Committee advised the Board that adopting the recently issued definitions would not have an effect on its current priority projects.

The Board will consider this input at its March 2019 meeting.

Compilation Engagements

The Committee discussed the Auditing and Assurance Standards Board’s Exposure Draft, "Compilation Engagements" and how the proposed standard could affect the use and applicability of Part II of the CPA Canada Handbook. The Committee also discussed the bases of accounting used to prepare compiled financial statements and whether a simplified accounting framework would assist small and medium sized businesses that prepare compiled financial statements. The Committee expressed mixed views on whether such a framework would benefit these enterprises.

The Board will consider the Committee’s feedback at its March 2019 meeting.