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.
Insurance Contracts with a Cash Surrender Value
The Private Enterprise Advisory Committee discussed accounting for insurance contracts with cash surrender value given that specific guidance is not provided in Part II of the Handbook.
Some Committee members observed that insurance contracts with cash surrender value are common in practice and that cash surrender value amounts can be material. Other Committee members noted that some enterprises use whole or permanent insurance policies as an investment vehicle while other enterprises may use less-expensive term insurance to satisfy lending requirements.
The Committee discussed the presentation in the income statement and considered how the insurance premiums including the change in cash surrender value should be shown. The Committee also discussed the appropriate classification in the statement of cash flows.
A few Committee members commented that there is diversity in practice for accounting for insurance contracts and that providing guidance would benefit preparers and users.
The AcSB will consider the Committee’s feedback as well as feedback from its Not-for-Profit Advisory Committee at the Board meeting in December 2022.
Amendments to Other Frameworks
The Private Enterprise Advisory Committee considered recent amendments issued in other jurisdictions to provide input on whether the amendments would provide significant benefit to Canadian private enterprises reporting under ASPE. The Committee discussed:
- International Financial Reporting Standards issued or amended by the International Accounting Standards Board since February 2021; and
- new or amended standards under U.S. generally accepted accounting principles issued by the U.S. Financial Accounting Standards Board (FASB) since February 2021.
The Committee recommended the AcSB consider amendments to International Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors. The amendments introduce the definition of accounting estimates and provide other clarifications to help entities distinguish accounting policies from accounting estimates.
The Committee also recommended that the AcSB consider the FASB’s amendment to provide private enterprises and not-for-profit organizations with an accounting alternative to perform the goodwill impairment triggering event evaluation at the end of the reporting period.
The AcSB will consider the Committee’s recommendations at its meeting in December 2022.
Other Topics
The Private Enterprise Advisory Committee discussed the results of its member-feedback survey for the 2021-2022 fiscal year to assess the volunteers’ level of satisfaction. Some Committee members recommended adding more users of private enterprise financial statements to the Committee to bring a broader stakeholder perspective and discussed strategies to recruit user members.
The Committee also discussed the format of meetings for 2023 and expressed a preference toward a mix of in-person and virtual meetings.