This summary of Accounting Standards Board (AcSB) decisions has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussion on projects, which may change after further deliberations by the Board. Decisions to publish Handbook material are final only after a formal ballot process.
The AcSB met with representatives from the Canadian Institute of Actuaries (CIA) to better understand the CIA’s work in supporting the implementation of IFRS 17 Insurance Contracts. The Board is committed to working together with the CIA to assist entities in applying the new insurance contract standard.
The AcSB also met with an external party that assists Canadian entities with IFRS 17 systems implementation to better understand the current landscape and the challenges these entities face.
In addition, the AcSB discussed its response letter to the International Accounting Standards Board’s (IASB) Exposure Draft, “Amendments to IFRS 17,” after considering the feedback it received from stakeholders through its extensive outreach activities. The Board decided on the key matters to raise with the IASB and directed staff to make amendments based on its comments. The Board’s response letter was sent to the IASB by the September 25, 2019, deadline.
IFRS® Discussion Group
The AcSB discussed an issue related to revising the exception described in paragraph 24 of IFRS 3 Business Combinations to include both current and deferred tax assets or liabilities. The Board considered different options for raising this issue with the IFRS Interpretations Committee or the IASB. The Board directed staff to discuss the issue with the IASB’s staff to assess what action, if any, may be appropriate.
The AcSB also considered a status update on the list of past issues raised by the Group. On the issue of cloud computing arrangements raised in January 2018, the Board decided, based on the final agenda decision the IFRS Interpretations Committee published in March 2019, that no further work is currently needed. The Board will monitor international developments relating to the remaining issues to determine whether further action is needed.
Implementation of IFRS Standards
The AcSB discussed the preliminary review of disclosures relating to the implementation of IFRS 16 Leases, as disclosed in Q1 2019 financial statements, including feedback from its User Advisory Committee. The Board directed staff to update the analysis to include the effects of IFRS 16 on an entity’s 2019 annual financial statements.
The AcSB also considered the preliminary review of the disclosures relating to the implementation of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, as disclosed in 2018 annual reports. The Board decided that no further research is to be undertaken at this time.
The AcSB received an update on recent domestic and international developments related to the financial reporting of transactions involving cryptoassets and discussed the Board’s potential next steps to take on this topic. The Board decided to actively monitor activity related to the financial reporting of cryptoassets as an interim measure, until it can deliberate the approach on this topic at its November 2019 strategic planning meeting.
Standards for Private Enterprises and Not-for-Profit Organizations
Amendments to Other Frameworks
As part of its ongoing activities to maintain high-quality domestic standards, the AcSB considers whether amendments made to accounting frameworks in other jurisdictions, if incorporated into Canadian standards, would significantly improve Parts II and III of the CPA Canada Handbook - Accounting. The Board discussed recommendations from the Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee on amendments made to the following accounting frameworks since March 2018:
- U.S. GAAP issued by the U.S. Financial Accounting Standards Board (FASB);
- IFRS® Standards issued by the IASB; and
- Not-for-profit specific amendments made to:
- New Zealand GAAP;
- Australian Accounting Standards; and
- U.K. GAAP.
The AcSB agreed with the Committees’ recommendation to include the accounting for cloud computing arrangements on the list of topics considered for the Board’s future projects. The Board also decided to consider the amendments made to IFRS® Standards regarding the definition of materiality as part of its Financial Statement Concepts project.
The AcSB plans to consider cloud computing in conjunction with its other domestic standards priority topics at its Annual Plan discussions in December 2019 and January 2020.
Financial Statement Concepts
The AcSB discussed its research project to undertake a targeted review of the financial statement concepts in Parts II and III of the Handbook. The Board’s discussion considered the interaction between the financial statement concepts and its projects on Combinations and Contributions, and next steps on the Financial Statement Concepts project. The Board decided that the Combinations exposure draft and Contributions consultation paper will be used to gather feedback from stakeholders that will assist the Board in determining the future direction of the Financial Statement Concepts project.
The AcSB discussed feedback received on its Exposure Draft, “Revenue,” in comment letters and during roundtable consultations with stakeholders. The Board also considered recommendations from its Private Enterprise Advisory Committee to address stakeholder feedback. The Board decided to:
- clarify that the guidance related to determining the unit of account and whether to combine or segment contracts is applicable to all types of revenue transactions;
- provide decision trees for the identification of units of account and allocation of revenue;
- revise the guidance for measuring the degree of completion based on the ratio of costs incurred to total estimated costs to allow the cost of uninstalled materials not specially produced or fabricated for the project delivered to the job site to be included in the costs incurred to date; and
- develop illustrative examples for the following:
- software contracts containing multiple-elements;
- contract losses when using the percentage of completion method;
- computation of income earned for the period under the percentage of completion method when using “Alternative B”; and
- upfront non-refundable fees or payment related to license contracts.
The AcSB also provided comments on the proposed Handbook text. The Board approved the issuance of final amendments, subject to final drafting and a written ballot.
The AcSB plans to issue the final amendments no later than the fourth quarter of 2019.
Standards for Private Enterprises
Implementation of Accounting Standards for Private Enterprise (ASPE)
The AcSB discussed three implementation issues with Accounting Standards for Private Enterprises (ASPE) that its Private Enterprise Advisory Committee recommended for discussion as follows:
- Liquidation basis: The Board discussed whether the liquidation basis of accounting is considered ASPE or not. It decided that current practice in this area already provides users with decision-useful information. Therefore, no standard-setting activities will be undertaken.
- Separate presentation of related party balances on the balance sheet: The Board discussed whether amounts owing on loans from directors, officers and shareholders, and amounts owing to parent and other affiliated companies, must be shown separately on the face of the balance sheet or if these can be detailed in the notes to the financial statements. The Board thought the presentation guidance is clear but decided that further clarification could be provided as an annual improvement.
- First-time adoption: The Board discussed whether an enterprise re-adopting ASPE after having previously applied ASPE in a year prior to the comparative year, but not prepared ASPE financial statements in that prior year, could apply the first-time adoption provisions in Section 1500, First-time Adoption, again. The Board decided to clarify as an annual improvement that the provisions in Section 1500 can be applied on re-adoption of ASPE.
The AcSB also decided to consider the timing of annual improvements in conjunction with its other domestic standards priority topics at its Annual Plan discussions in December 2019 and January 2020.
Standards for Not-for-Profit Organizations
The AcSB considered the field-test results and feedback from its Not-for-Profit Advisory Committee on the draft proposals for the initial measurement of a combination between organizations within the scope of Part III of the CPA Canada Handbook – Accounting.
The AcSB decided to:
- refine the criteria to determine whether a transaction should be accounted for as a merger or an acquisition to reduce the potential for diversity;
- require the disclosure of the rationale for undertaking a merger or acquisition;
- add illustrative examples on the application of the criterion; and
- add an illustrative example on the application of the disclosure requirements for combinations accounted for as a merger.
The AcSB reconfirmed that the scope of the standard will include combinations under common control. It also provided comments on the proposed Handbook text and the draft Basis for Conclusions. The Board approved the issuance of an exposure raft subject to final drafting changes and a written ballot.
The AcSB plans to issue the Exposure Draft in January 2020 with a 90-day comment period.
The AcSB continued its discussion on the consultation paper, including the illustrative examples to be included related to the recognition of revenue from contributions. The Board considered the feedback received from its Not-for-Profit Advisory Committee on the consultation paper, including the timeline for this project. The Committee noted that a comment period deadline in July 2020 is not preferred. Based on the Committee’s feedback, the Board plans to issue the consultation paper in May 2020 with a 120-day comment period.
Standards for Pension Plans
Given issues raised by stakeholders in Quebec on the application of Section 4600, Pension Plans, in Part IV of the CPA Canada Handbook – Accounting, the AcSB approved an outreach plan to understand issues arising from stakeholders.
The AcSB will discuss the priority of potential future projects, including a potential pension plans project, at its December 2019 meeting.
Board Advisory Committees
The AcSB received feedback on the discussions at recent meetings of its Not-For-Profit Advisory Committee and Private Enterprise Advisory Committee.
AcSB Strategic Plan
The AcSB will hold a planning session in November 2019 to begin discussions relating to its next strategic plan. In anticipation of that planning session, the Board discussed key themes identified to date based on its research activities. It plans to issue its Draft Strategic Plan for comment in the first half of 2020, with publication of the finalized Strategic Plan no later than March 31, 2021.
Due Process Compliance
The AcSB approved a report to the Accounting Oversight Council on its compliance with due process.