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AcSB

AcSB Decision Summary – June 21-22, 2023

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 will respond to change and reprioritize when necessary, ensuring we can address implementation challenges and provide the information users may need in these unique circumstances.

The AcSB values input and feedback from stakeholders and can be reached anytime through our online form.

Research

Crypto-asset Activities

The AcSB approved its “Accounting for Crypto-asset Activities: Crypto-asset Holdings – Payment Tokens” paper for issuance.

The AcSB discussed an outline of a research proposal on crypto-asset activities that seeks to identify whether there are broader issues with the current accounting for crypto-asset activities and whether those issues are leading to information in financial statements that is not decision-useful. The Board also thinks crypto assets could be used as an example to illustrate any potential issues with intangibles that are held for capital appreciation. The Board will review the research findings throughout the project and consider next steps. The Board may also use this research to inform future international discussions on intangibles, given the International Accounting Standards Board (IASB) has a research pipeline project on Intangible Assets.

Cash Flow Reporting

The AcSB discussed and approved a research project proposal on the topic of cash flow reporting. The Board is performing research to understand the usefulness of the Statement of Cash Flows and whether there are other cash flow measures more relevant to financial statement users. The Board intends to use this research to inform future international discussions, given the IASB has a research pipeline project on the Statement of Cash Flows and Related Matters.

IFRS® Accounting Standards

IFRS 9 Post-Implementation Review

The AcSB received an education session on the IASB’s Request for Information (RFI), “Post-implementation Review of IFRS 9 Financial Instruments—Impairment.” The IASB’s RFI was issued on May 30, 2023, and comments are due September 27, 2023. The Board plans to gather feedback to inform its response. As part of its outreach, the Board will be holding public roundtables on July 26, 2023 (in French) and July 27, 2023 (in English).

Contractual Cash Flow Characteristics of Financial Assets

The AcSB received an overview of the IASB’s Exposure Draft, “Amendments to the Classification and Measurement of Financial Instruments” and discussed the key messages for the Board’s response letter to the IASB.

The AcSB encourages interested and affected parties to share their views on the Exposure Draft by submitting response letters to the IASB by July 19, 2023, with a copy to the AcSB.

Supplier Finance Arrangements

The AcSB completed its final balloting process for the final amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures, which improve the information an entity provides about its supplier finance arrangements. These amendments and the accompanying Basis for Conclusions will be available in the CPA Canada Handbook – Accounting in August 2023.

Standards for Private Enterprises

Related Party Combinations

The AcSB completed its deliberations on the Exposure Draft, “Improvements to Accounting for Common Control Combinations." The Board approved the issuance of the amendments to Section 3840, Related Party Transactions; Section 1582, Business Combinations; and Section 3856, Financial Instruments. The amendments:

  • clarify the application of Section 1582 to business combinations under common control accounted for in accordance with Related Party Transactions, paragraph 3840.44(a);
  • provide an option to retrospectively restate prior periods when carrying amounts are used to account for a combination or to prospectively account for these transactions; and
  • clarify that financial instruments acquired or liabilities assumed when a business is transferred between two enterprises are initially measured in accordance with paragraph 3840.44.

The Board intends to issue these amendments and the accompanying Basis for Conclusions in the Handbook by September 2023.

Standards for Private Enterprises and Not-for-Profit Organizations

Revenue – Upfront Non-Refundable Fees

The AcSB discussed feedback from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee on concerns raised with Section 3400, Revenue related to accounting for upfront non-refundable fees or payments. The Board decided to issue an exposure draft to indefinitely defer the effective date of these amendments, with early application permitted, until the project on Evaluating the Preface is complete. The Board also decided to propose a new disclosure requirement in this exposure draft for entities recognizing upfront non-refundable fees or payments in revenue entirely up front. The Board expects to issue an exposure draft in October 2023 with a minimum 90-day comment period.

Revenue – Application Issues with the Percentage of Completion Method of Revenue Recognition

The AcSB discussed application questions related to the amendments to Section 3400 issued in November 2021, which were effective as of January 1, 2022. The Board considered whether guidance was needed to clarify the amendments.

Applicability of the percentage of completion method guidance to service contracts when revenue is recognized on a straight-line basis

The AcSB discussed a scenario where an enterprise enters into a two-year contract for a total fee of $3,000. After the first year, actual costs incurred are $1,000 and the estimated remaining costs are $1,400. The enterprise applies a straight-line method of revenue recognition, and the scenario assumes this was determined to be appropriate in accordance with Revenue, paragraph 3400.17.

This assessment was made based on the facts and circumstances and professional judgment.

The AcSB considered mixed views from its Private Enterprise Advisory Committee (the Committee) that:

  • the guidance in Appendix A of Section 3400 does not apply to straight-line recognition of revenue and actual costs of $1,000 should be recognized; or
  • the guidance in Revenue, paragraph 3400.A24 to estimate gross profit over the whole contract applies and 50 per cent of estimated costs of $1,200 should be recognized.

The AcSB noted that Accounting Standards for Private Enterprises are intended to be principles-based standards. Therefore, the Board decided not to issue guidance to clarify the amendments and encourages enterprises to consider their facts and circumstances, and to apply professional judgment.

Application of disclosure requirements for service contracts

The AcSB considered the views of the Committee on the application of Revenue, paragraph 3400.32A(b). This paragraph requires an enterprise to disclose the aggregate amount of costs incurred and recognized profits (less recognized losses) at the end of a reporting period for contracts in progress. The Committee indicated that this disclosure requirement can be challenging to apply to service contracts and is more directly attributable to construction contracts.

The AcSB considered whether an amendment was needed to clarify which type of contracts this disclosure requirement applies to. The Board decided not to undertake standard-setting action and encourages enterprises to use professional judgment when considering whether this disclosure requirement is applicable in their circumstances.

Accounting for losses on contracts with multiple deliverables

The AcSB discussed the Committee’s views on a scenario where an enterprise enters into a long-term contract that includes multiple elements. During the contract, the enterprise realizes that costs for one element will exceed the consideration allocated to that element. However, the overall contract remains profitable on a total basis.

The AcSB discussed whether a loss should be recognized partway through the contract for the one loss-making element or if the contract should be viewed in totality without a loss recognized in the interim.

The AcSB noted that guidance in paragraph Revenue, 3400.A33 specifically references revenue and cost on a total contract basis. However, the Board acknowledged that in certain circumstances, a loss could be recognized earlier for a specific element if this better reflects the economics of the contract. Therefore, the Board again decided not to undertake standard-setting action and encourages enterprises to continue to use professional judgment based on their facts and circumstances.

The AcSB also decided to discuss these application questions in its Fall 2023 Domestic Accounting Standards webinar to highlight the relevant judgments in determining an accounting outcome.

Insurance Contracts with Cash Surrender Value

The AcSB provided feedback on a draft exposure draft that would provide guidance on accounting for insurance contracts with cash surrender value. The Board tentatively decided to provide guidance in an accounting guideline.

The proposed guideline would:

  • require recognition of cash surrender value as an asset measured at the cash surrender amount;
  • require recognition of the annual change in cash surrender amount and policy premiums on a net basis where a net debit is reported as expense and a net credit is reported as income; and
  • establish disclosure requirements to ensure decision-useful information is provided.

The AcSB gave permission to begin the balloting process. The Board plans to issue the exposure draft in October 2023 with a minimum 90-day comment period.

Governance

Survey on Priorities

The AcSB discussed developing a survey for interested and affected parties on new domestic projects it could explore in the 2024-2025 fiscal year. The Board thinks a survey would be an easy way for more interested and affected parties to get involved in the standard-setting process. The Board will discuss feedback on a draft survey at its July 2023 meeting and expects to publish the survey in October 2023.

Sources of Guidance

The AcSB received an education session about staff research on the sources of authoritative and non-authoritative guidance issued by standard setters domestically and internationally, and related processes. The session also covered other sources of guidance available to relevant parties that apply Part II and Part III of the CPA Canada Handbook – Accounting. The Board discussed the findings from this research and had a preliminary conversation about their role and responsibility to provide guidance to parties that apply Parts II, III, and IV of the Handbook. The Board will continue this discussion at its November 2023 meeting.

Due Process

Project Plans

The AcSB discussed its approach to project plans. The Board decided to advance the timing of when a project is listed on the website, so the listing corresponds with when the research phase of a project commences.

AcSB’s Advisory Committees and Working Groups

IFRS® Accounting Standards Discussion Group

The AcSB received an update on the May 25, 2023, IFRS® Accounting Standards Discussion Group meeting. At this meeting, the Group discussed accounting for lending crypto assets, accounting for earn-in expenditures prior to acquisition of a mining interest, and accounting for the development of carbon credits that will ultimately be sold.

Crypto-asset Working Group

The AcSB received an update on the May 26, 2023, Crypto-asset Working Group meeting. At this meeting, the Group discussed accounting for stablecoin holdings and an update on the thought-leadership activities of the AcSB.

Insurance Transition Resource Group

The AcSB received an update on the June 5, 2023, Insurance Transition Resource Group meeting. At this meeting, the Group discussed the implementation of IFRS 17 Insurance Contracts, including matters for consideration in a post-implementation review of the standard. Additionally, the Group discussed the IASB’s Exposure Draft – “Amendments to the Classification and Measurement of Financial Instruments.”

User Advisory Committee

The AcSB received an update on the June 8, 2023, User Advisory Committee meeting. At this meeting, the Committee discussed primary financial instruments, the Post-implementation Review of IFRS 9 Financial Instruments– Impairment, connectivity between financial and sustainability reporting, climate-related risks, the International Sustainability Standards Board’s (ISSB) Agenda Consultation, and the IASB’s Exposure Draft – “Amendments to Classification and Measurement of Financial Instruments.”

Agriculture Advisory Group

The AcSB received an update on the June 12, 2023, Agriculture Advisory Group meeting. At this meeting, the Group discussed observations from the implementation of Section 3041, Agriculture, along with its revised Terms of Reference and Statement of Operating Procedures.

Academic Advisory Committee

The AcSB received an update on the June 16, 2023, Academic Advisory Committee meeting. At this meeting, the Committee discussed scalability, the Post-implementation Review of IFRS 9 Financial Instruments – Impairment and Post-implementation Review of IFRS 15 Revenue from Contracts with Customers, and the response to the ISSB’s Agenda Consultation.