We are committed to providing transcriptions in order to promote the accessibility of webinars that we offer. To that end, we endeavor to provide a transcription that accurately reflects the information conveyed. Please note, however, that there may be instances where we are unable to accurately capture what was said by the speakers. If you have any questions or concerns about the transcription provided, please contact us.
Eric English: Okay, good afternoon, everyone. We’re just waiting for everyone to file into the Zoom Meeting. So, you give us one moment, and we’ll get the presentation started here very shortly.
Okay, I think we have pretty well everyone signed on here. So let’s go ahead and get started.
Good afternoon and welcome to today’s Domestic Accounting Standards Update webinar. Attendance at this webinar and successful completion of the quiz may count towards your CPD requirements. The link to the quiz will be included in the chat. And upon successful completion of the quiz, you’ll be emailed a certificate for your records. And just a reminder before we get into our topics today: The opinions stated reflect those of the presenters and do not necessarily reflect the views of the AcSB.
So, on behalf of the Accounting Standards Board, it is now my pleasure to introduce today’s speaker, Armand Capisciolto. Armand is the Chair of the Canadian Accounting Standards Board and has served on the Board since 2015, including as a Member, Vice-Chair, and now Chair. His extensive experience as a standard-setter also includes chairing the AcSB’s Private Enterprise Advisory Committee and membership on the IFRS Accounting Standards Discussion Group.
A quick introduction to myself as well: I’m Eric English, a Principal with the Accounting Standards Board staff. I work closely with the Board, external parties, and volunteers to develop high-quality accounting standards and other guidance for public companies, private enterprises, and not-for-profit organizations. I’m also the current Secretary of the Accounting Standards Board’s Private Enterprise Advisory Committee and the Canadian Private Enterprise User Advisory Committee.
And just a quick rundown of today’s agenda: We’re going to be covering the AcSB’s strategic and annual plans, recently issued or effective domestic standards, guidance and other resources, and the AcSB’s current work plan for domestic standards.
If you have any questions throughout the webinar, you can type them in as we go along, and depending on time, we’ll try to get to as many as we can at the end of the session.
So before moving forward, we just wanted to do a quick poll to understand who is listening in live to this webinar, and this will help us tailor our comments to those listening. So, I’ll just launch the poll here.
And so, our first question is: What is your current role? We’ll give everyone a moment to reply in the quiz.
A few more responses coming in. We’ll give it one more moment.
Okay, so it looks like we are a little bit of a split here between mostly practitioners. But then we also have some financial statement preparers along with a few financial statement users listening in as well. So, we hope that we have some material today that you’ll find interesting.
And then, before we move on, just one more polling question. And now we’d like to ask which category of reporting entity is most relevant to your current role.
Just one more moment for the results to come in here.
Okay, so looks like mostly private enterprises. We have a few publicly accountable enterprises. And then not-for-profit organizations coming in shortly after private enterprises. So, I think we’ll have lots of good content for our listeners here today.
So, moving along, I’ll now pass it over to Armand, who’s going to tell us about the ASCB’s Strategic and Annual Plans.
Armand Capisciolto: Okay. Thanks, Eric. So just some kind of motherhood stuff first. As far as our Strategic Plan, our standard-setting is driven by our Strategic Plan. We were currently operating under 2022-2027 Strategic Plan, which we issued back in March. Every year, we then go through a process where we start with our Strategic Plan, develop an Annual Plan. Our Annual Plan for fiscal 25-26 (we have a March year-end) was issued on March 31, 2025.
When we look at our Strategic Plan that we set back in 2022—if we go to the next slide, Eric—really three strategic pillars that we’re focused on:
The first one, which I believe is kind of our bread and butter: Delivering relevant high-quality accounting standards.
But to do that, we have to do other things. One of those is supporting the quality reporting beyond traditional financial statements. I think we all know there’s plenty of information outside of financial statements. And we want to support, make sure that’s consistent and complementary to the accounting standards, and grow our international influence. And when I talk about growing our international influence, that is not just about influencing IFRS. That is also about sharing and discussing with other standard-setters from around the globe about their domestic standards, which ultimately helps out our own development of our own standards.
That drives our Annual Plan. Our Annual Plan really talks about how we’re going to accomplish what we want to accomplish in our Strategic Plan. So, what are we going to do for supporting accounting standards, what domestic projects we’re advancing, how we’re responding to evolving needs and growing our international influence.
Today’s session: We are focused on our domestic standard-setting. That’s the focus of today’s session.
One of the things in our Strategic Plan that I want to take some time to talk about—if we go to the next slide—is reviewing the Preface or evaluating the Preface. So, in our Strategic Plan, we identified a strategic priority of evaluating the Preface. And the reason we took on this priority was: We were hearing from some interested and affected parties that the Preface, which is what directs you to what part of the Handbook you’re going to apply, was directing certain entities to parts of the Handbook that weren’t necessarily meeting the needs of those entities and those entities’ users.
So, we did some research—a lot of that research involved discussing with our various advisory committees and working groups—and we’ve now completed that research.
And we did identify some challenges. However, when we considered those challenges, and some of them were on the fringes, we didn’t think that they were significant enough to warrant changing the Preface. So, there will be no change to the Preface. We evaluated it. We believe it’s fit for purpose at the Board level, and we recently issued a Project Summary, which is available on the FRAS Canada website. (Which I don’t know if there’s a link in this, Eric, or not, because we might have done these slides before it was published. It is what I’m thinking.) But if you go to the FRAS Canada website, there is a Project Summary, which outlines the research activities we undertook as well as how we came to the conclusions that we came to as a result of that research.
The next thing I want to talk about is our Canadian Private Enterprise User Advisory Committee. I am really excited about the fact that we recently created a user committee to advise the Accounting Standards Board on issues related to private enterprise. We’ve had a user advisory committee for a very long time—as long as I’ve been involved in standard-setting—that advised us on IFRS matters.
We’ve decided to create another committee to advise us on private company matters. So this advisory committee is made up of users of private company financial statements. That includes lenders, private equity investors, and others that are using private company financial statements to make investment and credit decisions.
And I think this is absolutely critical. If you’ve heard me speak before, if you’ve read my Inside Standard Setting newsletter on LinkedIn, one of the things that I like to say—and for those of you who know me, when I like to say something, I say it a lot—accounting standards are applied by accountants, but they’re not for accountants. They’re for the investors; they are for the creditors, many of which who are not accountants by trade. So for me, it’s actually critical that we’re talking to users specifically about private companies and how they use financial statements, how they make their decisions, because that’s going to lead us to setting better standards to meet the needs of those users.
I already spoke about our current Strategic Plan. We are actually starting our next round of strategic planning. So, as I said, our current plan goes to 2027, which seems like a long ways away but is not really that far away. So we have started to have Board discussions on our strategic direction from 2027 to 2032. I believe I have my five years correct. There, check my math, Eric. And we’re having those discussions. The reason we’re having those discussions now, because our Strategic Plan goes out to comment. You all have an opportunity to comment on our Strategic Plan. So that plan will be issued for comment, likely, in the spring of 2026. There will be outreach. After that, Board will deliberate that feedback we receive and be ready to issue it for April 1, 2027. So that’s why we start early to follow our due process, which includes public consultation. We, as a Board, have to make our preliminary decisions and proposals to put in front of you early on. You then comment; we redeliberate; it takes some time. So, please, be on the lookout for that in spring of 2026.
So with that, I believe that brings us to another polling question. Our question is simple: Where do you think the accounting standards, which should focus on its next Strategic Plan, continue (a) delivering relevant, high-quality accounting standards, (b) focus on the scope and boundaries of information included in the financial statements, (c) growing the Accounting Standards Board’s international influence, (d) all of the above, or (e) none of the above.
So, Eric, once you have enough people respond, I’d love to see the results of this one.
Eric English: Let’s give another moment here for people to respond—we have most people in. And there, we’ll share the results.
Armand Capisciolto: Okay. Well, most are all of the above, which is, I think, a good thing. And this is very helpful. Thank you, for that will help the Board as we continue to discuss these issues.
With that, Eric, I believe I’m turning it back over to you to talk about Recently Issued Standards and Amendments.
Eric English: Thanks, Armand. So, as Armand mentioned, we’ll move on to our next agenda item, which is domestic standards or amendments that have been recently issued.
So, this slide summarizes the key domestic standards and amendments and the effective dates for each of those projects.
One item on this slide, we’d like to draw your attention to, is the amendment to Related Party Combinations, which becomes effective for year-ends on or after January 1, 2025. The AcSB received an application question regarding this amendment and issued an Exposure Draft for a narrow scope amendment to Section 3840, Related Party Transactions, in December 2024. We will provide an overview of this project later in the presentation.
With regards to the amendments to Section 3400, Revenue – Upfront, Non-refundable Fees or Payments, the effective date of these amendments has been deferred with early application permitted until the evaluating Preface project is completed. The AcSB has concluded its research on evaluating the Preface and is considering next steps related to this project. We have included a slide in the Appendix with more information and a link to the project page should you wish to follow along with updates.
And, once again, more information on each of these topics is included in Appendix to these slides. You can download the slides on the website on the registration page, where you can find more in the Appendix if you’d like to read a little bit more.
Now we’ll get into Guidance and Other Resources.
And the first topic we’d like to discuss as it is related to the application of recently issued standards and amendments is the AcSB’s Guidance Framework.
So, the AcSB has developed a framework for issuing guidance. And when we talk about guidance, it’s important to clarify what we mean. There is, firstly, authoritative guidance, which would be the standards in the Handbook and any accounting guidelines. And then, there’s also non-authoritative guidance, which can include items like the Basis for Conclusions in Briefs or webinars like you’re watching today.
Increasingly, staff are getting more queries or issues in practice, typically relating to the exercise of judgment.
Now, many interested and affected parties had also noted that for IFRS there are readily available guidance tools, such as accounting firm books or other publications around the world. And up until now, there has been an ad hoc approach to determining when to issue guidance and what type to issue, which is why the Board developed this framework.
So, this framework addresses application issues regarding current standards as well as whether implementation support is needed for newly issued standards or amendments. And so, we’ll go through the process for application issues on the next slide.
So first, once an issue has been identified, we need to assess it against the proposed criteria for further discussion. This includes questions related to the prevalence and diversity of the issue and the impact to the accounting outcome on users’ decisions. These criteria are available on the AcSB’s website to understand the process and provide transparency on how issues are considered by the Board.
So following through the chart here, if an issue meets the criteria, it will be discussed at the relevant domestic advisory Committee at a subsequent meeting.
Information sought from the Committee includes understanding the judgments involved in coming to accounting conclusions on the issue, and then all this information will be given to the AcSB to determine the appropriate course of action.
The AcSB also discussed that going forward, the Board’s decision summary would be the key source for interested and affected parties to read about any application issues raised that meet the criteria and have been discussed at the Committee and the Board level.
In the next section, we’ll actually discuss the narrow scope amendment to related party business combinations. This is actually a project the Board began working on as a result of the application issues, which were raised through the guidance framework. So we can really see it working in its process there.
And next, I’d like to talk a little bit about our Climate-related Risks and Opportunities mini-series.
So, climate change is a topic that interested and effective parties are increasingly concerned with due to its potential effect on an entity’s business model, cash flows, financial positions, and financial performance.
Most industries have been or are likely to be affected by climate-related risks and opportunities and efforts to manage the impacts of climate change. When preparing annual financial statements in accordance with ASPE, management will need to assess how material climate-related risks and opportunities should be recognized, presented, and/or disclosed.
To assist the sector, the AcSB released a mini-series resource addressing relevant standards within Part 2 of the Handbook and the potential effects to consider for private enterprises.
This includes topics such as impairment of inventories; property, plant, and equipment and intangible assets; impairment of long-lived assets; and more.
The final instalment of topics was released in April 2025 and includes discussions on agricultural inventories and productive biological assets, disposal of long-lived assets and discontinued operations, leases, and economic dependence.
The slide includes a link to the resource, which you can find, again, on the registration page for download.
Now, given the current economic climate, we wanted to talk today about accounting in times of uncertainty.
Canada’s economic landscape is facing considerable uncertainty due to the imposition of tariffs and other political developments affecting the business environment.
These factors may adversely affect entities applying ASPE, presenting challenges that preparers and practitioners will need to address.
In today’s session, we’d like to highlight a few key areas that you may need to consider when applying ASPE amidst current economic uncertainties.
And so with that, I’ll actually pass it over to Armand now to discuss an example of where you might need to focus when applying ASPE.
Armand Capisciolto: Hey, thanks, Eric. I feel like if accounting standard-setters had a greatest hits album, this is our greatest hits. Because these standards keep on coming up. Anytime, we talk about economic uncertainty, it’s the same list of standards that come up.
We actually issued some guidance, non-authoritative guidance in the early days of COVID, and a lot of that guidance was related to this list of standards. So, this shouldn’t be anything new to most people listening in. You’ve dealt with uncertainty before. These are the standards that come into play when there is significant economic uncertainty.
Interesting enough, I saw on the poll what standards were of interest to people. There was a couple of people who said IFRS Publicly Accountable Standards. Our IFRS Accounting Standards Discussion Group had a very thorough discussion about many of these issues at our last IPG meeting. You can check out those meeting notes. Although it’s IFRS, a lot of the discussion that took place is relevant regardless of what accounting standards you’re talking about. And for those of you that are interested in IFRS, observing an IFRS Accounting Standards Discussion Group meeting actually qualifies for PD. So a little plug for listening in to our IPG meetings.
I’m not going to go over all of these because we can spend an hour just talking about accounting for uncertainty, but the one I thought was interesting, or we thought was interesting, worth raising with subsequent events. Because the reality is with some of these changes that are happening: The events seem to change daily. So what day you’re reporting on and what your year-end is matters. And as we all know, there are two types of subsequent events: There’s those that provide further evidence of conditions that existed at the financial statement date and therefore are adjusting subsequent events, and those are indicative of conditions that arose subsequent to the date that are subsequent events that get disclosed. And I think this comes into play, especially with some of the forward-looking items we look at in financial statements. So when you’re doing your impairment assessment, you’re doing going concern assessment—those types of things—this really matters.
So if you’re dealing with a March 31 year-end, tariffs may not have been announced until … It’s so hard to figure out when tariffs were announced. But what I think was early April was what President Trump referred to as Liberation Day. Well, if you have a March 31 year-end, and you’re impacted by those tariffs that were announced in April indicative of conditions that existed at the financial statement date? It’s a really interesting question, because there was a lot of rhetoric, a lot of discussion that this was going to happen. So were those conditions that existed? So these are the types of things that are going to involve a significant amount of judgment on preparers and auditors in dealing with this. Regardless of what you decide on whether it’s adjusting or non-adjusting, if it could be material to the company, disclosure is highly recommended. So just wanted to highlight that as kind of one of the things to consider.
What I do recommend is—as you’re preparing financial statements, auditing financial statements—taking a deep dive back into some of these classic standards that, like I said, are to a certain extent the greatest hits. So, Eric, back to you to talk about our work plan.
Eric English: Thanks, Armand. And yes, I’m sure that gives our audience a lot to think about as they’re starting to prepare financial statements in the coming year.
So now we’d like to get us into our Domestic Standards Work Plan, and I’ll start off with our Related Party Business Combinations – Narrow Scope Amendment.
So, this project was taken on to address an application question raised and contemplated as part of our guidance framework.
Last year, the Private Enterprise Advisory Committee discussed an application question relating to the amendments issued in September 2023 to Section 3840, Related Party Transactions.
You’ll recall that these amendments added an option to either retrospectively restate all periods when carrying values are used to account for a combination or to prospectively account for these transactions from the date the transfer occurred.
The question raised is, when the new option is applied to account for a combination prospectively from the date that the transfer occurred, what comparative figures, if any, are presented.
Feedback from discussions with the committee indicated that diverse views have emerged. One view is that an enterprise must identify and acquire and report comparative figures of the acquiring entity. Another view is that an enterprise should apply professional judgment to consider the needs of financial statement users, and in some scenarios, there could be no comparative figures.
Given the diverse views, PEAC recommended that the AcSB issue guidance to clarify the application of the amendment.
The proposals are narrow in scope and provide further guidance on using the new perspective option to account for combination under common control when carrying amounts are used. When an enterprise chooses to account for the combination prospectively from the transaction date, the proposed amendments allow an option to account for the combined enterprise either as a new entity, so without comparative information, or as a continuation of one of the combining enterprises, so presenting the comparative information of that enterprise.
The option to account for the combination retrospectively would still continue to be available.
The Exposure Draft, “Accounting for Common Control Combinations,” was issued in December 2024 and closed for comment on February 14, 2025.
Since then, the AcSB has been deliberating feedback received and that its May meeting approved the proposed amendments with some changes subject to its final drafting and balloting process.
The Board expects to issue the final amendments in September 2025.
And so with that, I’ll now pass it over to Armand to talk about our detailed review of ASPE.
Armand Capisciolto: Okay. So, I already spoke about evaluating the Preface, which was a strategic priority identified in our Strategic Plan. Another strategic priority was to explore scalability in our domestic standards. And we issued a Consultation Paper exploring scalability in Canada and received a number of responses to that. And what was interesting about those responses was that a number of interested and affected parties identified that ASPE can be too complex in certain areas and that complexity may not be warranted. So what we decided to do was to now say: Well, what are our next steps related to exploring scalability? And what we decided to do was what we’re now referring to as a detailed review of ASPE, which is looking at these areas that have been identified as more complex and determining if that complexity is warranted. And if it’s not warranted, then looking at: Can we address that through various types of solutions?
If we go to the next slide, Eric, we can look at either simplifying your requirements, introducing optionality, just redrafting the standard to make it clear on what’s required, or issue additional non-authoritative guidance. So, just to give you an example of the types of things that are types of topics that have come up with this: So, revenue recognition—lots and lots of feedback related to applying the percentage completion method and accounting for multiple element arrangements. No surprise that those are considered complex. So what we’re doing is examining: Well, are there ways that we can address that without impairing the information that we give to users? Because that, again, that is what we do as the accounting standard says: We want to make sure that the financial statement users, the investors and creditors, have the information they need to make decisions. So if we can simplify, add options, change the wording to make it clear that isn’t going to negatively impact the information that’s available to users, there’s something for us to do.
So, there’s a whole bunch of items that people have raised, and by no means this project a project that we’re looking at solving everybody’s problem. So we then identified scoping criteria. And we looked at the criteria: Is there diversity in application? And why is there diversity in application? Are the requirements complex, onerous, or costly to navigate? Is the issue pervasive? And is the complexity warranted? That is, do the benefits that arise from applying the requirements exceed the cost of doing so?
And so if it meets those scoping criteria, we then looked at potential solutions. Revenue is just one of the topics we looked at. We also looked at other topics. Just as an example—this is by no means complete. We also looked at things like disposal of long-lived assets and discontinued operations, and there might be some drafting things that we’re looking at there. Section 3856, to give an example. There’s a number of things in 3856 that people don’t necessarily like or think are complex. One of them is the requirement to have a fair value for interest-free or low-interest loans in arm’s length transactions, and that may be overly complex.
So where we’re at right now is the staff have talked to all of our advisory committees. We’ve been discussing this for a while now. We’ve looked at some of the challenges and looked at different solutions and what we will be issuing. If we go to the next slide, Eric, the next phase is to issue a Consultation Paper. What that Consultation Paper will do is kind of go through: Here are all the issues we looked at; these are the ones that we thought were in scope; these are the ones that we didn’t think were in scope. If we thought it was in scope, here is what we’re proposing at a high level for the solution.
We’ll then take the feedback that we receive and look at where that fits with all the other projects we’re working on, and then prioritize. And some of them we may package as Exposure Drafts, going forward. Some may be spun off into projects of their own with their own Exposure Draft. And that will all come in the next little while.
The first stage is, though, to get a Consultation Paper in front of you. And that Consultation Paper, we’re really close, and it’ll be issued in the second half of 2025. So I’m really looking forward to getting that out to people and to hear from people and get a chance, get your comment letters, but also get in front of you at outreach events. So be on the lookout for that, and also be on the lookout for events to attend to. Tell us what you think.
If we go to the next slide: The other project I want to talk about, which I actually think is kind of a preview of the detailed review of ASPE. We started this project before we started the detailed review of ASPE, and what we were looking at in our domestic standards is introducing optionality around the accounting for goodwill and the recognition of intangible assets. So what these proposals that are close to being out in ED form will allow entities to choose to amortize goodwill if they make that choice, and also provide relief from recognizing intangible assets acquired in a business combination. So going to provide a little bit more detail on some of the decisions we’ve made to date if we go to the next slide.
So, what have we tentatively decided to propose? That entities would be provided an accounting policy choice. Now, this policy choice you have to also choose. If you make this choice, you also have to make the choice to amortize goodwill, and that is to not have to separate intangible assets in a business combination. So, relief from the recognition of intangible assets. That means that all intangible assets that you would have otherwise separated will be subsumed into goodwill. So you’re going to end up with no intangibles on a business combination, a larger goodwill number. Well, then, as I said, you have to choose the goodwill amortization option, so you’ll amortize that goodwill so it’ll disappear over time, and we will also require disclosure of qualitatively significant intangible assets. The Exposure Draft will provide a ton of details on what qualitatively significant means. It doesn’t mean you have to identify all intangible assets. These are the ones that should be readily identifiable.
If we go on to the next part of this proposal, is the option to amortize goodwill. Again, if you’re taking that relief, you have to do this; if you’re not taking that relief, you can still choose to amortize goodwill. And then that goodwill will be amortized on a straight-line basis over—now, this is where it gets a little complex, but we think this is warranted—is that there’ll be a default period of 5 years unless the entity can demonstrate that another useful life not exceeding 10 years is more appropriate.
Some may say 5 years seems like a really low number. But you have to remember one of the situations that you’re using this option is when you’re subsuming a whole bunch of stuff into goodwill, some of which may have a relatively short lifetime. So that’s why we went with the shorter period. You can go longer than 5 years, but you would have to then say why, and not more than 10 years. So these are some of the tentative decisions that you will see in Exposure Draft.
Again, this Exposure Draft—that’s the next phase of this project. Again, we’ll have second half of 2025. The comment period for this document and the detailed review of ASPE will overlap a bit. That’s by design, because they’re very similar. And like I said, this is a bit of a preview of what some of the proposals in the discussion paper on the Detailed Review will eventually look like when we get to an ED where we’re saying: You know what? For those that this is important information, you have the option to continue doing what you’re doing. For those where your only user is a lender, and the lender isn’t giving you any, isn’t taking any security over intangibles, and they don’t care about the intangibles, and they add it all back, well, why go through the cost of a purchase price allocation and all those things, which are very costly aspects of accounting? And, therefore, we feel this option is addressing the cost-benefit analysis.
So that’s detailed review and subsequent measurement of goodwill. I will turn it back over to Eric to talk a little bit about agriculture.
Eric English: Thanks, Armand. So, in March 2025, the AcSB issued its Exposure Draft, Amendments to Section 3041, Agriculture, which closed for comment earlier this month on May 12. The Exposure Draft proposes narrow scope amendments to Section 3041 to firstly remove certain disclosure requirements for agricultural inventories that are measured using the net realizable value and cost model and also to clarify the amortization requirement for productive biological assets managed on a collective basis.
The AcSB also conducted targeted outreach with users of financial statements in the agriculture sector, the Canadian Private Enterprise User advisory committee, and practitioners and technical working groups in the agriculture sector.
The AcSB will deliberate feedback received from outreach activities at its July 2025 meeting and expects to issue final amendments in Q4 2025.
So next, I’d like to talk about a research topic the AcSB is currently undertaking relating to Financial Statement Concepts.
So, last year, the AcSB approved a project proposal for a Concepts Improvement Project.
The Board previously agreed that Financial Statement Concepts in Parts II and III should be reviewed to ensure they are fit for purpose for Canadian entities.
While an updated set of Financial Statement Concepts would not be expected to significantly impact application of existing accounting standards, it could benefit preparers and practitioners in addition to the Board.
While this project could provide greater clarity on topics that will help preparers and practitioners interpret and apply standards, the updated concepts will not change the standards themselves.
And so we can see on the diagram in this slide: There’s a few ways that preparers and practitioners could benefit from an updated Financial Statement Concepts.
So, firstly, it could help determine accounting treatment in emerging areas where standards do not yet exist, or assist in areas that require judgment in determining which authoritative standards should apply.
Secondly, the project will also help to clarify the intended purpose of concepts, including when and how they should be used in practice.
Highlighting the purpose and intended use of Financial Statement Concepts is expected to improve consistency of the application of standards in Parts II and III of the Handbook.
This will include reinforcing that concepts should not be used to replace or override the requirements of an accounting standard or accounting guideline.
Lastly, from the Board’s perspective, having updated definitions of financial statement elements could also help us to set standards in response to emerging issues.
The AcSB is currently seeking feedback from its advisory committees on topics to be updated in Financial Statement Concepts.
The focus of these consultations will be to identify areas for improvement in concepts to ensure they continue to be fit for purpose for Canadian entities.
And, now when discussing the Board’s approach to this project, it is important to note that the current financial statement concepts were actually developed prior to the changeover to International Financial Reporting Standards in 2011, and at that time were aligned to the IASB’s original Conceptual Framework.
So, some changes were then made to Section 1001 in consideration of differences between private enterprises and not-for-profit organizations.
The IASB subsequently undertook a project to update its Conceptual Framework for financial reporting, which was finalized in 2018.
And so, as part of this process, the Board is going to consider topics from the IASB’s revised Conceptual Framework when developing proposals to update concepts in Parts II and III.
Each topic will be reviewed to determine if it is fit for purpose for Canadian entities.
And so what’s this going to include? Well, it’s going to include identifying any areas that might need to be simplified for accounting standards for private enterprises, and accounting standards for not-for-profits.
And as part of this process, the Board will consider concepts topics included in the IFRS for small and medium-sized entities accounting standard to help identify areas for simplification.
And also, the AcSB will evaluate each topic on a cost-benefit basis, and considering the differing information needs of users for financial statements prepared under IFRS Accounting Standards, and the users of financial statements prepared under Parts II and III.
And you can find a helpful link on the slide here to where you can find out more about the benefits of this project as well as the background approach.
So before moving on to some of our other topics, we did want to ask a polling question to gather your thoughts on our financial statement concepts project.
So, as part of our project to improve concepts, the Board is seeking to provide a sufficient level of detail to aid in the understanding of accounting standards and to help establish accounting policies in areas where standards do not yet exist.
At the same time, the Board is aiming to strike an appropriate balance by ensuring that concepts are concise and readable so users can focus on important core concepts.
So our question to you is: Do you think that the concepts in Section 1000 and 1001 provide a sufficient level of detail?
And I’ll just give another moment here for everyone to respond.
So, it looks like a little bit of a split between: Some people think there’s enough detail...
Armand Capisciolto: Did Eric freeze?
Eric English: Do you have any thoughts on that, Armand?
Armand Capisciolto: Sorry. You froze there for a second, Eric. But I’m assuming you’re asking a question—or froze for me, anyway. I don’t know if you froze for others.
No. I think a bit of a split between. There’s enough detail, and some topics can benefit from more information. So, I think that’s, again, another interesting piece of information for the Board to consider as we discuss these things. I will say, from a preparer, an auditor stand point, you really should only be looking to concepts when there isn’t a specific standard to look at.
So, I personally would have loved to see more people say I don’t refer to concepts in my current role, but at least there’s 17 of you that that said that. It’s finding that balance between enough and too much is a tough one for the Board and for everybody. So, we’ll take that input as we continue to discuss this topic.
Eric English: Great! And so with that, I’ll now pass it over to you, Armand, to talk about our Contributions project.
Armand Capisciolto: Yes, I saw again: There’s quite a few people with a not-for-profit background on the call. So, in the next little bit, we’ll talk about a few Part III projects. One is a project that’s been ongoing for a while. I feel like I’ve been talking about this project for a very long time. And that is our Contributions – Revenue Recognition and Related Matters project. And we issued an Exposure Draft. We received a lot of comments, a lot of negative comments. We spoke about this last year, last fall. And we have decided to re-look at what was proposed in that original Exposure Draft. We issued a feedback statement explaining the rationale as to why we’re re-looking at that. And as those of you who were following the project know, we originally proposed to have one accounting policy for recognition of restricted contributions.
We’re not going down that path anymore. We’re going to continue to allow an accounting policy choice. And the new Exposure Draft that’s being worked on is about providing, improving the standard so the standard is less complex, more understandable, and applied more consistently than it is right now. So if you haven’t read our feedback statement that we issued last May, it’s a good read, explains all the thought process we went through.
So where are we on this project right now?
We’ve talked to a ton of people. The staff have talked to a ton of people. The Board’s discussed it a number of times. We discussed with our not-for-profit advisory committee a number of times, and staff have proposals drafted, but we don’t want to have to re-expose again.
So what we’re doing now is we are going to field-test the proposals that staff have drafted. If you go to the FRAS Canada website, there’s now a place for if you’re in the not-for-profit space and want to get involved in standard-setting and field-test some of these. There’s a place to contact the team and sign up to be a field-tester. The goal is… Why are we field-testing? We want to identify... We want to make sure the standards, the proposals the staff have drafted are working the way we expect them to work. We also want to identify any potential issues before we get this Exposure Draft out and so that we’re not redeliberating when we get comments on the Exposure Draft. So, you can really help us out if you’re in the not-for-profit space by signing up to field tests. The more field testers we have, the better evidence the Board will have in making its decisions on the Re-exposure Draft.
The other Part III project we’re working on is Reporting Controlled and Related Entities by Not-for-Profits.
And we all start off and say what this project isn’t. We’re not introducing mandatory consolidation of controlled not-for-profits. That is not what we’re doing. However, we do want to look at the definitions, look at the guidance and see if it can be approved. We want to… We think there’s some inconsistency in how people are determining whether they control whether or not for-profit controls another not-for-profit or not, or has significant influence and economic interest in it. We want to improve the disclosures so that when there is… even if you’re not choosing not to consolidate, that information is made available that is relevant to users and is high-quality information. And we want to introduce some illustrative examples to help with that.
So again, this project is not an easy project—control and not-for-profit. Dealing with control in a not-for-profit sector is difficult to determine. Where we are, though, is we’re putting Consultation Paper together. The team has been working on it for a while. There’s been a few different, kind of, potential solutions explored. The staff is coming to the Board at our June meeting with some proposals that will ultimately be in a Consultation Paper that we hope to have issued by the end of this fiscal year.
So with that, Eric, back to you.
Eric English: Okay. Thanks, Armand. So next, we’ll cover how you can get involved with the work of the Board.
So we want to know what you think, and are always interested in hearing from interested and affected parties. You can send us a question or comment directly on our website, which is linked on this slide.
You can also share your views by volunteering to join an advisory committee or one of our working groups. We post volunteer opportunities on our website, or you can reach out to the staff contacts on the slide to find out about any open opportunities to join a committee or a working group. I know Armand mentioned some opportunities to get involved with our Contribution project a moment ago as well. So you can find out on our website.
If you have any questions on a project or would like to share your views, you can also contact the staff listed on this slide.
To stay up to date on the AcSB’s activities, you can register an account on the FRAS Canada website and subscribe to our bi-weekly e-newsletter, the Standard.
You can also follow us on social media on X, formerly Twitter, and LinkedIn, using the links on this slide.
Lastly, this slide includes a link to the FRAS Canada website, where you can find additional information that we’ve been discussing today.
And so this slide includes a link to the post-webinar quiz. You can either access it by scanning the QR code on the screen here, so I’ll leave it up for a moment. And in the chat, we’ve also shared a link to the quiz so you can find it there. If you weren’t able to access the quiz during today’s session, once again, the slides are available for download on the website. You can download them there and simply scroll to this slide where you can find the link to the quiz.
And so with that, we’ve gotten to the Q&A portion of today’s session. Just a reminder: You can submit a question using the Q&A function, and we’ll try to get to as many questions as we can before the end of the session.
So with that, just looking at some of the questions coming in here.
Maybe, Armand, here’s the first one. One of our listeners is interested in the Goodwill and Intangibles project. They’ve asked: How will amortizing goodwill or not recognizing intangibles improve the investors’ or financial statement users’ understanding of the statements?
Armand Capisciolto: A great question! Little disappointing if you skip the first question, though, Eric. It really wasn’t a question. We’ll keep that one to ourselves.
But I think that this issue of goodwill and not recognizing intangibles, it’s not about improving information. It’s about… the effort that’s required right now for many entities, not all entities. For many entities, the cost of that effort exceeds the benefit. So if I have—and that’s why this is an option, not a requirement, an option—so if I have an entity whose primary financial statement user is a lender, that lender either has a mortgage on real estate or, kind of, the debt supported by receivables and inventory, that lender does not care whatsoever about the goodwill balance, the customer relationship balance, all of those other balances that get recognized in a business combination. And for those of you who have been involved in business combinations, you will know: Doing a purchase price allocation is probably one of the most expensive things you can do from an accounting standpoint. So in that situation, the cost exceeds the benefits. However, if I’m dealing with a startup that has IP, if I’m dealing with an entity that’s thinking about going public in the future, if I’m thinking about an entity that might have private equity in investors, doing the current accounting, which is pretty aligned with what public companies do, that may be well worth it—the cost is less than the benefits in those cases. So it’s not about it improving information; it’s about cost versus benefit. And for many entities, especially on the smaller side that apply our private companies standards, we don’t believe that cost is warranted, given the limited benefit that those entities users get from that information.
Eric English: Thanks for that answer, Armand. I think that was really helpful for some of our listeners here today. And just a reminder: I see a couple of hands going up. But if you have a question, please type it into the Q&A function, and we’ll answer it there, as we unfortunately aren’t using the raise hand function today for live questions.
So with that, we have another individual who is interested in the topics under ASPE that could be impacted by economic uncertainty or some of the tariff policy announcements you were mentioning, Armand, and they were wondering if we could explain how tariffs could impact the accounting for inventories.
Armand Capisciolto: Oh, interesting! Obviously, I think there’s a couple of things if you’re an importing entity and you’re therefore incurring the cost of the tariff.
A tariff would obviously be part of the cost of that inventory. So that’s kind of step number one. I think that the second step to think about is inventory is then measured at cost, the lower of cost or net realizable value.
So if you’re an importing entity, and you’re now paying these tariffs, I think you have to think about whether that total cost is recoverable as part of the net realizable value. Can you pass that cost along? If you can’t, there might be an impairment to consider related to that inventory, even if you’re not the importing entity—you’re an exporting entity. So you have inventory, and your customers now have to pay a tariff. On the other side again, will the customer want to pay as much for that product if they’re now adding a whatever percentage tariff on top of that? And therefore, again, that net realizable value, lower-of-cost-or-net-realizable-value test will come into play. So lots of things to think about with regards to inventory and in this environment that we find ourselves in right now.
Eric English: Thanks for that, Armand. We have another question as well. So, you recall earlier that we spoke about our Board’s new Guidance Framework. This individual is wondering if we could tell them about what types of guidance are available and have been issued by the Board.
Armand Capisciolto: Okay. So, when we think of guidance, there’s various forms of guidance, right? So, first of all, when we look at standards—and, Eric, you talked about this a little bit—within even the Handbook, there is the standard, the authoritative guidance. It’s often accompanied by non-authoritative guidance that’s in the Handbook. So, for example, our Basis for Conclusions on every standard we issue. So, the Basis for Conclusions is not authoritative. However, it is critical. It’s a critical piece of information, because it gives you the insights into what the Board was thinking when they set those standards. So if you’re trying to interpret a standard, the Basis for Conclusions is a great document to look at, because you’ll kind of, if you understand the problem the Board was trying to solve and how they concluded that this is the appropriate solution, it might give you insights into how to interpret that standard.
There’s also illustrative examples that are included in the Handbook, and then there’s stuff outside of the Handbook. So, the Decision Summaries. So, Eric spoke about how things would be dealt with in our Decision Summary. So if something comes through our Guidance Framework, and we look at it and say: Well, no, the standard’s clear in that we think professional judgment should be applied. We may then, in our Decision Summary, say, well, here is where we anticipated that professional judgment being applied so that information that’s included in the Decision Summaries could be useful to you in then determining was this an area where judgment applies or doesn’t apply.
We have webcasts like this. There was a webcast where a number of issues that came up at a Board meeting related to revenue recognition were addressed. We have the transcript available to that webcast on the website.
There’s a fabulous podcast, and I’m not just saying that because I’m one of the speakers on that podcast (but I probably am saying that because I’m one of the speakers on that podcast), on retractable or mandatorily redeemable shares that goes through a number of issues that if you’re dealing with that, I highly recommend it. So there’s various forms of guidance there.
Then, there’s stuff in addition to what we do with the Accounting Standards Board. The provincial and territorial bodies issue guidance. There’s guidance issued from various other places. So there’s lots of things out there to look at. Again, remember: It’s all supporting what’s in the standards. Never forget: The standards are the authoritative guidance. Everything else is helping you apply that authoritative guidance.
Eric English: Okay. Thanks, Armand. So, I think we’re just coming up on time here. So I think I’ll end the Q&A session there. But once again, if you have any questions, don’t hesitate to contact the staff listed earlier on the slide. We’d be more than happy to connect.
And so, with that, I’d just like to thank everyone. Thank you, Armand, for your time today and thank you to our audience for taking the time to join us and sending us some great Q&A questions.
A reminder that the on-demand version of this presentation will be made available approximately two weeks after today’s webinar. The slides are currently available for download on the webinar registration page. Should you wish to review anything that we spoke about today, or see some of the projects that we’ve included in the Appendix, you can find them there as well as a link to the CPD quiz is also in those slides if you weren’t able to complete it.
And again, once again, if you have any questions, feel free to reach out to the staff listed on the earlier slide. And with that, thank you to everyone for participating in today’s webinar and have a great afternoon.
Armand Capisciolto: Thanks, everyone.