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AcSOC Meeting Minutes – February 17-18, 2022

The Accounting Standards Oversight Council (AcSOC) discussed the activities of the Accounting Standards Board (AcSB), the Public Sector Accounting Board (PSAB) and related matters. The meeting spanned two days. The first day was open to the public.

The following notes relate to the first day, February 17.

Chair’s Opening Remarks

Accounting Standards Oversight Council (AcSOC) incoming Chair, Lorraine Moore, opened the meeting by welcoming the retiring Council Chair, Miville Tremblay. On behalf of the Council, Ms. Moore acknowledged Mr. Tremblay’s contribution over the past seven years and thanked him for his guidance and support. She also acknowledged that this was the last Council meeting for Marie Giguere, Heather Wolfe and Tom Trainor and, thanked them for their continued contribution.

She noted that there will be an opportunity to see Mr. Tremblay and other AcSOC alumni at the next in-person Council meeting in June 2022. Ms. Moore also welcomed members and the external observers to the meeting.

Ms. Moore highlighted that the IFRS Foundation Trustees reappointed the AcSB to the Accounting Standards Advisory Forum (ASAF) for the period 2022 to 2024.

AcSB Chair Report

Linda Mezon-Hutter introduced the AcSB’s Vice-Chair, Armand Capisciolto, and noted that he will be presenting some AcSB topics at the meeting.

Ms. Mezon-Hutter started her presentation by highlighting the AcSB’s key risks and explained how these risks will be managed. She noted a particular risk related to managing the impact of PSAB’s Not-for-Profit (NFP) project on the AcSB’s stakeholders. She highlighted the importance of the two Boards staying in sync and managing risk together based on common stakeholders as both Boards start to implement their new strategic plans and undertake new standard-setting activities.

Ms. Mezon-Hutter announced that Ingrid McDonald, AcSB Associate Director, will be leaving in early March and thanked her for her contribution.

She noted that staff capacity and Board capacity are key risks. She explained that as the Board continues to assess the impact of the COVID-19 pandemic and finalizes its 2022-2023 Annual Plan, it will again discuss staff and Board capacity to achieve the identified priorities at the Board’s March 2022 meeting. She also mentioned that the IFRS documents for comments are expected to decrease in 2022.

Referring to the slide on the AcSB/UK Endorsement Board (UKEB) meeting, she highlighted the importance of forming a strong relationship with the UKEB. She explained that the UKEB was formed because of Brexit when the United Kingdom withdrew from the European Union. The purpose of the UKEB is to influence, endorse and adopt new or amended international accounting standards issued by the International Accounting Standards Board (IASB) for use by UK companies. She noted that the endorsement processes that have been put in place by the UKEB are very similar to the processes that the AcSB is following.

Ms. Mezon-Hutter mentioned that the AcSB’s Strategic Plan was presented at ASAF providing an overview on standard setting in Canada, the objective of the draft plan and associated strategies, outreach performed, and feedback received to date. She added that ASAF members were very interested in sustainability and the connectivity between financial reporting and sustainability reporting.

About the rate-regulated activities project, Ms. Mezon-Hutter explained that although the risk is still considered as cautionary, the Board remains optimistic that the project will move forward. On the Insurance project, Ms. Mezon-Hutter stated that the IASB issued narrow-scope amendments to facilitate the adoption of IFRS 9 (Financial Instruments) and IFRS 17 (Insurance Contracts) at the same time. She highlighted that the AcSB maintains a dialogue with stakeholders and other standard setters related to IFRS 17. She also highlighted that the Board’s domestic agenda is on track.

She concluded with a due process update stating that there were no reportable departures from due process nor were there any unusual events in the application of due process that arose in the September 1 to December 31, 2021 period.

The due process manual is a public document outlining the AcSB’s rigorous set of procedures to develop and adopt standards. This document requires review every three years. The Board made some enhancements to the manual as it relates to accounting guidelines, Board member dissentions and the comment period of exposure drafts.

AcSB Update

On the interim performance report, Ms. Mezon-Hutter noted that the AcSB is on track to complete their main objectives in the 2021-22 Annual Plan and continue to effectively reach stakeholders on a consistent basis. She noted the joint outreach sessions performed with PSAB. The AcSB monitored developments related to sustainability standards and initiated research in support of the new Strategic Plan, including about the scalability of standards and stakeholder engagement. Next steps include surveys from the active committees to update Q4 activities from January to March 2022, and the completion of the final performance assessment.

Mr. Capisciolto updated the Council on the AcSB’s 2022-2027 Strategic Plan. He noted changes made since the last Council discussion on January 18, 2022, including to further align with PSAB’s Strategic Plan in the description of AcSOC, and editing the Chair’s Message to refer more broadly to the Independent Review Committee on Standard Setting and the final recommendations. He covered some core strategies of the Strategic Plan such as: the applicability of IFRS to Government Business Enterprises (GBEs) especially smaller GBEs that exist in many Indigenous governments; the improvement of quality reporting beyond traditional financial statements and the demand for climate-related information; and growing the AcSB’s international influence. The Strategic Plan will be finalized and issued on March 31, 2022 for implementation on April 1, 2022.

Council members provided feedback on the AcSB’s Strategic Plan that will be incorporated in the next update.

Mr. Capisciolto updated the Council on key projects of the AcSB’s 2022-2023 Annual Plan. Informed by an environmental scan and assessment of risks, the plan includes advancing the research and outreach on scalability and potential changes to the preface. The plan also includes time to monitor sustainability reporting developments, interact with material developed by the International Sustainability Standards Board (ISSB) and respond to exposure drafts.

PSAB Chair Report

Clyde MacLellan gave an overview of PSAB’s activities as they related to key strategies: the International Strategy, Conceptual Framework and Reporting Model, Government Not-for-Profit (GNFP) Project and Strategic Plan.

Mr. MacLellan highlighted certain changes to PSAB’s key risks: preparers not applying some or all the standards moved to a high risk; staff capacity constraints due to challenges in the current work environment moved to a medium risk; and the Board’s ineffective involvement in the international standard-setting process considered a medium risk. Regarding staff capacity and related risks, he noted some changes to the staff compliment in the last two years, resulting in lower standard-setting experience. In this context, PSAB is continuing to develop new staff members and familiarizing them with the public sector environment. A substantial change to the risks is the addition of a risk related to the development of sustainability standards that may not meet the needs of the public sector. This risk is at a very broad level with a particular focus on the unique perspective of the public sector users.

Mr. MacLellan presented PSAB’s key strategies dashboard where he provided an update of key projects. He stated that the International Strategy was moved to a green traffic light because it is in the implementation phase, progressing towards refining relationships with international partners and, communications with stakeholders and the PSAB community. Based on PSAB’s decision at their March meeting, the GNFP Strategy will be implemented in the Annual Plan.

The Conceptual Framework (CF)/Reporting Model (RM) have been kept as yellow as the review and analysis of the significant feedback received from stakeholders continues. As noted in the performance report, PSAB approved an extension of three months for the Reporting Model project to allow sufficient time to consider feedback from stakeholders.

The Employment Benefits project was moved to yellow because a total of 68 response letters were received, with generally positive feedback from a broad range of PSAB stakeholder groups.

PSAB approved the Financial Instruments project including narrow scope consequential amendments, going live on April 1, 2022. 

PSAB Update

Mr. MacLellan noted that members received an updated version of PSAB’s Strategic Plan with track changes. Minor edits were made in response to incremental feedback received. Since January 2022, some key changes included added reference to due process, refined wording in the Chair Message, updated discussion on enhancing the development processes, clarified scope of PSAB’s engagement with IPSASB, references to the performance measures in Risk and Accountability were included. Also, wording and descriptions were clarified and aligned with the AcSB’s Strategic Plan. In March 2022, PSAB will review and approve the Strategic Plan. The plan will be publicly issued in April 2022.

Mr. MacLellan provided a perspective on a Public Sector Accounting Discussion Group meeting that was held on November 12, 2021 with over 300 registrations. He noted that there was particular interest regarding the benefits, issues and challenges with reporting natural capital in financial statements (e.g., forests, waterways, etc.).

The 2022–2023 Annual Plan covers the first year of the new 2022–2027 Strategic Plan and has been updated for feedback received from the Performance Review Committee on February 8, 2022. The first draft of the Annual Plan was reviewed by PSAB in January 2022 and by AcSOC in February 2022. PSAB will approve the plan in March 2022. Mr. MacLellan explained that the final CF and the approval of the GNFP Strategy implementation plan, will be finalized in the first half of the fiscal year. The Employee Benefits Project Phase 1 and approval of Phase 2 approach will be finalized. The Financial Instruments Monitoring initiative will go live on April 1, 2022 and since this will be the first year of implementation, initial preparatory work will be required to understand the issues and challenges that may arise. There will be a significant amount of staff time invested in implementing the International Strategy to be able to influence future international standards projects to reflect Canadian interest.

Some new strategic initiatives reflected in the 2022-2027 Strategic Plan include the development of an Indigenous Peoples engagement strategy and the establishment of an Indigenous Peoples Advisory Committee. The GNFP and sustainability were identified as two pending technical projects. PSAB will also be monitoring activities related to sustainability standards, especially as it relates to the public sector perspective. The monitoring also includes the activities of IPSASB about sustainability as well as any feedback received from public sector stakeholders to the consultation of the Independent Review Committee.

In the early part of 2023, PSAB plans to initiate a project priority survey that will highlight and identify the projects to be considered for addition to PSAB’s work plan.

Mr. MacLellan presented PSAB’s post-implementation review assessments that were completed for the following standards: PS 3210 Assets; PS 3320, Contingent Assets; PS 3380 Contractual Rights; and PS 3420, Inter-entity Transactions. The Board concluded that more detailed reviews were not required.

A member asked for clarifications about the pressures and risks associated with the stakeholder communities in the public sector. Mr. MacLellan stated that the municipal governments regularly comment about the importance of playing an active role in sustainability and climate change to shape the future of financial and other related reporting. This also leads to other initiatives such as the measurement and recognition of natural assets. These matters are also important from an Indigenous perspective, including as it relates to lands and water.

Mr. MacLellan concluded with an update on PSAB’s draft 2021-2022 Interim Performance Report for the period from April 1 to December 31, 2021. The report has been updated for feedback received from the Performance Review Committee on February 8, 2022. The report includes a revised timeline for the CF and RM projects. The performance report forms the basis for PSAB’s external Annual Report.