Accounting Standards for Private Enterprises

Exposure Draft, Accounting for Related Party Financial Instruments and Significant Risk Disclosures (Proposed amendments to Financial Instruments, Section 3856)


The Accounting Standards Board (AcSB) proposes, subject to comments received following exposure, to amend FINANCIAL INSTRUMENTS, Section 3856 in Part II of the CPA Canada Handbook – Accounting as set out in this Exposure Draft. These amendments would also apply to not-for-profit organizations (NFPOs) using the standards in Part III.

The Board understands that some stakeholders raised various issues regarding Section 3840. The objective of these proposals is to address concerns on the accounting for related party financial instruments. The Board is considering whether to undertake a project relating to Section 3840 in the context of its consultation with stakeholders about the relative priorities for Part II projects.

Staff Contact(s)

Lester Cheng, CPA, CA

Director, Accounting Standards Board

Read what stakeholders had to say about the Accounting for Related Party FI-DC

Support Materials


In October 2014, the Board issued a post-implementation review for Section 3856. A summary of the feedback received during the post-implementation review is available in the Feedback Statement the Board published in September 2015.

These proposals include limited scope amendments to clarify the purpose of financial instrument risk disclosures as well as to address the following issues respondents raised relating to the accounting for related party financial instruments:

  • It is unclear whether related party financial instruments are in the scope of Section 3856 or RELATED PARTY TRANSACTIONS, Section 3840, after initial recognition.
  • It is unclear whether the guidance in Section 3856 relating to the recognition and measurement of compound financial instruments is available for related party financial instruments initially measured in accordance with Section 3840.
  • It is unclear whether the impairment and forgiveness of related party financial instruments should be recognized in net income or in equity.
  • It is challenging to apply the guidance in Section 3856 to the modification and extinguishment of related party financial liabilities.