Accounting Standards for Private Enterprises

Revenue

Summary

The Accounting Standards Board (AcSB) has consulted with stakeholders about its relative priorities for Part II as per its 2017-2018 Annual Plan. As part of this consultation, the AcSB conducted a survey for stakeholders who account for revenue using Part II or Part III of the Handbook.

Staff Contact(s)

Ingrid McDonald, CPA, CA

Principal, Accounting Standards Board

Project Status

  • Information gathering

    Completed prior to July 2018

  • Approving project

    The AcSB approved the project in July 2018

  • Consulting stakeholders

    Exposure Draft issued in May 2019

  • Deliberating feedback
  • Final pronouncement

Meeting & event summaries


March 6, 2019

AcSB Decision Summary – March 6-7, 2019

The AcSB continued its discussion on the proposed amendments to Section 3400, Revenue, in Part II of the Handbook. The Board considered the feedback from its Private Enterprise Advisory Committee on the proposed transitional provisions and effective date of the amendments. Based on the Committee’s feedback, the Board decided to propose transitional relief for the amendments relating to the percentage of completion method and multiple element arrangements. The Board also decided that the proposed effective date for the amendments will be for fiscal years beginning on or after January 1, 2021.

The AcSB also considered Committee members’ comments arising from their fatal flaw review of the proposed amendments. Based on the feedback, the Board proposes to:

  • clarify the proposed guidance for using input and output measures to determine the degree of completion of a contract when using the percentage of completion method;
  • include proposed guidance on the accounting for expected losses when it is probable that total contract costs will exceed total contract revenue when using the percentage of completion method; and
  • simplify the proposed guidance for determining the stand-alone selling price of a good or service when accounting for multi-element arrangements.

 The Board plans to issue the exposure draft no later than the second quarter of 2019.

February 7, 2019

Private Enterprise Advisory Committee Notes – February 7, 2019

The Committee provided feedback to staff on the draft Exposure Draft. In addition, the Committee advised that:

  • the AcSB consider providing transitional relief for the proposed guidance relating to multiple element arrangements; and
  • the proposed effective date should be January 1, 2021.

The Board will consider this input at its March 2019 meeting.

January 15, 2019

AcSB Decision Summary – January 15, 2019

The AcSB continued discussing the proposals to address stakeholders’ issues about insufficient guidance in Section 3400, Revenue. The Board discussed an updated draft of the proposed guidance, transitional provisions, and the proposed effective date of the amendments.

The AcSB also considered a communication plan for a forthcoming exposure draft and decided on its outreach activities with stakeholders.

The AcSB directed staff to begin the balloting process for the proposals.

The AcSB plans to issue the exposure draft no later than the second quarter of 2019.

December 12, 2018

AcSB Decision Summary – December 12, 2018

The AcSB continued discussing the proposal to address stakeholders’ issues about insufficient guidance in Section 3400, Revenue. The Board focused on multiple-element arrangements, upfront non-refundable fees/payments, and bill-and-hold arrangements. In addition, the Board discussed proposed illustrative examples and disclosure requirements specific to the percentage of completion method.

The AcSB will consider an updated draft of the proposed guidance, transition provisions, and the proposed effective date of the amendments at its January 2019 meeting.

The Board plans to issue the exposure draft no later than the second quarter of 2019.

November 27, 2018

Private Enterprise Advisory Committee Notes – November 27, 2018

The Committee provided feedback to the Board on specific aspects of the staff’s proposed amendments to Section 3400, Revenue. It also gave input on the applicability of the proposed illustrative examples to private enterprises.

The Board will consider this input at its December 2018 meeting.

November 14, 2018

Not-for-Profit Advisory Committee Meeting Notes – November 14, 2018

The staff gave an update to the Committee on the project relating to Section 3400, Revenue, in Part II of the Handbook. It includes developing solutions that address stakeholder needs with regards to Section 3400, and the project milestones relevant to the Committee.

The staff asked for input on the challenges NFPOs face with applying the guidance included in Section 3400 relating to:

  • bill-and-hold arrangements;
  • multiple-element arrangements;
  • percentage of completion method;
  • reporting revenue gross or net; and
  • upfront non-refundable fees/payments.

November 12, 2018

AcSB Decision Summary – November 12-13, 2018

The Board discussed the approach in developing the proposals to address stakeholders’ concerns over insufficient guidance on accounting for revenue in Section 3400, Revenue. The Board decided that while the proposed guidance will retain the principles-based approach, it will provide explanatory guidance, accompanied by illustrative examples when useful.

The Board discussed the proposed guidance for percentage of completion and reporting revenue gross or net. The Board will continue its discussions on the remaining topics at its December 2018 meeting:

  • multiple-element arrangements;
  • upfront non-refundable fees/payments; and
  • bill-and-hold arrangements.
The Board plans to issue an exposure draft no later than the second quarter of 2019.

September 11, 2018

Private Enterprise Advisory Committee Notes – September 11, 2018

The Committee discussed the Board’s approved project to address stakeholders’ issues in Section 3400, Revenue, on the following topics:

  • bill-and-hold arrangements;
  • multiple-element arrangements;
  • percentage of completion method;
  • reporting revenue gross or net; and
  • upfront non-refundable fees/payments.

The Committee considered the overall approach to the guidance that should be provided to address stakeholders’ issues raised. The Committee advised the Board that the proposed solutions retain the principles-based approach currently used in Section 3400. Therefore, the Committed suggested that rather than provide prescriptive guidance, the proposals should expand on the current principles, supplemented by illustrative examples when appropriate.

The Committee also discussed staff’s proposed solutions that looked to revenue guidance from various sources, including the superseded Emerging Issues Committee (EIC) abstracts in the pre-changeover standards in Part V of the Handbook and the IFRS® Standards and U.S. GAAP. The Committee considered whether the staff’s proposed solutions adequately addressed the issues raised by stakeholders and whether to suggest additional references.

September 10, 2018

Not-for-Profit Advisory Committee Meeting Notes – September 10, 2018

The staff presented the Committee with a brief verbal update on the AcSB’s July 2018 approval of a project on Section 3400, Revenue, in Part II of the Handbook and the next steps. NFPOs apply Section 3400 for sales of goods and services, which can be significant for some types of NFPOs. The staff also requested the Committee’s input off-line on the proposed solutions to address stakeholders’ issues about insufficient guidance on accounting for revenue, as well as requested input on the project milestones relevant to the Committee.

July 17, 2018

AcSB Decision Summary – July 17, 2018

The Board approved a project to address stakeholders’ issues about insufficient guidance on accounting for revenue in Section 3400, Revenue, in Part II of the Handbook. The Board plans to propose additional guidance on the following topics:

  • bill-and-hold arrangements;
  • multiple-element arrangements;
  • percentage of completion method;
  • reporting revenue gross or net; and
  • upfront non-refundable fees/payments.

In parallel with developing the proposed guidance, the Board will continue to examine the need for further improvements, including an assessment of retaining the current risk-and-rewards model.

The Board will consult its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee in developing the proposals. The Board plans to issue an exposure draft in the first half of 2019.

News


May 1, 2019

Document for Comment

AcSB Exposure Draft – Revenue

The AcSB proposes, subject to comments received following exposure, to amend Section 3400, Revenue, in Part II of the CPA Canada Handbook – Accounting. The amendments will provide additional guidance on how to apply certain requirements in Section 3400. These amendments would also apply to not-for-profit organizations using the standards in Part III of the Handbook, as relevant. Stakeholders are encouraged to submit their comments by July 31, 2019.

October 23, 2018

News

Webinar – AcSB Domestic Standards Update

October 23, 2018. Are you a Canadian private enterprise or not-for-profit organization, an advisor to one, or a user of financial reports? Learn about upcoming and future changes to Part II and Part III of the CPA Canada Handbook. Tune in on October 30, 2018 (French) or October 31, 2018 (English).

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.