The Accounting Standards Board (AcSB) has issued its Exposure Draft that corresponds to the International Accounting Board’s (IASB) Exposure Draft on this topic.
The proposed amendment relates to the assessment of whether a contract is onerous, and would:
- specify that the “cost of fulfilling” a contract in paragraph 68 of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, comprises the “costs that relate directly to the contract”;
- provide examples of costs that do, and do not, relate directly to a contract to provide goods or services;make no new requirements for entities to disclose information about onerous contracts;
- make specific transition requirements for entities already reporting using IFRS® Standards. Such entities would be required to apply a “modified retrospective” approach where they would apply the proposed amendments to contracts existing at the date of initial application — the beginning of the annual reporting period in which the entity first applies the amendments; and
- make no specific transition requirements for entities adopting IFRS Standards for the first time.
The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB, and issuing the AcSB’s own exposure draft on each IASB proposal. Subject to the responses to the AcSB’s Exposure Draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRS Standards for publicly accountable enterprises.