Financial Statement Concepts

The AcSB discussed a draft of its exposure draft for its Financial Statement Concepts project. The exposure draft proposes a new conceptual framework for Part II of the CPA Canada Handbook – Accounting Standards for Private Enterprises and Part III of the CPA Canada Handbook – Accounting Standards for Not-for-Profit Organizations. The Board plans to issue an exposure draft in 2027.

For more information on the Financial Statement Concepts project, read “What You Need to Know about Financial Statement Concepts.”

The AcSB discussed feedback from its Medium and Small Practitioners Advisory Committee, Not-for-Profit Advisory Committee, and Private Enterprise Advisory Committee on a draft updated Conceptual Framework for Part II of the CPA Canada Handbook – Accounting Standards for Private Enterprises and Part III of the CPA Canada Handbook – Accounting Standards for Not-for-Profit Organizations. The Board decided to incorporate the draft proposals into a future exposure draft as part of its Financial Statement Concepts project.

The AcSB agreed with advisory committee feedback that it is important to emphasize that the updated Conceptual Framework would not be intended to impact the existing recognition, measurement, or disclosure requirements in Part II and or Part III of the Handbook, or related Accounting Guidelines.

For more information on the Financial Statement Concepts project, read “What You Need to Know about Financial Statement Concepts.”

The AcSB discussed feedback from its Medium and Small Practitioners Advisory Committee, Not-for-Profit Advisory Committee and Private Enterprise Advisory Committee on updated financial statement concepts for Part II of the CPA Canada Handbook – Accounting Standards for Private Enterprise and Part III of CPA Canada Handbook – Accounting Standards for Not-for-Profit Organizations.

The AcSB agreed with feedback from the advisory committees that each of the following topics in the IASB’s Conceptual Framework would be fit for purpose for Canadian private enterprise and not-for-profit organizations, with some amendments to terminology for consistency with Part II and III of the Handbook:

• Recognition criteria
• Measurement
• Presentation and disclosure

The Board agreed with advisory committee feedback that concepts of capital and capital maintenance are not relevant to private enterprise and not-for-profit organizations.

Read more about the background and benefits of the AcSB’s Financial Statement Concepts project: “What You Need to Know about Financial Statement Concepts.”

The Medium and Small Practitioners Advisory Committee received an update on the AcSB’s tentative decisions about updating financial statement concepts for Parts II and III of the Handbook.

Additionally, the Committee provided feedback on the AcSB’s tentative decision to develop a single set of financial statement concepts covering both Parts II and III of the Handbook. The Committee noted that it will be important to ensure that a single set of financial statement concepts is easy to navigate for application in both Part II and Part III.

The Committee also provided feedback on staff’s proposed definitions of the elements of financial statements, which incorporates selective terminology and guidance from the International Accounting Standard Board’s Conceptual Framework. The Committee emphasized the importance of considering the different types of assets and liabilities recognized by for-profit and not-for-profit organizations as the AcSB begins developing proposals. Some Committee members also noted that increased guidance on the presentation of expenses in the income statement may be helpful and suggested the AcSB consider a separate project on financial statement presentation.

The AcSB will discuss the Committee’s feedback at its meeting in March 2025.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

Private Enterprise Advisory Committee Notes – January 30, 2025

The Private Enterprise Advisory Committee received an update on the AcSB’s tentative decisions about updating financial statement concepts for Parts II and III of the Handbook.

Additionally, the Committee provided feedback on the AcSB’s tentative decision to develop a single set of financial statement concepts covering both Parts II and III of the Handbook. The Committee noted that it will be important to ensure that a single set of financial statement concepts is easy to navigate for application in both Part II and Part III.

The Committee also provided feedback on staff’s proposed definitions of the elements of financial statements, which incorporate selective terminology and guidance from the International Accounting Standard Board’s Conceptual Framework. The Committee emphasized the importance of considering the different types of assets and liabilities recognized by for-profit and not-for-profit organizations as the AcSB begins developing proposals.

The AcSB will discuss the Committee’s feedback at its meeting in March 2025.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

Not-for-Profit Advisory Committee Notes – December 16, 2024

The Not-for-Profit Advisory Committee received an update on the AcSB’s tentative decisions about updating financial statement concepts for Parts II and III of the Handbook. The Board tentatively decided to:

• articulate that the availability of additional information will be considered by the Board during the standard-setting process;
• replace the term “conservativism” with “prudence”, as “prudence” is more neutral than “conservatism”; and
• distinguish between fundamental and enhancing qualitative characteristics.

Additionally, the Committee provided feedback on the AcSB’s tentative decision to develop a single set of financial statement concepts covering both Parts II and III of the Handbook. The Committee emphasized the importance of ensuring that the unique characteristics of not-for-profit organizations (NFPOs) are properly considered in this approach.

In February 2025, the Committee will continue discussing topics to be updated in financial statement concepts as part of this project.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

Private Enterprise Advisory Committee Notes – October 8, 2024

The Private Enterprise Advisory Committee continued discussions related to the AcSB’s project to improve Financial Statement Concepts in Part II of the CPA Canada Handbook – Accounting. The Committee provided feedback on whether each of the following topics from the International Accounting Standard Board’s (IASB) Conceptual Framework would be fit for purpose for Canadian private enterprises:

• the objectives of general purpose financial reporting;
• qualitative characteristics of useful financial information; and
• financial statements and the entity.

The Committee noted that the updated terminology and provisions in the IASB’s Conceptual Framework could enhance preparers’ and practitioners’ understanding of Financial Statement Concepts. These improvements may lead to greater consistency in applying the standards outlined in Part II of the Handbook, while also aiding the AcSB in the standard-setting process. The Committee also provided feedback on potential modifications and revisions to ensure these topics are suitable for Canadian private enterprises.

The AcSB will discuss the Committee’s feedback at its meeting in November 2024.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

Not-for-Profit Advisory Committee Meeting Notes – October 21-22, 2024

The Not-for-Profit Advisory Committee continued discussions related to the AcSB’s project to improve Section 1001, Financial Statement Concepts for NFPOs, in Part III of the Handbook. The Committee provided feedback on whether each of the following topics from the International Accounting Standards Board’s (IASB) Conceptual Framework would be fit for purpose for Canadian NFPOs:

• the objectives of general purpose financial reporting;
• qualitative characteristics of useful financial information; and
• financial statements and the entity.

The Committee noted that the updated terminology and provisions in the IASB’s Conceptual Framework could enhance preparers’ and practitioners’ understanding of financial statement concepts. These improvements may lead to greater consistency in applying the standards outlined in Part III of the Handbook and aid the AcSB in the standard-setting process. The Committee also provided feedback on potential modifications and revisions to ensure these topics are suitable for Canadian NFPOs. The Committee identified differences between users of NFPO financial statements and users of for-profit financial statements prepared under Part II of the Handbook, which will need to be considered when developing the updated concepts.

The AcSB will discuss the Committee’s feedback at its meeting in November 2024.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

Not-for-Profit Advisory Committee Notes – July 23, 2024

The Not-for-Profit Advisory Committee received an overview of the AcSB’s project to update Financial Statement Concepts in Parts II and III of the Handbook. This project will focus on:

• clarifying the purpose and intended use of Financial Statement Concepts; and
• ensuring Financial Statement Concepts are appropriate for private enterprises and not-for-profit organizations in Canada.

The Committee discussed the Board’s decision to move Financial Statement Concepts to a separate section within the Handbook outside of accounting standards. This is consistent with the approach used by other national and international standard setters for their conceptual frameworks. Committee members acknowledged that this decision is not likely to alter current practice. However, Committee members noted that it will be critical to retain the importance of Financial Statement Concepts as a foundational tool for understanding financial statements and accounting standards.

In October 2024, the Committee will begin to discuss topics to be updated in Financial Statement Concepts as part of this project.

Private Enterprise Advisory Committee Notes – July 18, 2024

The Private Enterprise Advisory Committee received an overview of the AcSB’s project to update Financial Statement Concepts in Parts II and III of the Handbook. This project will focus on:

• clarifying the purpose and intended use of Financial Statement Concepts; and
• ensuring Financial Statement Concepts are appropriate for private enterprises and not-for-profit organizations in Canada.

The Committee discussed the AcSB’s decision to move Financial Statement Concepts to a separate location within the Handbook outside of accounting standards. This is consistent with the approach used by other national and international standard setters for their conceptual frameworks.

Committee members acknowledged that this decision is not likely to alter current practice. Nevertheless, they emphasized the need to clearly communicate that this change does not diminish the significance of concepts nor signal a shift in the objectives of ASPE. The Committee also highlighted the necessity for additional educational materials to effectively convey the intended use and application of Financial Statement Concepts.

In October 2024, the Committee will begin to discuss topics to be updated in Financial Statement Concepts as part of this project. 

The Accounting Standards Board (AcSB) received a summary of research performed to date on Section 1000, Financial Statement Concepts, and Section 1001, Financial Statement Concepts for Not-for-Profit Organizations, in Parts II and III of the CPA Canada Handbook – Accounting, respectively. Additionally, the Board considered a comparison of Canadian domestic financial statement concepts to frameworks in other jurisdictions.

The AcSB discussed feedback from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee regarding how financial statement concepts are currently used and the challenges with applying those concepts. Further, the Board discussed what the intended use of financial statement concepts should be and agreed that they should not be used to replace or override authoritative accounting standards.

The AcSB then discussed the benefits of a potential financial statement concepts modernization project. The Board agreed that financial statement concepts in Parts II and III of the Handbook should be reviewed to ensure they are fit for purpose for Canadian entities. Additionally, the Board agreed that such a project should take a phased approach to identify any areas for improvement.

The AcSB will discuss a project proposal at its June 2024 meeting.

The AcSB discussed a financial statement concepts project proposal for Parts II and III of the CPA Canada Handbook – Accounting. The Board approved the project to include:

• elements (definition of an asset, liability, revenue and net assets);
• recognition;
• measurement;
• presentation and disclosure; and
• unit of account.

The Board directed the staff to prioritize work on the definitions of an asset and liability in conjunction with its ongoing domestic projects.