In Brief – AcSB’s Consultation Paper, “Improvements to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations”

Project Information

Project objectives:

The Accounting Standards Board (AcSB) released its Consultation Paper seeking input on improvements to Section 4450, including:

• identifying and assessing relationships with related and controlled entities;
• enhancing definitions of control and significant influence; and,
• strengthening disclosure requirements for users to better understand these relationships.

Scope of the project

The Consultation Paper focuses on:

• relationships between not-for-profit organizations (NFPOs); and
• interactions with profit-oriented enterprises, using existing guidance in Part III of the CPA Canada Handbook where appropriate.

No changes are proposed to the following:

• the definition of economic interest (paragraph 4450.10-.12)
• the option to consolidate or disclose controlled NFPOs (paragraph 4450.14); and
• the ability to exclude a large group of immaterial controlled organizations from consolidation and detailed disclosures (paragraphs 4450.14 and 4450.26-.28).

Current stage:

The AcSB is seeking feedback on its Consultation Paper.

Next steps:

Your feedback on the Consultation Paper will inform the AcSB’s decisions on whether to proceed with standard-setting activities and the development of potential future exposure drafts.

Comment deadline:

Comments are requested by February 28, 2027.

How to respond:

Keep an eye on our Improvements to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations project page for updates, key dates, and registration information. We want to hear from you!

Submit a response letter via our online form.

Attend an education session and roundtable. Registration details coming soon via our Improvements to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations project page.

Why did the AcSB undertake this project?

In Canada, NFPOs often serve the public interest and, in many cases, benefit from tax-exempt status and donor support, creating a heightened duty to be accountable and transparent. Unlike users for private enterprise financial statements, users of NFPO financial statements may have a limited ability to obtain additional information beyond what is disclosed.

Feedback from interested and affected parties highlighted challenges with existing standards:

• Inconsistent application: Existing definitions of “control” and “significant influence” can be difficult to apply, leading to diversity in practice.
• Limited transparency for users: Disclosures are often high level or boilerplate, making it difficult to understand relationships between entities.
• Complex NFPO structures: NFPOs operate in an increasingly complex environment, often involving multiple related and controlled entities.

What are the key proposals?

The Consultation Paper addresses the following key topics and considers the preliminary proposals.

1. New control model to evaluate relationships between NFPOs

• Introduces a revised definition of control in Part III of the Handbook based on:
  • power over the entity;
  • exposure to variable benefits; ando ability to use power to affect those benefits.
• Suggests additional guidance on:
  • assessing control in complex structures;
  • reassessing control when circumstances change; and
  • actions when control is lost.

2. Improvements to the definition of “significant influence”

• Aligns the definition of “significant influence” with the revised control model.
• Introduces a rebuttable presumption based on board representation.
• Adds guidance on when significant influence is lost.

3. Clarification of relationships with profit-oriented enterprises

• Requires NFPOs to apply Part II standards when assessing control and significant influence.
• Expands accounting policy options, including use of the cost method.

4. Enhanced disclosure framework

• Introduces a clear structure for disclosures:
  • General disclosures (qualitative):
    • applies to all types of relationships, including controlled entities, significantly influenced entities, and economic interests; and
    • includes providing clear and entity-specific information about the nature of the relationship between the NFPO and the other entity.
  • Summary financial disclosures (quantitative):
    • applies to control relationships between NFPOs that are not consolidated and controlled profit-oriented enterprises accounted for using the equity or cost method and
    • provides key financial data to help users understand the financial position and performance of controlled entities that are not consolidated.
  • Enhancements seek to reduce boilerplate disclosures, improve clarity on the nature and extent of relationships and provide more decision-useful information to users.

We want your feedback!

Get involved and share your views by our comment deadline, February 26, 2027.

How can I comment on the proposals?

You can share your views the following ways:

• Submitting a response letter via our online form.
• Attending an education session. Session dates and registration details will be posted on the Improvements to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations project page.

Stay informed

Visit the Improvements to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations project page to stay up to date.

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