Terms of Reference

(Revised and approved by the Accounting Standards Oversight Council on February 27, 2024)

Introduction

1. The Terms of Reference establish the purpose and authority of the Accounting Standards Board (AcSB), setting out its vision, mission, objectives, and responsibilities. These terms lay the foundation for the AcSB’s other governing documents:
   
   (a) Statement of Operating Procedures, which describes the procedures that the AcSB applies in carrying out its responsibilities; and
   (b) Standard-setting Due Process Manual, which sets out the due process the AcSB follows in setting financial reporting standards.

Vision

2. The vision of the AcSB is to be a global leader in enhancing the relevance of financial information and supporting the improvement of non-financial information reported to interested and affected parties.

Mission

3. The mission of the AcSB is to serve the public interest by developing accounting standards and other related reporting guidance that  support informed economic decision making. The Board serves the public interest by establishing high-quality accounting standards, being accountable to interested and affected parties,¹ and contributing to global best practices in accounting standard setting for private sector entities.

Objectives

4. The AcSB has the following objectives:
   1. To establish financial reporting standards and other guidance that improve the quality of information reported by Canadian private sector entities, with due consideration for the costs and the benefits to the preparers and users of financial statements, and changes in the economic environment.
   2. To facilitate the capital allocation process in both the business and not-for-profit sectors through the provision of improved financial information.
   3. To participate with other standard setters in the development of global best practices in accounting standard setting for categories of reporting entities in Canada’s private sector for which standards are endorsed or developed by the AcSB.
   4. To support the implementation of financial reporting standards and the resolution of emerging application issues.
5. In meeting its objectives, the AcSB is committed to the following:
   1. Meeting the differing financial reporting needs of various categories of reporting entities, in particular publicly accountable enterprises, private enterprises, not-for-profit organizations (other than not-for-profit organizations in the public sector), and pension plans.
   2. Providing high-quality accounting standards that promote confidence in the information reported by Canadian private sector entities.
   3. Respecting and encouraging input from all interested and affected parties, including ensuring the inclusive and respectful engagement of Indigenous Peoples in the standard-setting process.
   4. Bringing objectivity to the consideration of issues.
   5. Respecting the use of professional judgment.
   6. Responding to interested and affected parties' needs in a timely manner.
   7. Seeking ongoing improvement to the standard-setting process.
   8. Acting as thought leaders on financial reporting issues.
   9. Supporting the improvement of reporting quality beyond financial statements given the importance of connectivity between financial and non-financial reporting, such as sustainability.

Responsibilities

6. The AcSB has the following responsibilities:
   1. To develop or endorse financial reporting standards and guidance on its own authority, when satisfied as to need, usefulness, and practicality, following due process. Due Process requires a review of financial reporting concepts and practice, along with a process of consultation with interested and affected parties and debate. This includes working to influence the development of IFRS® Accounting Standards for publicly accountable enterprises and liaising with the U.S. Financial Accounting Standards Board to take into account the interests of Canadian publicly accountable enterprises that have adopted U.S. generally accepted accounting principles.
   2. To implement effective working processes for all projects and activities. The AcSB may commission advisory committees or working groups to aid in the development of financial reporting standards, guidelines or other material.
   3. To undertake research and encourage research by others in support of the development of financial reporting standards.
   4. To be accountable to interested and affected parties by responding to them in a timely manner, and facilitating their participation and input into the development of standards that affect them.
   5. To maintain and expand relationships with other Canadian and national standard setters by discussing issues of mutual interest, including issues regarding the development of financial reporting standards, and supporting the improvement of reporting quality beyond traditional financial statements.
   6. To account to the Accounting Standards Oversight Council or its successor (Oversight Council) for the effective and efficient fulfillment of its mission and objectives. The AcSB submits plans and performance reports annually to the Oversight Council to demonstrate how it is meeting its responsibilities. The AcSB gives due consideration to the input from, and recommendations of, the Oversight Council in carrying out its work.
   7. To advise the Oversight Council as to the human and financial resources needed to accomplish the AcSB's objectives.

Membership

7. The membership of the AcSB is, except for temporary vacancies, as follows:
   1. A compensated Chair, appointed on either a full-time or part-time basis.
   2. Between 11 and 14 volunteer members. A Vice-Chair may be appointed from among the volunteer members to assist in carrying out the role of the Chair.
8. The following have a right to attend and participate in AcSB meetings and receive any meeting materials:
   1. The Vice-President, Standards of the Chartered Professional Accountants of Canada (CPA Canada).
   2. The Director, Accounting Standards.  
9. The AcSB’s members are appointed by the Oversight Council. Members of the AcSB are selected and their terms of office set by the Oversight Council to ensure that the AcSB has an appropriate balance of competencies and experiences to meet its objectives. The Oversight Council, with the assistance of the AcSB, maintains and regularly reviews the competencies and experiences required of AcSB members to ensure there is appropriate involvement of interested and affected parties.
10. The Chair plays a crucial role in the standard-setting process. The Chair takes the lead role in ensuring the performance of the AcSB’s responsibilities detailed on paragraph 6. This includes the following:
    1. Presiding over meetings of the AcSB and communicating with members between meetings, as necessary, concerning the AcSB's activities.
    2. Attending meetings of the Oversight Council and its committees.
    3. Serving as one of Canada's representatives at meetings relating to IFRS® Accounting Standards.
    4. Acting as Canada's leading spokesperson and contact on private sector financial reporting standards matters for both the media and the public.
    5. Representing the AcSB in meetings of other parties involved or interested in the AcSB's activities.
    6. Making presentations nationally and internationally on financial reporting matters.

The Chair may delegate these responsibilities to the Vice-Chair, if one has been appointed, or to the Director, Accounting Standards, except that the responsibilities in sub-paragraph (b) may be delegated only with the agreement of the Chair of the Oversight Council.

11. The role of the Vice-Chair, if one has been appointed, is to act on behalf of the Chair in a temporary capacity, at the request of the Chair or in their absence, in:
    1. presiding over meetings of the AcSB;
    2. presiding over meetings of committees of the AcSB that are normally presided over by the Chair and, similarly, attending meetings of other committees of the AcSB that are normally attended by the Chair; and
    3. attending meetings of the Oversight Council or any of its committees, with the agreement of the Chair of the Oversight Council.

    The Vice-Chair also undertakes such other responsibilities as the Chair may delegate to them from time to time in accordance with paragraph 10. An appointee to the position of Vice-Chair is not thereby designated as a successor to the current Chair.

12. Any member of the AcSB who either:
    1. fails to attend more than two meetings of the AcSB in succession; or
    2. fails to attend, in any 12-month period, at least 50 per cent of all meetings of the AcSB

    in the absence of extenuating circumstances, will cease to be a member of the AcSB as of the end of the meeting at which they were in default. The Chair makes a recommendation to the Nominating and Governance Committee of the Oversight Council concerning any extenuating circumstances and the Nominating and Governance Committee decides whether the defaulting member may continue as a member. A member is deemed to be absent from a meeting of the AcSB unless they are in attendance for substantially all of it.

Reporting to the Oversight Council

13. The AcSB reports annually to the Oversight Council and the public on its activities, including its risk management process.
14. Each year, the AcSB presents its proposed agenda and project priorities to the Oversight Council for comments and considers the views and comments of the Oversight Council in determining its priorities and agenda. If, for any reason, the AcSB does not wish to incorporate specific views and comments of the Oversight Council into its priorities and agenda, the AcSB advises the Oversight Council as to its reasons and provides the Oversight Council with an opportunity to respond. The AcSB discusses with the Oversight Council any changes to the annual plan and advises the Oversight Council of significant decisions made in carrying out the plan.
15. The AcSB is accountable to the Oversight Council to demonstrate that it has used the resources allocated to it effectively and efficiently and that it has assessed how well it is meeting its mission.
16. The AcSB submits such reports as may be required by the Oversight Council from time to time in addition to those otherwise specified in these Terms of Reference.

Operations

17. The AcSB develops a statement setting out the principal operating procedures it follows in fulfilling its responsibilities.
18. The AcSB will create other advisory committees or working groups, including committees of its own members, as it deems necessary in carrying out its responsibilities.

Consultation and Communication

19. The AcSB develops and publishes a Standard-setting Due Process Manual that outlines its rigorous set of procedures for developing and endorsing financial reporting standards, including communication and consultation with all interested and affected parties.   
20. The AcSB disseminates information about standard-setting activities, together with invitations to the public to provide input on those activities.
21. The AcSB supports the development of examples and other guidance to assist interested and affected parties in understanding and applying financial reporting standards consistently.

Periodic Review

22. The AcSB reviews its Terms of Reference, Statement of Operating Procedures, and Standard-setting Due Process Manual at least once every three years to ensure that they continue to be fit for purpose. The Oversight Council’s authority and responsibilities over these documents are set out in its Terms of Reference.

¹ As described in paragraph 6(d), the AcSB is accountable to interested and affected parties by responding to them in a timely manner, and facilitating their participation and input into the development of standards.