The Not-for-Profit Advisory Committee’s purpose is to assist the Accounting Standards Board (AcSB) on maintaining and improving the accounting standards for not-for-profit organizations (NFPOs) in Part III of the CPA Canada Handbook – Accounting and in identifying the need for non-authoritative guidance about the standards. The Committee makes recommendations to the AcSB but is not authorized to interpret or provide authoritative guidance on accounting standards for NFPOs.
This document has been prepared by the staff of the AcSB and is based on discussions during the Committee’s meeting. The meeting notes do not necessarily represent the views of the AcSB and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of accounting standards for NFPOs. Only the AcSB can make such a determination.
Contributions
The Not-for-Profit Advisory Committee discussed the status of the Contributions – Revenue Recognition and Related Matters project and provided input on the next steps. Committee members agreed with the plan to conduct field testing of the proposals in mid-2025. Committee members noted the importance of including a diverse group of interested and affected parties in the field testing, given the diversity of the sector and the fact that the new exposure draft will propose improvements to both the deferral and the restricted fund methods.
The Committee also discussed potential solutions to address concerns raised at the October 2024 Committee meeting regarding the recognition of government grants and similar arrangements under the restricted fund method. The Committee supported removing or modifying the requirement in paragraph .04 of Section 4410, Contributions – Revenue Recognition, which requires all government funding be treated as a contribution. This modification would allow organizations to apply judgment to determine whether government funding should be accounted for as a contribution or within the scope of another standard (such as Section 3400, Revenue). However, some Committee members noted that determining whether a government grant would fall under the scope of Section 4410 or another standard could prove complex. The Committee also considered a second option to provide organizations more flexibility and fewer barriers to changing accounting policies between the deferral and the restricted fund methods. The Committee generally supported this proposal; however, some members noted that this option currently exists based on the guidance in Section 1506, Accounting Changes.
The Committee will discuss detailed field-testing plans for this project at its February 2025 meeting.
Financial Statement Concepts
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.”
Annual Plan
The Not-for-Profit Advisory Committee received an update on the AcSB’s activities relating to its 2024-2025 work plan and discussed potential new projects for the Board to consider in developing its 2025-2026 Annual Plan.
Some Committee members recommended that the Board consider a future project to provide guidance on the level of aggregation and disaggregation of expenses in the financial statements of NFPOs. Some Committee members also recommended that the Board continue to monitor the development of green bonds and other types of environmental, social, and governance–related financing in the not-for-profit sector as they become more prevalent.
The AcSB will consider feedback from its Not-for-Profit Advisory Committee, Medium and Small Practitioners Advisory Committee, and its Private Enterprise Advisory Committee in January 2025 when it begins developing next year’s annual plan.