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.
2021-2022 AcSB Annual Plan
The Not-for-Profit Advisory Committee (the Committee) discussed topics the AcSB previously identified as future priorities. The Committee advised the Board to consider projects on reporting controlled and related not-for-profit organizations (NFPOs), social impact bonds, and revenue for its next annual plan.
The AcSB will consider the Committee’s comments at the Board meeting on March 23-24, 2021.
Interest Rate Benchmark Reform in Canada
The Not-for-Profit Advisory Committee received an update on the recent developments in the Canadian Dollar Offered Rate (CDOR) and the U.S. dollar London Interbank Offered Rate (LIBOR) markets. The Committee also discussed the potential impact of IBOR reform on debt modification accounting and hedge accounting in Section 3856, Financial Instruments, and considered guidance provided in IFRS® Standards and U.S. generally accepted accounting principals (GAAP).
The Not-for-Profit Advisory Committee agreed with staff’s preliminary assessment of accounting issues arising from IBOR reform. On how IBOR reform affects the not-for-profit sector in Canada, the Committee observed that CDOR- and LIBOR-based loans and derivative instruments are uncommon in this sector. One Committee member noted seeing CDOR- and LIBOR-based derivative instruments; however, hedge accounting had not been applied.
The AcSB will consider the Committee’s feedback, as well as feedback from its Private Enterprise Advisory Committee, in a future meeting.
Cloud Computing Arrangements
The Not-for-Profit Advisory Committee received an update on the AcSB’s recent discussions on the accounting for cloud computing arrangements. The Committee noted that the guidance needs to be clarified for both the customer’s accounting for fees paid in a cloud computing arrangement and the related implementation costs because NFPOs refer to financial statement concepts to determine the accounting in the absence of specific guidance. The Committee also noted that some cloud computing contracts are complex, and the terms and conditions of the arrangement may not be transparent or may change as the cloud computing solution is implemented.
The Not-for-Profit Advisory Committee provided feedback on the staff’s analysis of different approaches to account for implementation costs incurred in a cloud computing arrangement that is a service contract.
The AcSB will consider the Committee’s feedback, as well as feedback from its Private Enterprise Advisory Committee, in March 2021.
Contributions
The Committee received an update on stakeholder feedback received on the Consultation Paper, “Contributions – Revenue Recognition and Related Matters.” The Committee discussed feedback from the Consultation Paper on the topic of asset recognition, including pledges and the capital asset recognition exemption.
Regarding pledges, the Committee advised the AcSB:
- Most NFPOs are not currently recognizing pledges. The ones that do have a history of collection and can estimate a provision for uncollectable amounts;
- The nature of the pledge may affect whether it is recognized as an asset; and
- Disclosure of additional information related to pledges may be useful to users; however, this information could be provided in documents other than the annual financial statements.
Regarding the capital asset recognition exemption, the Committee advised the Board:
- Removing the capital asset recognition exemption would have disproportionately negative impacts on smaller NFPOs;
- If the capital asset recognition exemption is retained, the information that is required to be disclosed about capital assets is sufficient;
- If the capital asset recognition exemption is retained, it should be based on revenue, but the current threshold should be adjusted for inflation; and
- A simplified transitional provision would be helpful for organizations that previously applied the exemption and are recognizing assets for the first time.
The AcSB will consider the Committee’s comments at the Board meeting on March 23-24, 2021.
Implementation of Accounting Standards for Not-for-Profit Organizations during the COVID-19 Pandemic
The Committee discussed COVID-19-related financial reporting issues, including impairment, accounting for government relief programs, and going concern. The Committee recommended that no further implementation support is needed at this time.
The AcSB will consider the Committee’s comments at the Board meeting on March 23-24, 2021.