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 was provided with an update on the AcSB’s decision to develop an exposure draft to improve the guidance on accounting for contributions and related topics. The Committee also discussed draft proposals for:
- the scope of the new standard;
- definitions of key terms; and
- recognition of revenue from unrestricted contributions, restricted contributions, and capital asset contributions.
The Committee commented on the proposed definitions of key terms and the proposals for recognizing revenue from contributions. The Committee discussed which types (time or purpose) of requirements associated with a restricted contribution would be viewed as substantive and, therefore, should be considered when determining when to recognize revenue. The Committee advised that refundability may not be a relevant consideration for all types of contributions as charitable donations cannot be refunded in Canada. The Committee agreed that administrative requirements, such as an audit requirement, would not be considered substantive for determining when to recognize revenue.
With regard to capital asset contributions, some Committee members preferred an approach that allows deferral of the contribution over the useful life of the asset. Other Committee members preferred an approach that recognizes capital asset contributions in a manner that is consistent with accounting for other types of restricted contributions.
The AcSB will consider the Committee’s feedback at its meeting on May 18, 2022.
Revenue
The Not-for-Profit Advisory Committee discussed implementing recent amendments to Section 3400, Revenue in Part II of the Handbook, regarding the accounting for upfront non-refundable fees or payments. The Committee indicated that these amendments will result in a change in practice for many NFPOs, particularly member-benefit organizations. The Committee indicated that this change in practice could be onerous and will not provide information that is useful to the users of the financial statements of member-benefit organizations.
The Committee advised the AcSB to defer the effective date of the amendments related to upfront non-refundable fees while the Board considers the application challenges stakeholders raised.
The AcSB will consider the comments from the Not-for-Profit Advisory Committee and the Private Enterprise Advisory Committee at its meeting on May 18, 2022.
Cloud Computing Arrangements
The Not-for-Profit Advisory Committee was asked to provide feedback on the examples included in the AcSB’s Exposure Draft, “Customer’s Accounting for Cloud Computing Arrangements.” The Exposure Draft is open for comments until June 20, 2022.
The Committee generally thought the examples were helpful as they illustrated the accounting outcomes and the fact pattern reflected simpler cloud computing arrangements. The Committee recommended adding more examples to illustrate some of the complexities found in other arrangements, such as when implementation is completed in stages or when access to software is provided prior to completion of implementation activities. Also, the Committee indicated that it would be helpful to have an example showing when an entity has control of a software intangible asset.
The Committee discussed the availability of pricing information to allocate arrangement consideration. The Committee observed that the price for software access and implementation would generally be available. However, pricing for specific implementation activities, such as customization, configuration, testing, and training, may not be provided by vendors. The Committee also briefly discussed the presentation of capitalized expenditures on implementation activities when the arrangement is a software service.
The AcSB will consider the Committee’s feedback on the Exposure Draft together with feedback from its Private Enterprise Advisory Committee and other stakeholders at its July 2022 meeting, after the comment period ends.