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 Committee discussed members’ comments that resulted from their fatal-flaw review of the forthcoming Consultation Paper. The Committee also provided feedback on next steps for this project, including the timing and nature of stakeholder outreach on the Consultation Paper.
The AcSB will consider the Committee’s comments at its December meeting, and plans to issue the consultation paper in May 2020.
Combinations
The Committee received an update on the status of the AcSB’s Combinations project. The Committee also provided feedback on the proposed outreach activities for the forthcoming exposure draft.
The Board plans to issue the exposure draft in January 2020.
Employee Future Benefits
The Committee provided feedback on the AcSB’s Exposure Draft, “Employee Future Benefits - Use of a Funding Valuation”. This feedback included input on the proposal to remove the accommodation to use a funding valuation for a defined benefit plan that does not have a funding valuation requirement.
The Board will consider this feedback together with other comments received on the Exposure Draft after the comment period ends. Comments on this Exposure Draft are due by December 16, 2019.
Not-For-Profit Research
The Committee received an update on a project to gather data and perform analysis on NFPOs in the private and public sectors and provided feedback on the analysis presented.
The research is being gathered to support both the AcSB and Public Sector Accounting Board (PSAB) to better understand the sector and to make informed decisions. The AcSB will consider the Committee’s feedback at its December 2019 meeting.
Part II Developments
As part of its mandate to monitor changes in the CPA Canada Handbook – Accounting (Handbook), Part II that may affect NFPOs, the staff summarized the following current activities:
- Revenue: The AcSB discussed feedback received on its Exposure Draft, “Revenue,” in comment letters and during roundtable consultations with stakeholders at its September 2019 meeting. The Board decided to clarify the guidance based on the feedback received and develop additional illustrative examples. The Board plans to issue the final amendments no later than the fourth quarter of 2019.
- Financial Statement Concepts: The AcSB continues to review the financial statement concepts in conjunction with its ongoing Part III projects, Combinations and Contributions.
- Annual Improvements: The AcSB decided at its September 2019 meeting to clarify the applicability of the provisions in Section 1500, First-time adoption, when an entity re-adopts Accounting Standards For Private Enterprises. Committee members advised that the same issue exists in practice for NFPOs regarding re-adoption of Section 1501, First-time adoption by not-for-profit organizations.
2020-2021 AcSB Annual Plan
The Committee discussed topics the AcSB previously identified as future priorities and provided input on which projects to undertake in the Board’s next Annual Plan.
The Committee advised the Board to consider projects on reporting controlled and related entities by NFPOs, accounting for insurance contracts with cash surrender value and accounting for cloud computing arrangements in the next fiscal year.
The Board will consider the Committee’s feedback at its meeting in December 2019 as it develops its 2020-2021 Annual Plan.
Due Process
The Committee discussed amendments to its Terms of Reference and Statement of Operating Procedures. The Committee supported the amendments to its Terms of Reference and approved the Statement of Operating Procedures for ratification by the AcSB.
Other Topics
The Committee discussed an emerging accounting issue relating to social impact bonds.
While these bonds may take many forms, the specific scenario discussed was one in which an investor provides upfront capital to an NFPO to undertake a specified initiative. The investment is then repaid using funds from a government organization in an amount that is variable depending on the outcomes of the underlying initiative. This exposes the investor to a gain or loss on the transaction. In some cases, the investor may donate a portion of the repaid amount back to the NFPO.
The Committee advised that existing guidance in the Handbook is insufficient and recommended that the AcSB consider if more relevant guidance is needed.