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 stakeholder feedback received on the Consultation Paper, “Contributions – Revenue Recognition and Related Matters,” about special types of contributions, including contributed materials and services, contributed capital assets, endowments, and bequests.
With regards to contributed materials and services, the Committee advised the AcSB that NFPOs should continue to be given a choice whether to recognize these items when the recognition criteria are met. With respect to the criteria, the Committee observed that the criterion related to whether the contributed materials and services would have otherwise been purchased can be subjective. The Committee advised the Board to reconsider this criterion.
The Committee supported capital assets contributions with similar characteristics being accounted for the same. However, the Committee had mixed feedback on what recognition method provided the most useful information.
With regard to endowments and bequests, the Committee noted that the current guidance on the definition of endowments is clear. However, there is diversity in practice regarding how this guidance is applied. The Committee thought additional application guidance such as illustrative examples could help to address this diversity. Similarly, the Committee thought that the guidance on how to recognize endowment income is clear. However, the Committee advised the AcSB that providing illustrative examples or other application guidance on endowment income would be challenging given the complexity and diversity in the terms of the underlying endowment agreements.
The AcSB will consider the Committee’s comments at the Board meeting on December 6-7, 2021.
Amendments in Other Frameworks
The Committee considered recent amendments issued in other jurisdictions to provide input on whether some or all of the accounting changes in those standards may provide significant benefit to Canadian NFPOs reporting under Part III of the CPA Canada Handbook – Accounting. Specifically, this considered amendments made to the following frameworks related to NFPOs since July 2019:
- U.S. generally accepted accounting principles issued by the U.S. Financial Accounting Standards Board;
- Public Benefit Entity Standards issued by the External Reporting Board in New Zealand;
- Australian Accounting Standards; and
- The “Statement of Recommended Practice – Accounting and Reporting by Charities,” which provides guidance for financial reporting by charities in the United Kingdom.
The Committee raised no concerns with the analysis presented. The AcSB will consider the results of this analysis at its meeting on November 10-11, 2021.
Public Sector Accounting Board Update
The Committee received an update from the staff of the Public Sector Accounting Board (PSAB), which included discussion of PSAB’s Draft 2022-2027 Strategic Plan and its Government Not-for-Profit Strategy Project.
New Practice Issues
The Committee discussed new issues emerging in practice, including:
- accounting for lease arrangements when there is a significant decrease in the expected use of the leased facility over the remaining lease term; and
- accounting for the risks associated with essential workers during the COVID-19 pandemic.
The AcSB will consider what action, if any, is required on these issues at a future meeting.