The Private Enterprise Advisory Committee assists the Accounting Standards Board (AcSB) with maintaining and improving accounting standards for private enterprises (ASPE) in Part II of the CPA Canada Handbook – Accounting and with 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 ASPE.
The AcSB staff has prepared this document based on discussions held during the Committee’s meeting. The meeting notes do not necessarily represent the AcSB’s views, and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of ASPE. Only the AcSB can make such a determination.
Climate-related Risks and Opportunities
The Private Enterprise Advisory Committee discussed a draft non-authoritative resource on assessing the effects of climate-related risks and opportunities on financial statements. The Committee indicated that this resource would be useful as sustainability and climate risks are relevant for private enterprises. For example, some lenders are starting to consider climate risks in their risk-rating models for their clients. Others are seeing impacts on insurance policy premiums.
The AcSB will consider the feedback from the Committee at its March 2024 Board meeting.
Revenue – Upfront Non-refundable Fees or Payments
The Private Enterprise Advisory Committee discussed feedback on the AcSB’s Exposure Draft, “Revenue – Upfront Non-refundable Fees or Payments.” This Exposure Draft proposed to indefinitely defer the effective date of previously issued application guidance for upfront non-refundable fees or payments. The proposed amendments also introduce a new disclosure requirement for upfront non-refundable fees or payments recognized in revenue when the enterprise recognizes the fee or payment in revenue upon entering into an arrangement.
The AcSB will consider feedback from its Private Enterprise Advisory Committee and its Not-for-Profit Advisory Committee at the March 2024 Board meeting.
Financial Statement Concepts
The Private Enterprise Advisory Committee received an overview of financial statement concepts in Parts II and III of the CPA Canada Handbook – Accounting. Additionally, the Committee received a comparison of Canadian domestic concepts to conceptual frameworks in other jurisdictions.
The Committee discussed the purpose of financial statement concepts, including how they serve as foundational elements for the AcSB in the development of accounting standards. Further, the Committee discussed how preparers and practitioners use these concepts when applying standards.
The Committee discussed the location of concepts within the Handbook and considered whether concepts are an accounting standard or whether concepts should be included in the Handbook outside of accounting standards similar to the International Accounting Standards Board and the Financial Accounting Standards Board conceptual frameworks, which are separate sections outside of accounting standards.
Committee members noted that preparers and practitioners use concepts to gain a deeper understanding of accounting standards and to aid in determining proper application. This includes areas that require professional judgment, as well as areas in which accounting principles are developing. Committee members also noted that a decision framework for applying qualitative characteristics in financial statement concepts would improve consistency of application.
In April 2024, the AcSB will discuss the Committee’s feedback as part of the Board’s ongoing research on financial statement concepts.
AcSB Guidance Framework
The Private Enterprise Advisory Committee received an education session on the current guidance landscape for accounting standards for private enterprises. The Committee discussed types of guidance that are currently available, including those issued by the AcSB and by other sources, such as CPA Canada and provincial, territorial, and Bermudian CPA bodies.
The Committee then discussed a draft guidance framework that is being developed by the AcSB to respond to requests for guidance from interested and affected parties. This discussion included potential criteria to consider in determining if issuing guidance is necessary, as well as the Committee’s role in the proposed guidance framework.
In March 2024, the AcSB will consider the Committee’s feedback when discussing the draft guidance framework.
Application Questions
The Private Enterprise Advisory Committee discussed application questions on the following topics:
- consolidated financial statements;
- redemption of retractable or mandatorily redeemable shares; and
- presentation of related party loans.
The discussion focused on the prevalence of the issues, diversity-in-practice issues, and how to apply the guidance in the standards and professional judgment to the issues. The AcSB will further discuss these application issues at its March 2024 meeting, and these discussions will be reported in the Decision Summary thereafter.