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.
Insurance Contracts with Cash Surrender Value
The Private Enterprise Advisory Committee received an update on the AcSB’s recent discussions and tentative decisions related to a project to develop guidance on accounting for insurance contracts with cash surrender value.
The Committee provided feedback on a draft Accounting Guideline that would provide guidance on accounting for insurance contracts with cash surrender value. The proposed Guideline would provide guidance on:
- recognition and measurement of cash surrender value;
- presentation of cash surrender value, change in cash surrender value, and policy premiums; and
- disclosure requirements.
The AcSB will consider the Private Enterprise Advisory Committee’s feedback at the September 2023 Board Meeting.
Revenue – Upfront Non-refundable Fees or Payments
The Private Enterprise Advisory Committee received an update on the AcSB’s recent decision to issue an exposure draft to amend Section 3400, Revenue. The proposed amendments are to indefinitely defer the effective date of application guidance and illustrative examples relating to accounting for upfront non-refundable fees or payments, and to introduce a new disclosure requirement for entities recognizing upfront non-refundable fees or payments in revenue entirely up front. The Committee recommended adding further details in the Basis for Conclusions document to clarify why the Board is proposing the new disclosure requirement. The Board will consider the Committee’s feedback at its meeting in September 2023. The Board plans to issue an exposure draft in October 2023.
Scaling the Standards
The Private Enterprise Advisory Committee received an overview of the proposed scalability solutions in the AcSB’s Consultation Paper I, “Exploring Scalability in Canada.”
The Committee provided the following feedback on the AcSB’s proposed strategies:
- The nature and complexity of the types of transactions an entity undertakes is an important factor when determining the usefulness of the existing framework it applies. An entity’s size should not be the only factor considered when determining a scaled solution approach.
- Common concepts between frameworks with recognition and measurement differences is an important factor to consider and incorporate into any scaling solution.
- Adding an intermediary framework between Part I – IFRS® Accounting Standards and Part II – ASPE will create additional cost and complexity for financial statement preparers and practitioners. The demand for an intermediary framework from all interested and affected parties appears limited.
- Identifying and addressing opportunities to simplify accounting areas will contribute to a scaled solution. So too will identifying opportunities for private enterprises to apply more complex guidance where the existing guidance is too simplistic. For example, the hedge accounting guidance under ASPE may be seen as too simplistic for certain hedging relationships entered by private enterprises. A scaling solution that permits an entity to apply the hedge accounting guidance under IFRS Accounting Standards is welcomed in many cases.
- A new framework for smaller entities could help standardize the information financial statement users receive and improve the overall quality and comparability of the financial statements. This benefit to financial statement users needs to be considered in conjunction with the view that additional frameworks will add to the cost of learning, applying, and assessing the compliance with any new framework.
- The greater the number of scaling options available will impact the comparability of the financial statements produced. This will decrease the understandability and decision usefulness of the information financial statement users need.
The Committee members were reminded that the Consultation Paper’s comment deadline is July 31, 2023.
The AcSB will consider the Private Enterprise Advisory Committee’s comments when the Board begins deliberating the feedback received on the Consultation Paper at the Board meeting in September 2023.
Due Process
The Private Enterprise Advisory Committee discussed amendments and supported certain changes to its Terms of Reference and Statement of Operating Procedures.
Other Topics
The Private Enterprise Advisory Committee considered the results of its member-feedback survey for the 2022-2023 fiscal year to assess the volunteers’ level of satisfaction. Committee members raised no further comments.