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.
2020 Annual Improvements
The Private Enterprise Advisory Committee discussed the five issues the AcSB is considering for annual improvements. A summary of the issues and the Committee’s recommendations on staff’s draft of the proposals are as follows:
- Presentation of Related Party Balances: The Board proposes to clarify that an enterprise may present amounts owing on loans from directors, officers and shareholders, and amounts owing to parent and other affiliated companies, either separately on the face of the balance sheet or in the notes to the financial statements. The Committee recommended clarifications to the staff’s draft proposals.
- First-time adoption: The Board proposes to permit an enterprise re-adopting ASPE could re-apply the first-time adoption provisions in Section 1500, First-time Adoption. The Committee advised that the Board also require note disclosure about why an enterprise re-adopted ASPE.
- Section 1540, Cash Flow Statement disclosures: The Board proposes to remove a requirement in Section 1540 to disclose the total assets and total liabilities acquired or disposed of in a business combination or in a disposal of assets. The Committee didn’t recommend any changes to staff proposals and noted similar disclosure requirements also exist in the underlying standards Section 1582, Business Combinations, and Section 3475, Disposal of Long-lived Assets and Discontinued Operations to meet users’ information needs.
- Measurement of investments in a related party transaction: Illustrative Example 3 in Section 3840, Related Party Transactions, illustrates the accounting for newly issued shares in a related party transaction by the enterprise receiving the shares. Section 3856, Financial Instruments, specifically excludes from its scope the measurement of interests in subsidiaries, enterprises subject to significant influence and jointly controlled enterprises. Therefore, the Board proposes to clarify in the illustrative example which standard applies for the measurement of the investment by the enterprise receiving the shares. The Committee made recommendations on staff’s proposals for the Board to consider at a future meeting.
- Measurement of newly issued common shares in a related party transaction: Illustrative Example 3 in Section 3840 also demonstrates the initial measurement of share capital from the issuers’ perspective. However, the measurement basis is different from illustrative Example 3 in Section 3856 for a similar fact pattern. The Board seeks to make the Illustrative Examples consistent. The Committee had no further recommendations on the staff’s proposal to remove references to assigned value as the basis for measuring the shares in Section 3856.
Related Party Transactions
The Committee discussed how enterprises distinguish a business combination under common control from other types of related party combinations. The Committee also provided advice for the AcSB’s consideration on how to define common control.
The AcSB will discuss the Committee’s feedback later this year.
Cloud Computing Arrangements
The Committee advised the AcSB on the accounting challenges relating to cloud computing arrangements. The Committee also discussed the research findings on accounting for these arrangements in other jurisdictions.
The AcSB will consider the Committee’s comments, as well as those received from its Not-for-Profit Advisory Committee, at its meeting on September 9, 2020.