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.
Relief from Recognition of Intangible Assets and Amortization of Goodwill
The Private Enterprise Advisory Committee received an update on the AcSB’s tentative decisions related to its Subsequent Measurement of Goodwill and Acquired Intangible Assets project. The exposure draft proposals will offer an option to amortize goodwill as well as relief from recognizing intangible assets acquired in a business combination (relief) in Part II of the Handbook.
The Committee discussed transition guidance. Most Committee members agreed with staff’s recommendation that the policy choice to amortize goodwill should be applied retrospectively to the goodwill balance at transition, and that a “catch-up” adjustment of goodwill amortization be applied from the original recognition date using a default 5-year amortization period, unless the entity can demonstrate that another useful life not exceeding 10 years is more appropriate. Most Committee members also agreed that the policy choice to elect the relief be applied retrospectively at transition to all past business combinations and that earlier application of both proposals be allowed.
The Committee also discussed changes in accounting policy. The Committee supported the AcSB’s tentative decision that the relief and the goodwill amortization accounting policies be applied consistently to all business combinations and not on a transaction-by-transaction basis. The Committee agreed that an exception in paragraph 1506.09 of Section 1506, Accounting Changes, should be provided for both the relief and the amortization of goodwill, so that an entity could change its accounting policy even if it doesn’t meet the more reliable or relevant information criterion. The Committee also agreed with staff’s proposal that a change in accounting policy should be accounted for on a modified retrospective basis.
Finally, the Committee discussed subsequent sales of acquired intangible assets. Committee members noted that, based on their experience, subsequent sales of intangible assets acquired through business combinations are not common in practice.
The AcSB will consider input from the Committee at its meeting on November 26-27, 2024.
Detailed Review of ASPE
The Private Enterprise Advisory Committee continued the discussion from its July 2024 meeting regarding application issues in Section 3856, Financial Instruments, that might be addressed through this project. The Committee also discussed application issues for the second batch of selected ASPE standards that included Section 3063, Impairment of Long-lived Assets, and Section 3065, Leases. The AcSB will discuss this feedback at its December 2024 meeting and will seek feedback on additional application issues from its Private Enterprise Advisory Committee and Medium and Small Practitioners Advisory Committee at the meetings in Q1 2025.
Annual Plan
The Private Enterprise Advisory Committee received an update on the AcSB’s activities relating to its 2024-2025 work plan and discussed potential new projects for the Board to consider in developing its 2025-2026 Annual Plan.
The Committee discussed the importance of addressing challenges with Section 3840, Related Party Transactions, and how some challenges seen in practice may be addressed as part of the Detailed Review of ASPE. The Committee also discussed the potential costs and benefits of adopting a control-based model for the recognition of revenue currently addressed in Section 3400, Revenue. While the Committee noted that the costs and complexities of moving to a control-based model would likely be significant for private enterprises, it did acknowledge that the Board should consider if there are longer-term benefits to taking on such a project in the future.
The AcSB will consider feedback from its Private Enterprise Advisory Committee and its Not-for-Profit Advisory Committee in December 2024 when it begins developing next year’s annual plan.
Agriculture
The Committee discussed the AcSB’s project that will propose narrow-scope amendments to Section 3041, Agriculture. Through this project, the Board will propose to remove the disclosure requirements in paragraphs 3041.88(c) and 3041.88(d) for the net realizable value model. The disclosure requirement in paragraph 3041.88(d) also exists in Section 3041 for the cost model and in Section 3031, Inventories. The primary purpose of this discussion was to seek input from the Committee on whether changes should be proposed to the Section 3031 disclosures similar to those being proposed in Section 3041.
The Committee discussed the usefulness of the disclosure requirement in paragraph 3031.35(c) and the effects if this disclosure was removed. The Committee generally did not support removing this disclosure, indicating it was useful information for financial statement users.
The Committee also discussed the proposed changes to the inventory disclosures in Section 3041. The Committee thought that those agricultural inventory disclosure requirements should remain.
The Committee discussed additional proposed changes to Section 3041, including removing the disclosure regarding aggregate gains and losses arising from changes in the carrying value as well as improving the authoritative guidance for agricultural producers to assess a productive biological asset’s productive capacity. The Committee did not have significant feedback on these topics.
The AcSB will consider feedback from its Private Enterprise Advisory Committee and its Agriculture Advisory Group in December 2024.