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.
Financial Statement Concepts
The Private Enterprise Advisory Committee continued discussions related to the AcSB’s project to improve Financial Statement Concepts in Part II of the CPA Canada Handbook – Accounting. The Committee provided feedback on whether each of the following topics from the International Accounting Standard Board’s (IASB) Conceptual Framework would be fit for purpose for Canadian private enterprises:
- the objectives of general purpose financial reporting;
- qualitative characteristics of useful financial information; and
- financial statements and the entity.
The Committee noted that the updated terminology and provisions in the IASB’s Conceptual Framework could enhance preparers’ and practitioners’ understanding of Financial Statement Concepts. These improvements may lead to greater consistency in applying the standards outlined in Part II of the Handbook, while also aiding the AcSB in the standard-setting process. The Committee also provided feedback on potential modifications and revisions to ensure these topics are suitable for Canadian private enterprises.
The AcSB will discuss the Committee’s feedback at its meeting in November 2024.
For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”
Related Party Combinations
The Private Enterprise Advisory Committee discussed narrow-scope proposals to be included in an exposure draft to address an application question regarding the amendments issued in September 2023 to Section 3840, Related Party Transactions, in Part II of the Handbook.
These amendments added an option in paragraph 3840.44(b) to either retrospectively restate all prior periods when carrying values are used to account for a combination or prospectively account for these transactions from the date that the transfer occurred. The application question asked which comparative figures, if any, should be presented when an enterprise applies the new option to account for the combination prospectively from the date the transfer occurred.
The Committee discussed the AcSB’s tentative decision to propose a narrow-scope amendment that would allow an option in paragraph 3840.44(b)(i) to account for the combined enterprise as either a new entity or as a continuation of one of the combining entities when the combination is accounted for prospectively. The Committee discussed that this would address the application question raised, but they also provided recommendations to clarify the options available, thereby making the proposed guidance easier to understand. The Committee also recommended that the Board consider other amendments to paragraph 3840.44 to clarify when the guidance in this paragraph applies and to which types of combinations.
The Committee also discussed the proposed effective date and transition guidance. The Committee agreed with staff’s recommendation to propose an effective date of January 1, 2026, with earlier application available because the proposals are expected to make the current guidance easier to apply and therefore most enterprises would want to adopt the proposals as soon as they are available. The Committee also agreed with staff’s recommendation to apply the proposals prospectively to be consistent with the transition guidance for the Related Party Transactions amendments issued in September 2023, and because the proposals would not have changed how a combination was accounted for by enterprises that early adopted those amendments.
The AcSB will consider the Committee’s feedback, as well as feedback from its Small Practitioners Working Group at its meeting in October 2024.
Amendments to Other Frameworks
The Private Enterprise Advisory Committee considered recent amendments issued in other jurisdictions to assess whether any of the amendments would provide significant benefit to Canadian private enterprises reporting under Part II of the Handbook. The Committee discussed amendments made to the following frameworks:
- IFRS® Accounting Standards issued by the IASB;
- U.S. generally accepted accounting principles issued by the U.S. Financial Accounting Standards Board;
- Public Benefit Entities Standards issued by the New Zealand External Reporting Board; and
- Australian Accounting Standards issued by the Australian Accounting Standards Board.
The Committee discussed IFRS 18 Presentation and Disclosure in Financial Statements – a new standard issued by the IASB in April 2024. The Committee indicated that aspects of IFRS 18 would be useful in Part II of the Handbook, such as guidance on the aggregation and disaggregation of information and mandatory subtotals in the income statement. The Committee recommended that any project related to this topic for Part II of the Handbook be considered and revisited after IFRS 18 has been implemented to better understand the cost and benefit of adoption.
The Committee also discussed amendments issued by the IASB to IFRS 9 Financial Instruments related to the derecognition of financial liabilities using electronic payment systems. The Committee discussed that the derecognition guidance in ASPE is similar to the guidance in IFRS 9 before these amendments were issued by the IASB. As such, some private enterprises might infer that the amendments made in IFRS apply to ASPE or look to IFRS, as no such guidance exists in ASPE. The Committee recommended that the AcSB issue guidance to clarify that the words in ASPE have not changed, and therefore the Board does not expect a change in the way these transactions are treated under Section 3856, Financial Instruments.
Finally, the Committee discussed the amendments issued by the IASB to IFRS 7 Financial Instruments: Disclosures related to the disclosure of contractual terms affecting the timing or amount of cash flows from linked contingent events (such as environmental, social, and governance targets). The Committee indicated that similar contractual terms are not common practice for Canadian private enterprises but may become so in the future. The Committee suggested that the existing disclosure guidance in Section 3856 may be sufficient to cover contractually linked contingent terms.
The AcSB will consider the Committee’s feedback at its meeting in November 2024.
ASPE Climate Awareness Project
The Committee received an update on the ASPE Climate Awareness project, which includes a miniseries of non-authoritative resources on assessing the effects of climate-related risks and opportunities on ASPE financial statements. The Committee discussed new planned content on topics including agricultural inventories and productive biological assets, disposals of long-lived assets and discontinued operations, leases, and economic dependence.
The AcSB expects to publish articles on these topics between January and April 2025.