This summary of Accounting Standards Board (AcSB) decisions has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussion on projects, which may change after further deliberations by the Board. Decisions to publish Handbook material are final only after a formal ballot process.
The AcSB will respond to change and reprioritize when necessary, ensuring we can address implementation challenges and provide the information users may need in these unique circumstances.
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Research
Crypto-asset Activities
The AcSB received an update on the crypto-asset research activities, including the release of a paper providing an overview of the current crypto-asset ecosystem. The update detailed a proposed marketing and communications approach for the paper and other considerations that may be explored for possible future resources.
The AcSB also discussed emerging risks and issues with the accounting for crypto-asset lending arrangements from the lender’s perspective. The issues discussed included whether the crypto-asset lent should be derecognized, whether a new unit of account is created, and whether the measurement of the crypto-asset lent should factor in credit risk. The Board also discussed how entities are currently accounting for crypto-asset lending arrangements and considered the recent failures of entities engaging in these activities. The Board will revisit this issue at a future meeting.
Strategic Research
The AcSB discussed next steps for its project on proposed strategies related to the Preface to the CPA Canada Handbook – Accounting and scalability of the standards, as set out in the 2022-2027 Strategic Plan. The Board decided to begin the consultation phase of this project and discussed consultation options. When it meets in November 2022, the Board will continue discussing next steps, including the extent and nature of stakeholder consultations.
Standards for Not-for-Profit Organizations
Contributions
The AcSB continued discussing the exposure draft proposals related to the recognition of revenue for restricted contributions, capital asset contributions, endowments, and contributed materials and services.
The AcSB discussed the criteria for determining whether a contribution is externally restricted. The Board reached the preliminary view that a contribution is externally restricted when the resources are designated for a specific purpose or period and this is explicitly communicated between the organization and the contributor.
The AcSB also discussed the recognition of capital contributions and whether they should be accounted for differently than other types of restricted contributions. To address stakeholder concerns related to volatility in the statement of operations, the Board considered whether deferring and amortizing capital contributions into income over the useful life of the asset would result in decision-useful information for financial statement users.
The AcSB reaffirmed its tentative decision that endowment contributions should be recognized as direct increases in net assets in the period in which an organization is entitled to the contribution. For contributions with external restrictions requiring that the resources be maintained for a specific period, the Board reached the tentative decision that they should be accounted for like other restricted contributions. This is because the organization is not required to hold these contributions permanently and typically, they can be used once the term lapses. The Board also discussed disclosure requirements for endowments.
The AcSB discussed the criteria to be met for organizations that choose to recognize contributed materials and services. The Board reaffirmed that an organization may choose to recognize contributed materials and services when the fair value can be reasonably estimated, they are used in the normal course of the organization’s operations, and they would have otherwise been purchased to fulfil the organization’s mandate.
When the Not-for-Profit Advisory Committee meets in October 2022, it will discuss and provide input on these topics and the draft proposals. When the AcSB meets in October 2022, it will consider the Committee’s input and continue discussing the exposure draft proposals. The Board plans to issue an exposure draft in the first quarter of 2023.
Reporting Controlled and Related Entities
The AcSB discussed feedback from the Not-for-Profit Advisory Committee on research activities related to Section 4450, Reporting Controlled and Related Entities. The Board directed its staff to conduct additional research on the topic before considering next steps. The Committee will discuss and provide input on next steps at its October 2022 meeting.
Standards for Private Enterprises
Financial Instruments in a Common Control Transaction
The AcSB received feedback from its Private Enterprise Advisory Committee on how entities are currently accounting for financial instruments acquired in a common control transaction and which principles (Section 3840, Related Party Transactions, or Section 3856, Financial Instruments) are more appropriate for the measurement of these instruments. The Board discussed this feedback and agreed to issue a narrow scope amendment to clarify that financial instruments acquired in a common control transaction should be measured using the principles in Section 3840. The Board expects to issue an exposure draft on November 1, 2022, with a 90-day comment period.
Related Party Combinations
The AcSB discussed a project proposal to improve accounting for Related Party Combinations. With this project, the Board proposes revisiting the requirements in Section 3840, Related Party Transactions, paragraph 3840.44(b), to retroactively restate comparatives and removing the reference to the “exchange amount” in paragraph 3840.44(a) to clarify that business combinations under common control should be accounted for using Section 1582, Business Combinations. The Board expects to issue an exposure draft on November 1, 2022, with a 90-day comment period.
The AcSB also approved its communications and outreach plan for the exposure draft and will begin stakeholder consultations following the issuance of the proposals.
Standards for Private Enterprises and Not-for-Profit Organizations
Cloud Computing
The AcSB completed its deliberations on stakeholder comments on the Exposure Draft, “Customer’s Accounting for Cloud Computing Arrangements”, considering feedback from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee.
The AcSB discussed how Section 4410, Contributions – Revenue Recognition, would interact with the new Accounting Guideline AcG-20, Customer’s Accounting for Cloud Computing Arrangements, as not-for-profit organizations (NFPOs) may receive contributed materials and services and cash funding in relation to a cloud computing arrangement. The Board noted that for a NFPO to apply Section 4410, it needs to determine the nature of the contributed items received. There are different accounting requirements for contributions of materials and services in paragraph 4410.16, and contributions of capital assets recognized in accordance with Section 4433, Tangible Capital Assets Held by Not-for-Profit Organizations and Section 4434, Intangible Assets Held by Not-for-Profit Organizations. Entities would apply the Guideline to determine the nature of the contributed items received.
The AcSB then considered whether it is appropriate for a NFPO to apply its accounting policy choice for contributed materials and services in paragraph 4410.16 to contributions received in a cloud computing arrangement, that are not intangible assets. The Board recognizes that if a NFPO has a preexisting accounting policy to not recognize contributed materials and services in accordance with paragraph 4410.16, then it would not recognize contributed materials and services in a cloud computing arrangement, unless the NFPO retrospectively changes its accounting policy. The Board noted it currently has a project on accounting for contributions and related topics for NFPOs and decided any consideration of changes to paragraph 4410.16 should be considered more holistically as part of that project.
The AcSB also finalized the transition provisions by including additional transition relief to address stakeholders’ concerns over the cost and efforts required to analyze historical information when applying the Guideline retrospectively.
The AcSB approved the issuance of AcG-20, subject to drafting changes and a written ballot. Two Board members intend to dissent from issuing the Guideline. The Board plans to issue the Guideline in mid-November 2022.
Revenue
The AcSB completed its deliberations of stakeholder feedback on the Exposure Draft, “Revenue – Upfront Non-refundable Fees or Payments.” The Board approved the issuance of the proposal to defer the effective date of the previously issued amendments to Section 3400, Revenue related to upfront non-refundable fees or payments subject to drafting and a written ballot. The Board plans to issue the amendments in mid-November 2022.
Post-implementation Reviews of Sections 1591 and 3056
The AcSB received an update on the feedback from the Private Enterprise Advisory Committee on whether post-implementation reviews of Section 1591, Subsidiaries and Section 3056, Interests in Joint Arrangements are required. The Board agreed with the Committee’s assessment that post-implementation reviews are not required for these Sections.
Standards for Pension Plans
Pension Plans
The AcSB completed its deliberations on stakeholder comments on the Exposure Draft, “Pension Plans,” after considering the feedback of its Pension Plan Working Group. The Board also reviewed a draft of the amendments, reflecting its decisions at its July 2022 meeting.
The AcSB decided to make amendments to clarify its intent regarding:
- the criteria for derecognizing a pension obligation transferred to a third party in a buy-out arrangement; and
- the dates on which assets and liabilities would be recognized in an amalgamation and derecognized in a split.
The AcSB approved the issuance of the final amendments to Section 4600, Pension Plans subject to drafting and a written ballot. The Board plans to issue the amendments in mid-December 2022.
Relevance of Financial Reporting
Independent Review Committee on Standard Setting in Canada (IRCSS)
The AcSB received an update on the draft report being prepared by the IRCSS, which considers the feedback received on the Consultation Paper. The Consultation Paper addressed key matters related to the governance and structure for establishing Canadian accounting, auditing and assurance standards, and what might be needed for the future, including sustainability standards.
Sustainability Reporting
The AcSB discussed its draft response letter to the Office of the Superintendent of Financial Institutions’ (OSFI) draft Guideline B-15 Climate Risk Management. The Board’s letter will focus on areas of overlap with financial reporting and provides OSFI with comments to consider in developing high-quality disclosure requirements.
Due Process
AcSB’s Advisory Committee
Not-for-Profit Advisory Committee
The AcSB received an update on the July 26, 2022, Not-for-Profit Advisory Committee meeting. The Committee discussed contributions, cloud computing arrangements and Committee member survey results.
Due Process Compliance
The AcSB approved a report for the Accounting Standards Oversight Council on its compliance with due process.