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Eric English: I think we just have everyone joining the webinar now, so we’ll give a moment to make sure everyone gets online.
A lot of registrations today, so happy to see we have a really good crowd joining us.
Okay, I think pretty well everyone’s online here, so we’ll go ahead and get started. More people may filter in as we get started through our opening remarks.
Good afternoon, everyone, and welcome to today’s Domestic Accounting Standards Update webinar.
A reminder that attendance at this webinar and successful completion of the quiz may count towards your CPD requirements. The link to the quiz will be included in the chat at the end of the presentation. Upon successful completion of the quiz, you will be emailed a certificate for your records.
And with that, I’ll just share my screen with the slides so everyone can follow along.
Okay, and before we get started, just a reminder that the opinions stated here reflect those of the presenters and do not necessarily reflect those of the AcSB.
On behalf of the Accounting Standards Board, it is now my pleasure to introduce today’s speaker, Armand Capisciolto. Armand is the Chair of the Canadian Accounting Standards Board. He has served on the AcSB since 2015, including as a member, Vice-Chair, and now Chair. His extensive experience as a standard setter also includes chairing the AcSB’s Private Enterprise Advisory Committee and membership on the IFRS Accounting Standards Discussion Group.
A quick introduction to myself as well. I’m Eric English, a Principal with the Accounting Standards Board staff. I work closely with the board, external parties, and volunteers to develop high-quality accounting standards and other guidance for public companies, private enterprises, and not-for-profit organizations. I’m also the current Secretary of the Accounting Standards Board’s Private Enterprise Advisory Committee.
And so, a brief overview of today’s agenda. In today’s session, we are going to cover Recently Issued or Effective Domestic Standards, Guidance and Other Resources, the AcSB’s Current Work Plan for Domestic Standards, the AcSB’s 2025–2026 Planning Cycle.
If you have questions throughout the webinar, you can type them in as we go along. And depending on time, we’ll try to get to as many as we can before the end of the session.
Okay. And with that, we’re just going to do a quick poll to start here.
We’d like to know: What is your current role? This will help us get an idea of who’s listening in, and we can tailor some of our comments, based on who we have listening today.
I’ll just give another moment for everyone’s responses to come in. And I’ll push those results out now.
So, looks like we have a lot of public practitioners or professional advisors in the crowd, as well as a good mix of preparers, too. And then some financial statement users as well. So, I think we’ve got a lot of content today that I think everyone will find interesting.
And then we have one more polling question we’d like to ask.
Apologies. I just need to stop sharing that last one.
And we’ll launch our second polling question, which is: Which category of reporting entity is most relevant to your current role?
We’ll just give another moment there to respond.
Okay. So, it looks like we’re a little over half private enterprises. And then we have some not-for-profit organizations as well. And also, some publicly accountable enterprises. So, a really interesting mix we have today. And, yes, as I said, I think there’s a lot of relevant material that I think you’ll find valuable.
So, with that, I’ll move on to our next agenda item. These are domestic standards or amendments that have been recently issued.
So, this slide here summarizes the key domestic standards and amendments, and the effectiveness for each of those projects.
One item on this slide we’d like to draw your attention to is the amendment to related party combinations, which becomes effective for year-ends on or after January 1, 2025. The AcSB has received an application question regarding this amendment and is expecting to issue an Exposure Draft for a narrow-scope amendment to Section 3840, Related Party Transactions, later this year. I will provide an overview of this project later in the presentation. You can also find more information on each of these topics in the Appendix to the slides if you’re interested in reading a little bit more.
And so now, we’d like to tell you about the AcSB’s guidance framework as well as some other resources.
So, the next topic we’d like to discuss, as it is related to the application of recently issued standards and amendments, is the AcSB’s guidance framework.
The AcSB has developed a framework for issuing guidance.
First of all, when we talk about guidance, it’s important to clarify what we mean.
So, there is the authoritative guidance, which would be the standards in the Handbook and any accounting guidelines. And then we also have non-authoritative guidance, which could include items like the Basis for Conclusions, In Briefs, webinars, or different podcasts.
Increasingly, staff are getting more queries on issues in practice. Typically, queries relate to the exercise of judgment.
Many interested and affected parties have also noted that for IFRS, there are many readily available guidance tools, such as accounting firm books or other publications around the world.
Up until now, there’s been an ad hoc approach to determining when to issue guidance and what type to issue, which is why the board developed this framework. The framework addresses application issues regarding current standards, as well as whether implementation support is needed for newly issued standards and amendments.
We’ll go through the process for application questions on the next slide.
So, we can see the nice flowchart here. The first step is whether the issue raised meets the proposed criteria for further discussion. This would include questions related to the prevalence and diversity of the issue and the impact of the accounting outcome on users’ decisions. These criteria will be available on the AcSB’s website for interested and affected parties to understand the process and provide transparency on how issues are considered by the board.
And just to quickly remind everybody, if you want to follow along with the slides on your own computer, they are available for download on the registration page. So, you can find them there if needed.
Moving along in our flowchart. If an issue meets these criteria, it will be discussed at the relevant domestic advisory committee at a subsequent meeting. Information sought from the committee will include understanding the judgments involved in coming to accounting conclusions on the issue. All of this information will then be given to the AcSB to determine the appropriate course of action.
The AcSB also discussed that going forward, the decision summary would be the key source for interested and affected parties to read about any application issues raised that meet the criteria and have been discussed at the committee and the board levels.
In the next section, we’ll actually discuss a narrow-scope amendment to related party business combinations. This is a project that the board began working on as a result of application issues, which were raised through the guidance framework.
Another resource we’d like to tell you about is our climate-related risks and opportunities mini-series.
Climate change is a topic that interested and affected parties are increasingly concerned about due to its potential effect on an entity’s business model, cash flows, financial position, and financial performance.
Most industries have been, or are likely to be, affected by climate-related risks and opportunities and efforts to manage the impacts of climate change. This raises questions about how climate-related risks and opportunities may impact the financial statements of private enterprises in Canada from various perspectives. This includes, but is not limited to, financial, physical, and transition risks and opportunities.
Currently, there are no climate-specific standards included in Part 2 of the Handbook. Climate-related considerations are like any other business element or topic with potential impacts on an entity’s cash flows, business model, and financial performance.
When preparing annual financial statements in accordance with Part 2 of the Handbook, management will need to assess how material climate-related risks and opportunities should be recognized, presented, and/or disclosed.
To assist the sector, in June of this year, the AcSB began releasing a mini-series to begin addressing relevant standards within Part 2 of the Handbook and the potential effects to consider for private enterprises. You can read more about the topics that have been released so far, and we’ve included a helpful link on the slide where you can find those. We will also be releasing more topics posted in January through to April of next year. Again, you can access those all through the link on the slide and stay tuned as we release more next year.
So next, we’ll provide you with an update on the AcSB’s ongoing projects as part of its domestic standards work plan.
First, as I mentioned earlier, we’ll talk about a narrow-scope amendment for related party combinations.
This narrow-scope amendment was taken on to address an application question raised and contemplated as part of our new guidance framework.
Earlier this year, the Private Enterprise Advisory Committee discussed an application question related to amendments issued in September 2023 to Section 3840, Related Party Transactions.
So, if you recall briefly, these amendments added an option to either retrospectively restate all prior periods when carrying values are used to account for a combination or to prospectively account for these transactions from the date the transfer occurred.
The question raised is: When the new option is applied to account for a combination prospectively from the date the transfer occurred, what comparative figures, if any, are presented?
The committee’s discussion focused on the prevalence of the issue, diversity in practice, and how to apply the guidance in the standards and professional judgment to the issue. Feedback from the discussion indicated that the following views have emerged: (1) An entity, an enterprise must identify and acquire and report comparative figures of the acquiring entity, or (2) An enterprise should apply professional judgment to consider the needs of financial statement users. And in some scenarios, there could be no comparative figures.
Given these diverse views, PEAC recommended that the AcSB issue guidance to clarify the application of the amendment.
Moving forward, the AcSB considered this feedback and noted that the current language in paragraph 3840.44(b) could infer that determining the acquirer is required when carrying values are used to account for the transaction prospectively, from the date that the transfer occurred. The board discussed that, in some scenarios, identifying the acquirer could be complex or onerous for private enterprises.
The AcSB tentatively decided to develop an Exposure Draft for a narrow-scope amendment to Section 3840.
The board expects to issue this Exposure Draft in Q4 2024, so stay tuned for that very soon.
And with that, I’ll now pass it over to Armand to talk about our detailed review of ASPE.
Armand Capisciolto: Okay, thanks, Eric. So, our detailed review of ASPE. This is an interesting name and an interesting project, just in general. It’s a project that’s a result of the feedback we received on our Scalability Consultation paper. And during our outreach on scalability consultation, we heard from many people that ASPE is either too complex or did not result in information that’s useful to the users. And to be honest, I was a little surprised by that, but that’s the feedback we received. So, as a result, what we have decided to do is to do a review of ASPE and look at each standard and say: “Well, what are the specifics? What are those challenges, and what are the potential solutions?”
And I want to be clear: This is not a project to address every complaint we have ever heard about ASPE; that project would be much larger than the project we have ongoing. But what we’re trying to do is to identify where complexity in the standards can be reduced without negatively impacting the information that the financial statements provide to users.
I like to describe this project as trying to reduce complexity where that complexity isn’t warranted.
So, where are we right now in this project? Right now, we’re getting input from our various advisory committees. We have been discussing some of these issues that we’ve been made aware of and trying to determine: Are these items that should be in the scope of this project? And then, if they’re in the scope of this project, we start discussing what are some of the solutions.
As an example of one of the topics that we’ve had a discussion on, we have heard feedback that allocating overhead costs to inventories can be complex and time-consuming for some entities.
So, when we look at that issue and we look at how we’re thinking about this project, the first question we have is: Was there any diversity occurring? And I think our initial thoughts—and again, these are just early-phase thoughts—are that, well, there is some diversity, but is that diversity applying because of facts and circumstances or potentially due to misapplication of the standard?
And then we start saying: “Well, if that’s the case, are the requirements complex, onerous, or costly to apply; complicated to navigate; etc.” And you know what? In this case, maybe it is complex and onerous and costly to apply.
And then we say: “Well, okay, but there is a lot of things like that; we can’t solve everybody’s problem. Is the issue pervasive?”
And the answer would be, well, yes, any company that has inventory—manufacturing—has this issue.
And then we get to the, for me, the most important question: Is that complexity warranted?
And what we’re trying to determine there is: Do the benefits that arise from applying the requirements exceed the cost of doing so?
And I would say they do for some; they don’t for others. So if I was dealing with maybe an owner-managed business, a manufacturer with only one line of business, that might not be as important to its users as a large manufacturer that has multiple lines of business.
And so then we start thinking: “What are some of the solutions?” We start thinking: “Do we add optionality? Do we simplify for everybody?” And a lot of these—we’re getting to the point where optionality is probably the best course of action, because it is warranted for some, maybe for some large manufacturers, but not warranted for maybe some of the smaller ones.
So, those are the types of discussions we’re having with our user advisory committee. They've been really interesting discussions. Inventories is just one of the topics that we’ve been discussing. Some of the other areas we’ve been chatting about are our asset retirement obligations. And again, we hear that there’s a high degree of estimation uncertainty associated with making recognition and measurement. It is complex because of that.
Having a lot of fun talking about everybody’s favorite standard. I know it’s my favorite standard—3856, Financial Instruments. We’ve heard feedback that there are a lot of things that are difficult to apply in that standard whether it’s interest-free or low-interest loans.
Is that complexity of determining the fair value at initial recognition worth it? Is there a benefit from it? Maybe not.
But derivatives, we’ve also talked about derivatives. And that one might be a little bit of a different discussion. Because if you’re entering into a … Derivatives are complex by their very nature. If you are entering into a complex transaction, maybe you should expect complex accounting.
So, these are the types of discussions we’re having at this point in time. Once we’ve had all these discussions with our advisory committee, the board will determine whether these fit the scope of the project, and we will be putting forward some solutions.
Those solutions will appear in a consultation paper, and we are working towards that. We’re hoping to issue the consultation paper at some point in 2025. I hope I’m getting that right. If not, I’m going to hear from staff after this session if I got that wrong.
So that’s our detailed review of ASPE. I think it’s a really interesting and important project. And really part of our strategic focus for our domestic standards is scalability.
The next project I want to talk about, which is very similar to the detailed review of ASPE, is our project on Subsequent Measurement of Goodwill and Relief from Recognition of Intangible Assets. And this project started before we started our detailed review. If we hadn’t already started this project, it probably would have been something we would be considering in the detailed review. But it’s very similar. The plan is to propose optionality, to reduce complexity where that complexity isn’t warranted.
When it comes to business combination accounting and the subsequent measurement of goodwill and intangibles, we know it’s complex. We know it’s costly. Anyone who’s dealt with a purchase price allocation can attest to that. But at the same time, we have heard, in some cases there’s not a whole lot of benefit arising from that complexity.
So, especially in situations where the only user is a bank, and maybe they’re a secured lender, and they’re not lending on intangibles, and they’re discounting what goodwill is when they do their analysis of the company’s balance sheets, why incur all this complexity when your primary user is going to ignore it?
So, our proposals are to introduce optionality. That optionality will have two elements. The first will be to provide relief from recognizing intangible assets acquired in a business combination.
And that option will only exist if you also choose the option to amortize goodwill. But even if you don’t choose to take advantage of the relief, we will still have an option to amortize goodwill.
So, if we go on to what some of the tentative decisions the board has made related to this project. Again, as I said, provide an accounting policy choice related to the relief from recognition of intangibles, but only if you’re also choosing to amortize goodwill.
If you choose this, all intangible assets would then be subsumed into goodwill. So, for those of you who are old enough, you might say: “That sure sounds like what the accounting was many, many years ago.” However, we would still offset that with some qualitative disclosure about qualitatively significant intangible assets. So, there would be some information on: What are these intangibles that are being subsumed into goodwill?
With regards to the other policy choice, which is to amortize goodwill, again, you have to do this if you’re choosing relief. But if you don’t choose relief on intangibles, you still have this option.
Basically, if you choose this option, we’re saying that goodwill will be amortized on a straight-line basis.
There will be a default period. So, a default period of five years. So, why a default period of five years? If you choose that default period, you don’t have to think about what the useful life is, because some of you might be saying: “Well, how do you determine the useful life of goodwill?” So, we have a default period.
But you can choose to use something other than that default period if you can demonstrate that another useful life not exceeding ten years is more appropriate.
So, those are the tentative decisions we’ve made to date. We have some more decisions to make. And we’re still getting feedback from our advisory committees on this project, but you can expect to see an ED at some point in 2025. Hopefully, earlier in 2025 versus later in 2025. We’ve heard for a long time this is something people want. We are expecting a lot of feedback when we issue that ED. And just so you’re aware, we did a lot of feedback in developing the proposals we were working on before the ED. We spoke to a lot of people, had a lot of public roundtables on this topic, and we heard a lot from people. And we’re looking forward to hearing even more.
Okay, so switching gears a little bit, or quite a bit, from goodwill to agriculture. Our agriculture standard was issued a number of years ago, and has now been effective for two years.
At this point in time, for any new standard, the board then has to decide: Are we going to do a post-implementation review or not?
And even within the period since the standard has been issued and become effective, although we haven't started a PIR, we have had a number of discussions with our Agriculture Advisory Group.
And they have made us aware of certain application issues that are arising.
As a result, the board has decided not to do a formal PIR.
Why did we decide not to do a formal PIR? Because a PIR in and of itself is not a standard-setting project. It is an information-gathering project.
So, we said: “Well, we’ve heard for the past two years from our Ag. Group about the issues, and they’ve made us aware of these issues. If we go and do a formal PIR, well, that’s going to delay us actually addressing the issues that they’ve made us aware of. So, rather than do a PIR, we are going straight to some narrow-scope amendments.”
These narrow-scope amendments are going to focus on two issues that we have heard from the industry that are challenging:
The net realizable value (NRV) model disclosures are certain disclosures related to inventory that are measured using the NRV model that are difficult to do, especially for entities that don’t have a formal costing system and just really look at their inventory at the beginning and end of the year.
And also look at the guidance related to productive biological assets, and provide some additional guidance to assist entities in determining productive capacity and how changes in that productive capacity should be accounted for when it’s managed on a collective basis.
So, at this point, we’re having discussions with our advisory groups. Next week, we have two meetings with advisory groups, and I believe this is on the agenda in both of those meetings.
Then it will come to the board in December, and hopefully, we’ll be issuing an Exposure Draft shortly thereafter. So again, we’ve heard of these issues, and we’re … rather than slowing the process down through a post-implementation review, we are going straight to narrow-scope amendments on this one.
The next project that I’m going to talk about is Financial Statement Concepts. And this is a really important project. To us at the board, it’s a very important project because the concepts are the basis for our standard-setting.
They really drive when we’re setting specific standards. We try to link everything to our concepts.
They do have benefits, which I’ll talk about on the next slide, beyond standard-setting, which we think are also helpful. But it is a project that is critically important to make sure that we are standard-setting in an effective manner.
And I think this is the key point. When we talk about concepts, we do not expect that it will have a significant impact on the application of existing standards, because concepts can never, never take precedence over what is in a specific standard. If we’ve decided to say, “You shall do X” in this situation, even though we might change our concepts, and that might be inconsistent with what the standard says, we’re not changing the standard. That’s not what this project is. This project is about the concepts. So, I really want people to be aware of this. Changing the concepts, we do not expect this to have a significant impact on the application of existing standards, and we do not expect to increase the complexity of standards.
As far as how it could help you—being preparers, practitioners, users—it could help determine accounting treatment for emerging areas where standards do not exist. As we know, we live in an environment where things change fast. So, there could be things that arise in the future where standards don’t exist, and you would go to concepts as your first place for developing an accounting policy. Looking to concepts can help you come to judgments when you have to apply professional judgment, and also provide… we think the modernizing of it, the updating, will provide clarity on when you should look to concepts. So, these are some of the benefits that we feel that are beyond just for the standard setter.
So, this is a slide I get nervous about when I talk to people in the private company space. Because there’s four letters on here, IASB, and some of you might be saying: “What? What? Why are they talking about IFRS here?” And I want to be clear what we’re doing. We are using the IASB’s conceptual framework as a starting point. Do not interpret this as some conspiracy to move all of you to IFRS that are applying ASPE. Our framework that exists right now for Part 2 and Part 3 is consistent with the old IASB framework. They updated theirs a few years ago. And when we look at it, we want to update ours to make sure it is using modern terminology, modern concepts. And we will review. Everything we review is going to say: “Is this fit for purpose for Canadian entities and specifically Canadian entities applying our domestic standards?” So, although it’s a starting point, it’s just that—it’s just a starting point. This is not about bringing things in line with IFRS. We see ASPE, we see Part 2 as being distinct from IFRS, and we think that is great. We think that is fit, that is what the Canadian market needs and wants. So, we’re not changing course on that whatsoever. But we also don’t want to reinvent the wheel, and the IASB did some really good work at updating their concepts when they updated their concepts. But given their old concepts were our starting point, we thought that should be our starting point as well.
So, let’s do a polling question. It’s like a conceptual polling question. So, when you think of concepts, and you think of the qualitative characteristics of financial statements, which do you think is most important? Understandability, relevance, reliability, comparability, or all are equally important? So, I’m looking forward to seeing what people have to say here.
Okay. Looks like most people have responded, Eric. And a lot are saying all characteristics are important. Don’t disagree with that. Probably second is people saying understandability. I can’t disagree with any of those things. So, no, thank you for that. That’s helpful for us to know as we have these discussions.
Okay, so now we’re going to switch into the wonderful world of not-for-profits, and we’re going to talk about contributions—a topic I’ve talked about a lot over the past few years. And I don’t want to give you a history lesson of this project, but I’ll give you a little—the “Coles Notes” history lesson of this project. We went out with an Exposure Draft, moving to a single model of revenue recognition for restricted contributions that was not well accepted.
So, the board has changed course, and we’ve concluded that a single model may not meet the diverse needs of the not-for-profit sector. And we also heard from users—and this to me was the critical part—that moving to a single recognition model, the cost of doing so will not exceed the benefits. Users told us: “Yes, it would make our life easier to have one model, but we can operate within the two, and the cost is too high.” We have a feedback statement that talks about how we got to this conclusion to change course. The link is on the slide, so hopefully, you’ll give it a read. So, when we look at our new course, our new direction is we’re going to continue to allow an accounting policy choice for the recognition of contributions. So, there will still be the deferral method. There will still be the restricted fund method.
But we’re proposing improvements to both methods, so we can leverage some of the information that people said: “You know what, this is good stuff.” Even though they disagreed with kind of the basics of going to one model, there were other things that people liked in our Exposure Drafts. We want to leverage the things people liked.
So, this was decided in the spring. In the summer, staff talked to a lot of people, targeted outreach sessions, surveys, because originally what we proposed looked a lot like the deferral method. So, we needed to get some feedback on what some of the challenges were with the restricted fund method, and so that was done over the summer.
And at this point, where we’re at, we continue to discuss at the board level, and with our not-for-profit advisory committee — just move to the next slide, Eric — a number of issues. At our September meeting, we just had again some very intense conversations about how the deferral method is actually also an option within the restricted fund method. We talked about how funds are presented. We talked about items are presented within the funds. We talked about definitions of endowment contributions. There are still some other things to discuss before we get to an ED phase. We’re discussing those with our not-for-profit advisory committee again in the fall, and then coming to the board, and we’re hoping to have a revised Exposure Draft out for people to comment on in 2025.
So, with that, I will turn it back to Eric to talk about a few other projects.
Eric English: Thanks, Armand. And yes, definitely lots of interesting things going on with our work plan right now.
So, I’m going to talk now about Reporting Controlled and Related Entities. This applies to not-for-profit organizations reporting under Part 3 of the Handbook.
So, the AcSB is currently undertaking a project related to Section 4450, Reporting Controlled and Related Entities for Not-for-Profit Organizations. At its meeting in March, the board decided that their research will not include changes to the current choice between consolidating and disclosing controlled entities for not-for-profit organizations. Instead, the board discussed that the purpose of the research project is to improve the transparency of the financial statements for financial statement users regarding the relationship that entities have with related and controlled entities.
In March, the AcSB approved a project proposal to amend Section 4450 to improve the disclosures related to controlled and related entities; introduce illustrative examples to assist in the application of the definitions of control, significant influence, and economic interest in not-for-profit organizations in Section 4450; and to revisit the current definitions of control, significant influence, and economic interest held in not-for-profit organizations, if necessary, based on the relevant learnings gained from the development of illustrative examples.
Following the March meeting, the board met with a focus group to gather further input and discuss potential illustrative examples to be incorporated into the standard. The board considered input from this group that illustrative examples may not be sufficient to address the challenges. As such, the board decided to expand the scope of the project to include re-evaluating the approach to determining relationships between entities in Section 4450. This expanded scope would also consider options to simplify the application of the standard.
Through its discussions, the board decided that a consultation paper was needed to gather further input. So, in terms of next steps, the board will seek input from its not-for-profit advisory committee and focus group as it develops a consultation paper on this project. You can visit the project page linked on the slide here for further information and to follow the project as it progresses along.
Moving over to pension plans, the AcSB conducted research and developed proposals in an Exposure Draft to improve the presentation and disclosure of investments held by pension plans under Part 4 of the Handbook. The proposals seek to make improvements in three areas. Those are (1) fair value disclosures, (2) disclosures of interest in investment vehicles, and (3) presentation and disclosure of investment expenses.
In developing these proposals, the board consulted with its Pension Plan Advisory Committee. The board issued an Exposure Draft in June 2024. The comment period closed in October 2024 for this Exposure Draft. The board will deliberate the feedback received on the exposure at its November meeting later this month. And again, you can follow the project page linked on this slide for further updates.
And now, I’d like to move on to one of our other research projects on evaluating the Preface. The Preface sets out which accounting framework in the four parts of the Handbook applies to each type of reporting entity. As part of the AcSB’s 2022 to 2027 Strategic Plan, the AcSB committed to evaluating the Handbook’s Preface to assess whether the Preface directs entities to the most appropriate frameworks based on their reporting needs.
The AcSB will work to identify the types of entities that are directed by the Preface to apply an accounting framework and explore if their financial reporting needs are adequately met. If not, the board will also explore alternative options and consider if changes to the Preface are needed.
At its June 2024 meeting, the AcSB discussed research on the project, including outreach with its committees. While most members thought that changes to the Preface are not needed, some highlighted potential changes that the board might consider. Members thought that certain entities, such as social enterprises, small health and wellness funds, and sports and social clubs, are using frameworks that may not be suitable, given their size, complexity, and the information needs of their financial statement users.
The AcSB is conducting additional research on the financial reporting needs of these entities. This will include further discussions with the advisory committees and outreach with staff of other Canadian standard-setting boards. The AcSB will discuss next steps at its November 2024 meeting.
And so now to shift gears a little bit, we’d like to talk to you about our 2025–2026 planning cycle. So, informed by the strategic plan, the AcSB’s annual plan sets out specific annual objectives and helps to further the strategies that fulfill the AcSB’s public interest mandate. It outlines key activities that we will undertake during the fiscal year.
So, at this point, we’re in the early stages of developing our annual plan for 2025–2026. As part of this process, the AcSB will consider topics to add to its work plan for the upcoming year. When determining which topics to be added, the board will consider feedback from areas like advisory committees, post-implementation reviews, review of amendments to accounting frameworks in other jurisdictions, and feedback submitted through its guidance framework. Considering any capacity constraints as well as relevant external factors, the board will select which projects will be added to its work plan for the upcoming year. These projects will be communicated via our annual plan, which is posted on our website on March 31st.
And for reference, you can see our 2024–2025 annual plan linked on this slide here.
And so now that we’ve given an overview of how the board considers priorities for its annual plan, we’d like to do a quick survey of which topics you think the AcSB should consider as part of our 2025–2026 work plan.
And so, I’ll just launch that survey here now.
There you go. Give it another moment. There, we got most respondents. But just make sure everyone gets a chance to vote.
Okay, so with that, it looks like we have a bit of an even split here—related party transactions, application guidance, and prioritizing completing projects in the current work plan are all kind of more or less evenly split. And then we have, actually, carbon credits coming in close behind them. I know, Armand, did you want to comment on any of these results or any observations?
Armand Capisciolto: No, no. I’m glad that completing our current projects is top of the list, because we do want to get those done. No, the application guidance—I think the one thing there, Eric, you talked about the guidance framework earlier. First of all, we need to be aware of what the application issues are, and if it meets the criteria, we will have chats about it at the board.
One of the things that I think is really important when it comes to application guidance—for us to spend time on it, it needs to be a pervasive issue. It needs to be an issue that is not just an issue for your company or your one client that’s hard to deal with. The Accounting Standards Board is not a help desk. But if it’s pervasive and it’s an issue that impacts many companies and will impact users, yes, we need to chat about that at the board, and we need to be made aware of them.
On carbon credits—again, really interesting issue. We did some research on the accounting for carbon credits for companies applying IFRS. It was really interesting research to do. What we found out was, it is increasing in prevalence. However, not necessarily material yet on companies’ financial statements. So, although prevalent, not necessarily significant. So, from an IASB standpoint, when they take on a project, they want to see it as both prevalent and significant.
So that’s an interesting kind of result of our research. While I’m talking, I do see some people that are raising hands. Please submit your question through the Q&A function. We do not plan on unmuting any of our three hundred and some participants for the Q&A. So please use the Q&A function.
Eric English: Yes, those are some good insights, Armand. And thank you, everyone, for responding to that poll. It is helpful for us to get some of these data points to see what’s really burning issues for our interested and affected parties.
And so, with that, I’d now like to cover how you can get involved with the work of the Accounting Standards Board.
So, we want to know what you think and are always interested in hearing from you. You can send us a comment or a question directly on our website, which is linked on this slide. You can also share your views by volunteering to join an advisory committee or one of our working groups. We post volunteer opportunities on our website, or you can reach out to one of the staff contacts on the slide to find out about any open opportunities to join a committee or a working group.
With that, I’ll actually just note that either later this week or early next week, our—there will be a posting up on our website for the Private Enterprise Advisory Committee, a Not-for-Profit Advisory Committee, as well as the Medium and Small Practitioners Advisory Committee. So, if you’re interested in getting involved in one of those groups, stay tuned for a posting, which will be going up shortly. And as always, you can send me an email with my email on the slide here as well if you have any questions or are interested in getting involved.
And so, to stay up to date with the AcSB’s activities, register an account on FRAS Canada’s website, and you can subscribe to our bi-weekly e-newsletter, The Standard. You can also follow us on social media on X (formerly Twitter) and LinkedIn, using the links on this slide.
The slides include a link to our website where you can find additional information about the AcSB’s activities and some of our ongoing projects talked about today.
Now, here we have a link to our post-webinar quiz. The link will be shared in the chat, so you can click on it there as well. If you have your phone handy, you can also scan the QR code here. That’ll take you right to the quiz, and you can do it on your phone easily. These slides are also available for download now on the registration page. So, if you’re not able to access them during the session, you can find them there and flip to the post-webinar quiz and access it that way as well.
And so with that, we’d like to leave some time at the end here for some questions. Just a reminder—you can submit a question, using the Q&A function. As Armand mentioned, we won’t be taking people off mute. So please, instead of raising your hand, we’ll ask that you type your question into the Q&A function, and we’ll try to get to as many questions as we can before the end of our time here.
Right, so we’ll just look through here.
Let’s see. Okay, so we have one on goodwill. Someone was interested in learning more about the Goodwill and Intangibles project. They’re wondering if we can clarify where the board has tentatively determined that goodwill should be amortized over a default period of five years unless the entity can provide evidence that a different useful life, not exceeding ten years, is more suitable.
So, Armand, I was wondering if you could maybe give us some detail there on what led up to the board’s tentative decisions in that area.
Oh, sorry, sorry, Armand. I think you might be on mute.
Armand Capisciolto: We’ve had a lot of discussions on that topic, and it’s been a tough one. So, a couple of things.
First of all, if you’re taking the relief of subsuming all the intangibles into goodwill, those intangibles, if you would have done a proper purchase price allocation, would have had different useful lives.
And so now we’re trying to figure out what the useful life is of all of them. We’ve had a lot of discussions. We had discussions on should the default period just be ten. But then the concern was, well, if the majority of what ends up in goodwill is stuff that would have been intangibles otherwise, and would have had a much shorter life of ten years, and you have a default period of ten, people will go to ten.
And then you might be on the balance sheet for too long. So, we had this decision to set it lower and saying: “If you have a reason to go beyond, we’re not saying you don’t have to.” But we didn’t want people… but we thought… if you have a lower period, you’re less likely to have these assets … that shouldn’t be on the balance sheet for a long period of time.
And, given one of the reasons we took on this project was simplicity and the fact that we’ve heard many users eliminate the stuff from the balance sheet altogether, we thought the simple way would be to set that rather than having people try to figure out a useful life, just have a short useful life. We’re almost positive we’re going to get comments on that five years when we issue the Exposure Draft. So, we’re really looking forward to what people have to say about it.
Eric English: Thanks, Armand. That was very informative. And I think maybe while we’re on the topic of goodwill, we have another question come in regarding already existing goodwill amounts on the financial statements. Would that be amortized as part of the transitional provisions?
Armand Capisciolto: We have not made any tentative decisions on that yet. The transitional provisions is a topic that we are discussing with both our Private Enterprise Advisory Committee and at the board level in November.
Just a couple of things on some of some of these tentative decisions, just to expand. First of all, this is a policy choice, not a transaction-by-transaction choice. So, we are saying that once you choose, this is how you apply it for them consistently.
So, we’re going to have to figure out what the transitional provisions are because there will be historic goodwill that has to be dealt with.
The other area that we again haven’t made any decisions on but are discussing with the board is: Is this policy choice one of those policy choices that finds itself as being one of, what I call, the “free choices”, meaning you don’t have to meet the relevant and reliable test in 1506? For those of you old enough, a lot of those come from the old differential reporting requirements.
So that’s also a discussion we’re having, because there could be a time where maybe I have a user that wants the complexity to be warranted, and I should, kind of, do a proper PPA and deal with the amortization. But then my users change, and I want to start amortizing. How do we go back and forth?
One way to do that is to not meet the relevant, reliable test, but also there are challenges related to that. So, these are all discussions happening in November. I can't really say what the board has decided because we haven’t had the discussion yet. But it’s going to be an interesting discussion because there’s a lot of things for us to consider with regards to this. At the end of the day, we want this to be useful to entities applying ASPE, so we are considering how, from both the transitional and a policy choice standpoint, we can make it as useful as possible.
Eric English: Thanks for that, Armand.
Another question we had come in here, and this is maybe clarifying a little bit on our guidance—the AcSB’s guidance framework.
The question is: Will application guidance outside the standard ever be prepared by the board outside of the decision summary? Or is the decision summary the only vehicle? So perhaps you could elaborate on some of our other vehicles of non-authoritative guidance that we might put out.
Armand Capisciolto: Yes, yes, all tough questions. So, we have done other guidance outside of the decision summaries. Eric spoke about the guidance we’re issuing right now on climate-related risks, and how an entity applying ASPE might have to consider those. Those are outside. We issued guidance in the past on COVID, the issues of COVID, when that was happening.
And even one of the application issues that I talked about in the Agricultural project that we now are saying needs some standard setting. We did actually issue a publication—notes to explain how we thought standards should be applied.
The other thing we’re, again, we’re still in the exploration stages with this, we are trying—if any of you follow our IFRS Accounting Standards Discussion Group—we have a searchable website that has a way to search all of the issues discussed. We haven’t got there yet. We’re working on it. But we are hoping, as we discuss more of these application issues, that we have a way to search those decision summaries similar to what we do for the IDG.
Eric English: Thanks, Armand. And maybe, just while you mentioned our climate risks and opportunities mini-series, someone else asked the question if you could tell us about some of the recent topics the board has released as part of this mini-series, and maybe give the audience a little bit of a flavour as to what kind of non-authoritative guidance we’re putting out there.
Armand Capisciolto: Yes. So, when I think about these topics, it’s …, if you think about the issues related to climate risks, things are changing—whether they’re changing from a physical standpoint or a transitional standpoint, depending on changes in government regulations, or even what companies say they’re going to do or not do relate to net-zero commitments.
So, what these publications do is they provide some insights into: How do you take that information?
And consider that when you’re thinking about impairment of long-lived assets. How do you think about that when you’re thinking about inventory valuation? So, these are some of the issues. I’m going to admit that my memory of every single topic we’ve covered is escaping me right now, but those are the types of topics that the series covers.
Eric English: Thanks for that, Armand. And maybe we’ll just take one more question as we’re coming up close to the hour here.
This one is on financial statement concepts.
So, recall as part of the presentation we mentioned that we, the AcSB, will be considering topics from the IASB’s conceptual framework when developing proposals for the project. Wondering if you can just tell us a little bit about what the AcSB is doing to ensure that these topics are suitable for use in Canada.
Armand Capisciolto: Yes, so a few things. First of all, we’re comparing the words in the current IASB framework to what’s currently in Section 1000 or in Part 2. And we’re looking at it and saying: “Okay, why are there differences?” And are the different words helpful or not? And are they helpful for private companies?
The other thing that I think is really important as we go through this analysis of whether they’re fit for purpose for private companies in Canada is really thinking about the cost-benefit analysis. Because we do think about cost-benefit differently when we’re talking about private companies than we think about it when we’re talking about public companies and public accountable enterprises, and types of enterprises applying IFRS.
One of the basics that one of the discussions we’ve had already on this topic is this idea that, in a private company scenario, typically, your users can ask for more information.
So that’s something, as an example, that is something that we’ve embedded, or we’ve discussed with our committees about embedding into the concepts. So, we’re taking those elements of cost versus benefit, which are different for private companies than they are for public companies, and making sure that’s part of our revised conceptual framework as we move forward for Part 2 and Part 3.
Eric English: Thanks, Armand. Yes, thanks for answering those questions, Armand. I think that was very helpful for some of the listeners on the call.
I realize there are still some questions coming in that we couldn’t get to, but hopefully we were able to shed some additional light on the projects that we’re working on through the Q&A that we’ve gotten through so far.
And so with that, we’ll conclude our presentation. Thank you, Armand, for your time today, and thank you to our audience for taking the time to join us.
The on-demand version of this presentation will be made available shortly after today’s live webinar. So check back for that within the next few days, or within the next week.
The slides will be available for download on the webinar registration page in case you didn’t get access to them or weren’t able to click on the CPP quiz link during the presentation today. You can always access it there via the slides.
And as always, if you have any questions, you can reach out to the staff listed on the earlier slide at any time.
And so with that, thank you for participating in today’s webinar, and have a great afternoon, everyone.
Armand Capisciolto: Thanks, Eric. Thanks, everyone, for joining.