The Accounting Standards Oversight Council (AcSOC) discussed the activities of the Accounting Standards Board (AcSB), the activities of the Public Sector Accounting Board (PSAB), and related matters.
At its virtual meeting held on October 29-30, 2020, AcSOC received presentations on, and discussed the following:
- Chair’s Opening Remarks
- Approval of AcSOC Minutes
- AcSB Chair’s Report
- Recruitment of PSAB Chair
- PSAB Chair’s Report
- AcSOC’s Incoming Vice-Chair
Chair’s Opening Remarks
AcSOC Chair Miville Tremblay welcomed all attendees, including AcSB members Armand Capisciolto, Michel Charbonneau, Nancy Anderson, and Carol Rowe.
Approval of AcSOC Minutes
AcSOC approved the minutes of the meeting held on June 11, 2020.
AcSB Chair’s Report
Recent Activities
AcSB Chair Linda Mezon briefed AcSOC with an update on COVID-19’s impact on the Board. She also commented on the Board’s recent activities related to its international work, its domestic projects, and its compliance with due process.
Impact of COVID-19
The AcSB continues to monitor the COVID-19 pandemic closely to determine how best to respond and operate in this environment. The Board is focusing its discussions on ensuring stakeholders’ needs are addressed.
International Activities
The AcSB undertakes various activities to support Canadian preparers and auditors in implementing standards and addressing emerging accounting topics in practice.
The AcSB continues to ask various industry groups, committee volunteers, and other stakeholders about the challenges they face when in implementing new or existing standards, including:
- COVID-19-related accounting issues (e.g., rent concessions and financial reporting considerations);
- accounting for acquired leases in a business combination; and
- accounting for acquired leases in an asset acquisition.
The IFRS® Discussion Group discussed these three leasing issues at its May 2020 meeting.
In response to stakeholder feedback on the challenges of conducting modification assessments on a high volume of leases due to COVID-19 related-rent concessions, the International Accounting Standards Board (IASB) issued the Exposure Draft, “Covid-19-Related Rent Concessions,” in April 2020, with a 14-day comment period. On May 15, 2020, the IASB tentatively decided to amend IFRS 16 Leases to provide lessees with an optional exemption from assessing whether a COVID-19-related rent concession is a lease modification. On September 18, 2020, the AcSB published the Exposure Draft, “Leases,” proposing to amend Section 3065, Leases. This Exposure Draft was issued with a 14-day comment period. The Board will incorporate the amendments into Part II of the CPA Canada Handbook – Accounting on November 2, 2020.
AcSOC applauded the AcSB for responding quickly to stakeholder’s needs by issuing the Exposure Draft with a 14-day comment period and making the relief available for the 2020 year-end reporting period.
Ms. Mezon informed AcSOC that the Trustees of the IFRS® Foundation published the Consultation Paper on Sustainability Reporting to assess the demand for global sustainability standards and if the Foundation should contribute to developing such standards. She said the AcSB will formulate a response to this Consultation Paper. The Council can expect an update on this matter at its February 2021 meeting.
On its Primary Financial Statements project, the IASB’s Exposure Draft, “General Presentation and Disclosure,” published in December 2019, proposed a new IFRS® Standard on presentation and disclosures in financial statements. When finalized, the new standard will replace IAS 1 Presentation of Financial Statements. This project’s primary goal is to enhance communicating information in the financial statements, focusing on information included in the statement of profit and loss. The AcSB responded to the IASB’s Exposure Draft in September 2020, supporting the IASB’s project and noting that it will enhance the usefulness, comparability, and consistency of the financial statements for investors and other users.
With regards to the Interest Rate Benchmark Reform (IBOR) – Phase 2 project, Ms. Mezon reminded AcSOC that the objective of Phase 2 is to assist entities in providing useful information to financial statement users when changes are made to contractual cash flows or hedging relationships because of the reform. The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial instruments and hedging relationships. Ms. Mezon informed the Council that the AcSB completed its endorsement activities, as required by its Due Process Manual, and issued the final amendments in the Handbook on October 1, 2020.
On its Goodwill and Impairment project, the IASB extended the comment period deadline for its Discussion Paper, “Business Combinations – Disclosures Goodwill and Impairment,” to December 31, 2020, as a result of the COVID-19 pandemic. Ms. Mezon highlighted that the Discussion Paper aims to improve disclosures of acquisitions and the accounting for goodwill. She added that this Discussion Paper will be relevant to many Canadian stakeholders as business combinations and goodwill are widespread throughout multiple industries across Canada. The Board continues to perform its outreach activities and plans and will discuss its response letter to the IASB at the AcSB’s meeting on October 27, 2020.
In response to a question on CPA Canada’s hiring freeze, Stephenie Fox, Vice-President, Standards, informed AcSOC that CPA Canada’s Executive Committee will meet in early November 2020 to discuss the hiring freeze, among other topics.
Domestic Activities
Ms. Mezon reminded AcSOC that the AcSB issued the Exposure Draft, “Combinations – Initial Measurement and Related Disclosures,” in January 2020, with a 90-day comment period. However, in light of the COVID-19 pandemic, the Board extended the comment deadline from April 14 to May 14, 2020. The Board deliberated the feedback to the Exposure Draft and agreed to make some key changes to the Exposure Draft. They included revising some of the disclosure requirements and requiring that all combinations of not-for-profit organizations under common control to be accounted for as mergers. Considering the importance of this standard in the current environment, the Board plans to issue the final standard in March 2021.
As part of developing its 2020-2021 Annual Plan, the AcSB decided to include the Cloud Computing Arrangements project as it remains a priority. The Board directed staff to research this field to better inform the Board’s decision on the appropriate way forward.
Compliance with Due Process
Ms. Mezon advised AcSOC that there were no reportable departures from due process from May 1, 2020 to September 30, 2020. However, she said a comply-or-explain action arose in September 2020 when the Board published the Exposure Draft, “Leases.” The Exposure Draft proposed to amend Section 3065 Leases to provide relief for both lessees and lessors on accounting for rent concessions that have arisen as a result of the COVID-19 pandemic. In response to stakeholder feedback, the Board issued the Exposure Draft with a 14-day comment period to make the relief available for the 2020 year-end reporting period. No other comply-or-explain actions arose in this period.
Recruitment of PSAB Chair
Mr. Tremblay and Marie Giguère, Chair of AcSOC’s Nominating and Governance Committee, briefed AcSOC on the Committee’s recruitment process for a new PSAB Chair who would be presented to the AcSOC for approval.
Following a discussion, AcSOC unanimously approved the appointment of Clyde MacLellan as the new PSAB Chair.
Mr. MacLellan served as Interim Chair since July 2020 and will assume the role permanently as of November 1, 2020.
PSAB Chair’s Report
Recent Activities
PSAB’s Interim Chair Clyde MacLellan updated AcSOC the Council on recent Board activities, including strategies, key files, public interest considerations, as well as governance and operations matters.
PSAB Key Strategies
International Strategy
At its May 5, 2020, meeting, PSAB voted to adopt Option 2 – adapt International Public Sector Accounting Standard (IPSAS) principles when developing future standards as outlined in the second consultation paper of its International Strategy decision. The Board reviewed all feedback from stakeholders and its Strategic Advisory Group in making its decision. The decision has been publicly shared on the PSAB website and an In Brief document explaining the decision was released in early June 2020. The Board approved the Basis for Conclusions document at its July 2020 meeting and released it in September 2020.
At its September 2020 meeting, PSAB reviewed and approved the Criteria for Modifying and Reviewing IPSAS Principles in preparation for the April 1, 2021, implementation date. Mr. MacLellan highlighted the Board is revising its Due Process Manual to reflect the International Strategy decision. AcSOC expects to review the revised Due Process Manual at its February 2021 meeting.
Government Not-for-Profit (GNFP) Project
Mr. MacLellan said PSAB approved the “Government Not-for-Profit Strategy Consultation Paper II” at its meeting on September 25, 2020, which it expects to publish in January 2021, with a 120-day comment period. He added that Consultation Paper II is being released at the same time as the Conceptual Framework and Reporting Model documents for comment. The Board encourages stakeholders to read the documents together as the Conceptual Framework and Reporting Model make proposals that may address some issues GNFP organizations raised. The Board’s expects to finalize its GNFP strategy in the fall of 2021.
Conceptual Framework and Reporting Model
Mr. MacLellan informed the AcSOC that PSAB approved four exposure drafts related to the Conceptual Framework and Reporting Model at its September 2020 meeting. The Board expects to publish the exposure drafts and the accompanying bases for conclusions documents in January 2021, with comments due by mid-May 2021.
Strategic Plan
Mr. MacLellan informed AcSOC that PSAB voted at its June 2020 meeting to defer issuing its upcoming Strategic Plan by one year. This decision considers the significant pressures stakeholders face and the potential need for the Board to reassess its proposed strategic themes considering the uncertainty the pandemic brought on. The Board also agreed to extend the timeline of its current 2017-2021 Strategic Plan by one year through a Notice of Intent statement that was posted on its website. The Board expects to release its Draft Strategic Plan for comment in the spring of 2021, with a 150-day comment period.
Key Files
Employee Benefits
When it met in June 2020, PSAB approved a revised project plan for the Employee Benefits project. As part of the revised project approach, the Board decided to use principles from IPSAS 39, Employee Benefits, as a starting point. The Board can modify the IPSAS 39 principles to better fit the Canadian environment and provide customized guidance where needed.
Public Private Partnerships
Mr. MacLellan reminded AcSOC that PSAB transitioned its existing Public Private Partnership Task Force into a Group of Experts panel to facilitate approval of the final standards by December 2020. At its September 2020 meeting, the staff presented the Board with a draft of the final public private partnerships standard. The Board asked the staff to prepare the Basis for Conclusions, incorporating its feedback, for the Board’s for review and approval at its upcoming December 2020 meeting.
Financial Instruments/ Foreign Exchange
Mr. MacLellan informed AcSOC that, in April 2020, PSAB approved three narrow-scope amendments to address specific issues the Canadian Council of Comptrollers raised. The Board reviewed and approved: two Exposure Drafts:
- “Financial Instruments: Presentation Narrow-scope Amendments”; and
- “Foreign Exchange Narrow Scope Amendments”
The Board issued these Exposure Drafts for public comment in July 2020, with stakeholder feedback requested by October 28, 2020. PSAB plans to issue this standard in the CPA Public Sector Accounting (PSA) Handbook in early summer of 2021, with an effective date of April 1, 2022.
Purchased Intangibles
At its September 2020 meeting, PSAB approved final PSA Handbook amendments and a new Public Sector Guideline (PSG) 8, Purchased Intangibles, to allow recognition of purchased intangibles in financial statements.
Public Interest Considerations
Public Sector Accounting Discussion Group
The Public Sector Accounting Discussion Group meeting held on July 17, 2020, was recorded and posted for viewing until October 30, 2020. The Group discussed implementation costs related to cloud computing solutions and the first-time consolidation of a governmental unit when there is a change in control.
Annual Plan
Mr. MacLellan reminded AcSOC that PSAB developed and issued its 2020-2021 Annual Plan before the COVID-19 pandemic. Since then, the Board re-evaluated its activities and priorities in response to COVID-19 and approved a revised 2020-2021 Annual Plan at its September 2020 meeting.
PSAB shared the revised Annual Plan with AcSOC and the Performance Review Committee.
AcSOC’s Incoming Vice-Chair
Following a discussion, AcSOC unanimously approved Lorraine Moore as its incoming Vice-Chair for the period beginning April 1, 2021.
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The Accounting Standards Oversight Council (AcSOC) is an independent, volunteer body established by the Canadian Institute of Chartered Accountants (CICA)* in 2000. It serves the public interest by overseeing and providing input on the activities of the Accounting Standards Board (AcSB), which sets financial reporting standards for profit-oriented enterprises and not-for-profit organizations, and the Public Sector Accounting Board (PSAB), which sets financial reporting standards for governments and their organizations. AcSOC’s responsibilities include appointing the AcSOC, AcSB and PSAB members. Reporting to the public and made up of representatives that include regulators, investors and other users, preparers, and auditors of financial reports, AcSOC brings a broad perspective to complex issues facing standard setters in both the private and public sectors.
*The CICA, CGA Canada and CMA Canada have since consolidated under the CPA Canada banner as the profession’s national body.