The Accounting Standards Oversight Council (AcSOC) discussed the activities of the Accounting Standards Board (AcSB) and the Public Sector Accounting Board (PSAB), and related matters.
At its meeting in Toronto, Ontario, on February 20-21, 2020, AcSOC received presentations on, and discussed, the following:
- Chair’s Opening Remarks
- AcSB Activities
- AcSB’s Draft 2020-2021 Annual Plan
- PSAB Activities
- PSAB’s Draft 2020-2021 Annual Plan
- Reports on Attendance at AcSB and PSAB Meetings
Chair’s Opening Remarks
AcSOC Chair, Miville Tremblay welcomed all attendees, including those observing the meeting via livestream. He congratulated Marie Giguere on her appointment to the Order of Canada. Mr. Tremblay also welcomed Nancy Anderson and Michel Charbonneau, two AcSB members, to the meeting.
AcSB Activities
Recent Activities
Linda Mezon, AcSB Chair, commented on the AcSB’s recent activities related to the achievement of its strategic objectives, its international work, its domestic projects, and its compliance with due process.
Strategic Objectives
Ms. Mezon informed the Council that Maria Theofilaktidis was recently appointed as a Trustee of the IFRS Foundation on January 1, 2020. She currently holds the position of Executive Vice-President, Chief Compliance Officer and Head of Enterprise Risk at the Bank of Nova Scotia. The AcSB will support Ms. Theofilaktidis by providing summary documents prior to every Trustees meeting. Ms. Theofilaktidis will provide the Council with updates on international accounting matters at the Council’s future meetings.
She also noted that Kathleen Casey was appointed Financial Accounting Foundation Chair, effective January 1, 2020. Richard Jones was also recently appointed Chair of the Financial Accounting Standards Board (FASB), effective July 1, 2020.
Ms. Mezon highlighted that the AcSB met with the Accounting Standards Board of Japan in January 2020 to discuss their respective financial reporting frameworks, organizational structures, and key projects. The AcSB is committed to collaborating with national standard setters across the world on a regular basis.
In discussing the Board’s challenges, Ms. Mezon said that although the Board has a strong staff team, the staff lacks standard-setting experience due to turnover and is also lacking a staff member with senior financial public company reporting experience. The Board has mitigated this risk by asking Board members to spend more time reviewing documents and providing feedback to less experienced staff. Also, the Board continues to face production challenges related to the online CPA Canada Handbook platform, Knotia.
International Activities
The AcSB undertakes various activities to support Canadian preparers and auditors in implementing standards and addressing emerging accounting topics in practice. The Board continues to ask various industry groups, committee volunteers and other stakeholders about the challenges of implementing new standards, including IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers, and IFRS 16 Leases.
Ms. Mezon informed the Council that the Board continues to monitor the implementation of the new Leases standard. Given that most public companies have now published their annual financial statements, Board Staff will be analyzing this information for feedback on post-implementation challenges of the new standard.
On goodwill and impairment, the AcSB is participating in the IASB’s project to investigate possible improvements to IFRS 3 Business Combinations and IAS 36 Impairment of Assets. The IASB will issue a discussion paper on this topic in March 2020 with a 120-day comment period.
As for rate-regulated activities, the Board will seek information from its stakeholders on whether the standards should be amended to provide guidance on rate-regulated activities. An exposure draft on this topic is expected to be issued in the second half of 2020.
Ms. Mezon reminded the Council that the IASB published its Exposure Draft, “Amendments to IFRS 17 Insurance” in June 2019. The comment period ended on September 25, 2019 and the IASB received 122 comment letters. The IASB is expected to complete the technical discussions relating to the proposed amendments by the end of February 2020. The IASB will discuss the effective date of IFRS 17 Insurance Contracts at its March 2020 meeting. Ms. Mezon emphasized that a common global adoption date is critical to the success of transition to achieve global comparability.
On the IASB’s Primary Financial Statements project, Ms. Mezon said that the proposals in the Exposure Draft introduce categories and subtotals in the statement of profit and loss, require the disclosure of management performance measures, and require the disclosure of unusual items. This project aims to promote better communication in financial reporting. The IASB issued an Exposure Draft, “General Presentation and Disclosures” in December 2019. Stakeholders are encouraged to respond with their comments by June 30, 2020.
In response to a question on the IASB’s Primary Financial Statement project, Ms. Mezon noted that the IASB does not intend to prescribe how management performance measures are calculated, however, a reconciliation between each measure and the most directly comparable subtotal or total specified by IFRS would be required.
In response to a question on the Canadian Securities Administrators’ (CSA) Proposed National Instrument 52-112 and IASB’s Primary Financial Statements project, Ms. Mezon said that the two documents are available for comment in the same time period. The Board will encourage stakeholders to consider both the CSA’s and the IASB’s documents for comment together.
She also said that the Auditing and Assurance Standards Board is aware of the IASB’s Primary Financial Statements project and will consider the implications of this project on audits.
Domestic Activities
Ms. Mezon informed the Council that the AcSB issued its Exposure Draft, “Combinations – Initial Measurement and Related Disclosures” in January 2020 with a comment deadline of April 14, 20201. This Exposure Draft addresses concerns raised by the not-for-profit sector regarding the lack of guidance in Part III of the CPA Canada Handbook for not-for-profit organizations (NFPO) combinations. This lack of guidance has led to a diversity in practice including the use of different frameworks to account for transactions with similar characteristics. As a result, the Board proposes to introduce a new standard to account for the combination of two or more NFPOs.
In discussing Employee Future Benefits, Ms. Mezon noted that the Exposure Draft, “Employee Future Benefits – Use of a Funding Valuation” was issued in September 2019 with a comment period deadline of December 16, 2019. The Board is currently deliberating feedback on its Exposure Draft. The proposed amendments modify the guidance for defined benefit plans for which a funding valuation is required to address recent changes in pension legislation, as well as issues with defined benefit plans for which a funding valuation is not required.
Compliance with Due Process
Council members were advised that there were no reportable departures from due process or “comply or explain” actions, nor were there any unusual events in the application of due process between September 1, 2019 and January 31, 2020.
AcSB’s Draft 2020-2021 Annual Plan
2019-2020 Interim Performance Report
Ms. Mezon informed the Council that the Board made substantial progress on its domestic projects and its global contributions.
In discussing the Board’s risks, she noted that the Board continues to improve on the timeliness of its activities by better scoping projects to respond to stakeholders on a timely basis.
The Performance Review Committee met with the Board on February 19, 2020 to discuss the AcSB’s interim Performance Report.
2020-2021 Draft Annual Plan
Ms. Mezon provided the Council with an update on the Board’s 2020-2021 draft Annual Plan. She noted that some of the environmental factors considered in the Board’s new Annual Plan are as following:
- An increased focus on relevance of accounting standards and other guidance;
- Removal and replacement of LIBOR with effects on financial markets as a key reference rate;
- IFRS 17 endorsement process; and
- AcSB staff turnover and standard-setting experience.
Mr. Linsmeier informed the Council that the PRC reviewed the Board’s 2020-2021 Annual Plan and agreed that the plan would provide a basis for the Committee to assess the AcSB’s performance for the year ended March 31, 2021.
In response to a question, Ms. Mezon noted that the Board’s online Handbook platform, Knotia, is outdated. CPA Canada is aware that it is no longer fit for purpose and will assess alternate solutions in the near future.
One member remarked that “translation cost” is one of the highest costs on the Board’s budget and asked what the Board is required to translate. Ms. Mezon responded that the Board is required to translate all documents as they must be issued in English and French simultaneously, the only exception pertains to documents issued by the IAASB (ex. Bases for Conclusions). However, in some cases, even these documents are translated and this is based on a case-by-case assessment of the Board.
PSAB Activities
Recent Activities
Charles-Antoine St-Jean, PSAB Chair, commented on recent Board activities, including strategies, key files, public interest considerations, and governance and operations matters.
PSAB Key Strategies
International Strategy
Consultation Paper 2, “Reviewing PSAB’s Approach to International Public Sector Accounting Standards” was approved at the March 2019 PSAB meeting and released on May 8, 2019. PSAB received 28 written responses to the Consultation Paper and conducted 18 formal interviews on the International Strategy Paper. The Board reviewed the feedback during the December Board meeting, which will assist with its final decision in March 2020.
Mr. St-Jean also noted that PSAB hosted an International Strategy Strategic Advisory Group meeting in January 2020 to discuss the feedback received on Consultation Paper 2, and to get the group’s insight on any strategic matters related to the project. All feedback from the Group will be considered by the Board in March 2020.
Government Not-for-Profit (GNFP) Project
Mr. St-Jean said that comments from the GNFP Consultation Paper were reviewed by Staff and a high-level summary of responses was provided to PSAB at its December 2019 meeting. A GNFP Strategy Committee will be formed to assist with the assessment of responses and consideration of options for PSAB’s GNFP Strategy. A second Consultation Paper is expected to be presented to PSAB for approval at its September 2020 meeting.
Conceptual Framework
Mr. St-Jean informed the Council that PSAB’s Concepts Underlying Financial Performance Task Force will provide the Board with an update at its March 2020 meeting. Projected deliverables for the project have been accelerated to better meet the needs of stakeholders.
Key Files
Employment Benefits
A special Board meeting was called in October 2019 to review and discuss the Employment Benefits project. The Board decided to pause and revisit the project plan, the revised plan is expected to be approved at the June 2020 PSAB meeting.
In response to a question on this, Mr. St-Jean said that Employment Benefits is a complex file where a lot of time and resources have been committed. The board decided to revisit the project plan to ensure that the project delivers solutions that meet the needs of its stakeholders on a timely basis.
Public Private Partnerships
Mr. St-Jean informed the Council that the Public Private Partnerships (PPP) exposure draft was approved by PSAB at its September 2019 meeting. PSAB aims to issue the exposure draft in early November with a comment period deadline of late February 2020.
Financial Instruments / Foreign Exchange
The Board proceeded with a process review of its Financial Instruments standard. The purpose of the review was to identify lessons learned and propose recommendations. The results of the review were presented to PSAB at its December 2019 meeting.
In December 2019, the Canadian Council of Comptrollers submitted a “hedging” proposal to the Board, outlining certain suggested changes to the Financial Instruments standard. PSAB will further evaluate these proposals at its March 2020 meeting.
Purchased Intangibles
PSAB approved an exposure draft that proposes to remove the exclusion in the conceptual framework prohibiting recognition of purchased intangibles in financial statements. The exposure draft proposes allowing the recognition of intangibles purchased through an exchange transaction. Created, developed, and inherited intangibles would remain excluded from recognition until PSAB addresses these topics in its technical agenda.
The exposure draft was published on November 30, 2019, with a comment period deadline of January 31, 2020. Nine responses were received so far, with the analysis of these responses to be reviewed at the March 2020 Board meeting. The effective date would be for fiscal years beginning on or after April 1, 2021.
Public Interest Considerations
Public Sector Accounting Discussion Group
The PSAB Chair informed the Council that the Public Sector Accounting Discussion Group met on November 15, 2019. Two new members, a member from the indigenous community and a member representing the millennial generation, joined the Discussion Group at this meeting.
PSAB will receive its first Annual Report from the Discussion Group at its March 2020 Board meeting.
In response to a question on Indigenous Governments, Mr. St-Jean said that the Board plans to have an indigenous strategy to deal with the complex issues of this stakeholder group. The Board is currently engaging with Indigenous Governments in the standard-setting process to better understand their financial reporting needs.
PSAB’s Draft 2020-2021 Annual Plan
The Council revised the Board’s 2020-2021 Annual Plan. Members provided the Board with their comments for consideration.
Mr. Linsmeier informed the Council that the PRC reviewed the Board’s 2020-2021 Annual Plan at its February 19, 2020 meeting. The PRC agreed that the plan would provide a basis for the Committee to assess the PSAB’s performance for the year ended March 31, 2021.
Mr. St-Jean said that the PRC will review the Board’s Annual Plan once more at its March 18, 2020 meeting. Comments from the PRC and AcSOC will be considered for incorporation into the Annual Plan prior to its final approval by PSAB at its March 2020 meeting.
Reports on Attendance at AcSB and PSAB Meetings
One member commented on their attendance at a recent AcSB meeting. They noted that the meeting was well run, and attention was paid to due process. They were impressed by the quality of the discussions and the caliber of the participants.
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1 Secretary’s Note: Please note that the comment period deadline of the Combinations Exposure Draft was extended to May 15, 2020 as a result of the COVID-19 pandemic. Please click here for more information.
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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.