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Accounting Standards for Private Enterprises

AcSB Exposure Draft – Accounting for Common Control Combinations

Summary

The Accounting Standards Board (AcSB) proposes, subject to comments received following exposure, to amend Section 3840, Related Party Transactions, in Part II of the CPA Canada Handbook – Accounting. These proposed narrow-scope amendments address accounting for a combination between enterprises or businesses under common control. The amendments will apply to private enterprises applying the standards in Part II of the Handbook, as relevant.

Staff Contact(s)

Katharine Christopoulos, CPA, CA Director, Accounting Standards Board

How to reply

Respond to the Exposure Draft – Accounting for Common Control Combinations by submitting a comment letter (in a Word file) by February 14, 2025.

Support Materials

Background

In September 2023, the AcSB issued amendments to Section 3840, Related Party Transactions. The amendments allowed an option in paragraph 3840.44(b) to either retrospectively restate prior periods when carrying amounts are used to account for a combination under common control, or to prospectively account for these transactions from the date the transfer occurred. The amendments are effective for fiscal years beginning on or after January 1, 2025, with earlier application permitted.

Since issuing the amendments, the AcSB received an application question regarding the comparative figures to be presented, if any, when a transaction is accounted for prospectively from the date the transfer occurred in accordance with paragraph 3840.44(b)(i).

The AcSB considered the application question using its Guidance Framework, and, through discussions with its Private Enterprise Advisory Committee, it is aware of differing views emerging in practice. One view is that an enterprise must identify an acquirer and report the comparative figures of the acquiring entity. Another view is that an enterprise should apply professional judgment to consider the information needs of its financial statement users, and, in some scenarios, there could be no comparative figures presented.

The AcSB considered this feedback and noted that the current language in paragraph 3840.44(b) could infer that determining an acquirer is required when carrying values are used to account for the transaction prospectively from the date that the combination occurred.  The Board discussed that identifying an acquirer could be complex or onerous for private enterprises in some scenarios. 
The AcSB proposes to amend paragraph 3840.44(b) to address this narrow issue.