Skip to main content

Accounting Standards for Private Enterprises

Related Party Combinations

Summary

In September 2023, the Accounting Standards Board (AcSB) issued amendments to Section 3840, Related Party Transactions, in Part II of the CPA Canada Handbook – Accounting Standards for Private Enterprises. 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.

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 discussed the application question with its Private Enterprise Advisory Committee and is aware of differing views emerging in practice.

The AcSB considered the Committee’s feedback and decided to develop an exposure draft for a narrow-scope amendment to Section 3840.

Staff Contact(s)

Danielle MacLeod, CPA, CA Associate Director, Accounting Standards Board

Phone number  +1 416 204 3951
Email address  [email protected]

Project Status

  • Information gathering
  • Approving project

    The AcSB approved the project in June 2024

    The AcSB is developing narrow-scope proposals to address accounting for combinations under common control when carrying values are used and an enterprise chooses to account for a combination prospectively

  • Engaging Communities
  • Deliberating feedback
  • Final pronouncement

Meeting & event summaries

October 11, 2024

AcSB Decision Summary – September 17-18, 2024

The AcSB continued discussing narrow-scope proposals to be included in an exposure draft to address an application question from practice regarding the amendments issued in September 2023 to Section 3840, Related Party Transactions, in Part II of the Handbook.

These amendments added an option in paragraph 3840.44(b) to either retrospectively restate all prior periods when carrying values are used to account for a combination, or prospectively account for these transactions from the date that the transfer occurred. The application question asked which comparative figures, if any, should be presented when an enterprise applies the new option to account for the combination prospectively from the date the transfer occurred.

The AcSB tentatively decided to propose a narrow-scope amendment that would allow an option in paragraph 3840.44(b)(i) to account for the combined enterprise as either a new entity or as a continuation of one of the combining entities when the combination is accounted for prospectively. The Board discussed that this would allow preparers to consider the information needs of its financial statement users and provide information that is relevant and decision useful.

The AcSB will seek further input on the exposure draft proposals from its Private Enterprise Advisory Committee and Small Practitioners Working Group in October 2024. The Board will consider input from the Committee and the Group, and will continue discussing the proposals at its October 2024 meeting. The Board plans to issue an exposure draft in the last quarter of 2024.

September 11, 2024

AcSB Decision Summary – May 22, 2024

Related party business combinations

The AcSB discussed and considered input from its Private Enterprise Advisory Committee on an application issue raised regarding the amendments to Section 3840 , Related Party Transactions, in Part II of the Handbook issued in September 2023. These amendments added an option in paragraph 3840.44(b) to either retrospectively restate all prior periods when carrying values are used to account for a combination or prospectively account for these transactions. The question discussed is, when the new option is applied to account for a combination prospectively from the date that the transfer occurred, what comparative figures, if any, are presented?

Committee members advised that this is a common scenario arising in practice.

The AcSB considered various options to address the issue through authoritative or non-authoritative guidance. The Board directed staff to gather further information and decided to continue discussing the question at its June 2024 meeting.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.