Scaling the Standards

The Private Enterprise Advisory Committee received an overview of the feedback received on its Consultation Paper I, “Exploring Scalability in Canada,” which closed for comment on July 31, 2023. The Committee discussed scaling solutions from a private enterprise perspective, including proposals to simplify or implement tiering in Part II of the CPA Canada Handbook – Accounting, and the need for a new framework for smaller entities.

The Committee discussed feedback received on Consultation Paper I that indicated that Part II of the Handbook is too complex, with Committee members providing mixed views on this feedback. Some thought that some standards in Part II of the Handbook are too complex to apply or result in information that is not useful to financial statement users. Examples provided include accounting for financial instruments, related party transactions, business combinations, and employee stock options. Other Committee members thought that many of the challenges that private enterprises face when applying these standards are because the underlying transactions are complex, not necessarily the standards themselves.

At its January 2024 meeting, the AcSB will consider the feedback from the Private Enterprise Advisory Committee, the Not-for-Profit Advisory Committee, and the Small Practitioners Working Group in determining next steps on this project.

The Not-for-Profit Advisory Committee received an overview of the feedback on its Consultation Paper I, “Exploring Scalability in Canada,” which closed for comment on July 31, 2023. Committee members discussed specific scaling solutions from a not-for-profit perspective, including the proposals to simplify/implement tiering in Part II and Part III of the CPA Canada Handbook ̶ Accounting and the need for a new framework for smaller entities in the not-for-profit landscape. The Committee discussed the feedback from the Consultation Paper that indicated that the existing Part II and Part III of the Handbook are too complex, with Committee members providing mixed views on this feedback. The Committee also discussed the broad range of organizations in the sector that are subject to audit requirements, including very small NFPOs.

The AcSB will consider the Not-for-Profit Advisory Committee’s feedback at the December 2023 Board meeting together with feedback from the Private Enterprise Advisory Committee and Small Practitioners Working Group in determining next steps on this project.

The AcSB continued its discussions on its “Consultation Paper I – Exploring Scalability in Canada,” which closed for comment on July 31, 2023.

The AcSB decided to continue conducting research and targeted consultation on potential solutions to add tiering within existing Part II and Part III frameworks in the CPA Canada Handbook – Accounting and a new framework for small entities. The Board will seek feedback on these potential solutions at its October 2023 Small Practitioners Working Group meeting and at its November 2023 Not-for-Profit Advisory Committee and Private Enterprise Advisory Committee meetings.

The AcSB was not asked to make any final decisions regarding these scaling options and will discuss next steps for this project at the Board’s December 2023 meeting.

The Private Enterprise Advisory Committee received an overview of the proposed scalability solutions in the AcSB’s Consultation Paper I, “Exploring Scalability in Canada.”

The Committee provided the following feedback on the AcSB’s proposed strategies:

• The nature and complexity of the types of transactions an entity undertakes is an important factor when determining the usefulness of the existing framework it applies. An entity’s size should not be the only factor considered when determining a scaled solution approach.
• Common concepts between frameworks with recognition and measurement differences is an important factor to consider and incorporate into any scaling solution.
• Adding an intermediary framework between Part I – IFRS® Accounting Standards and Part II – ASPE will create additional cost and complexity for financial statement preparers and practitioners. The demand for an intermediary framework from all interested and affected parties appears limited.
• Identifying and addressing opportunities to simplify accounting areas will contribute to a scaled solution. So too will identifying opportunities for private enterprises to apply more complex guidance where the existing guidance is too simplistic. For example, the hedge accounting guidance under ASPE may be seen as too simplistic for certain hedging relationships entered by private enterprises. A scaling solution that permits an entity to apply the hedge accounting guidance under IFRS Accounting Standards is welcomed in many cases.
• A new framework for smaller entities could help standardize the information financial statement users receive and improve the overall quality and comparability of the financial statements. This benefit to financial statement users needs to be considered in conjunction with the view that additional frameworks will add to the cost of learning, applying, and assessing the compliance with any new framework.
• The greater the number of scaling options available will impact the comparability of the financial statements produced. This will decrease the understandability and decision usefulness of the information financial statement users need.

The Committee members were reminded that the Consultation Paper’s comment deadline is July 31, 2023.

The AcSB will consider the Private Enterprise Advisory Committee’s comments when the Board begins deliberating the feedback received on the Consultation Paper at the Board meeting in September 2023.

The AcSB discussed a final draft of its “Consultation Paper I – Exploring Scalability in Canada.” Subject to minor amendments, the Board approved the Consultation Paper and plans to issue it at the end of March 2023.

The AcSB discussed and approved an outreach and communications plan for its consultation paper on its strategic initiative related to scaling the standards, as set out in the 2022-2027 Strategic Plan.

The AcSB also gave permission to begin the balloting process. The Board plans to issue the consultation paper at the end of March 2023.

The AcSB reviewed a revised draft of its consultation paper on its strategic initiative related to scaling the standards, as set out in the 2022-2027 Strategic Plan. The AcSB will review and approve the final consultation paper at its March 2023 meeting. The Board expects to issue the consultation paper at the end of March 2023.