Highlights
The Accounting Standards Board (AcSB) proposes, subject to comments received following exposure, to incorporate amendments to International Accounting Standard (IAS) 37 Provisions, Contingent Liabilities and Contingent Assets in Part I of the CPA Canada Handbook – Accounting.
This AcSB Exposure Draft reflects proposals made by the International Accounting Standards Board (IASB) that the AcSB intends to adopt, subject to deliberating comments received, as Canadian generally accepted accounting principles.
Comments are requested from individuals and organizations in Canada who agree with the Exposure Draft proposals as well as from those who do not. Comments are most helpful if they relate to a specific paragraph or group of paragraphs. Any comments that express disagreement with the proposals should clearly explain the problem and include a suggested alternative, supported by specific reasoning.
Comments received on the AcSB Exposure Draft will be available on the website shortly after the comment deadline unless confidentiality is requested. The request for confidentiality must be stated explicitly within the response.
IASB® Exposure Draft
The IASB recently issued the Exposure Draft, “Provisions—Targeted Improvements,” which is available on the IASB website at www.ifrs.org.
The IASB’s Exposure Draft proposes amendments aimed at aligning IAS 37 Provisions, Contingent Liabilities and Contingent Assets with the updated Conceptual Framework for Financial Reporting introduced in 2018, enhancing the relevance and usefulness of financial information. These changes aim to clarify the requirements for easier application and modify the timing for recognizing provisions for certain levies, resulting in earlier and more progressive accruals. The proposed amendments also aim to reduce diversity in the rates entities use to discount future expenditures to their present value, enhancing the comparability of the financial statements.
Specifically, the proposals in the IASB’s Exposure Draft:
- clarify the present obligation recognition criterion;
- provide specific guidance for threshold-triggered costs;
- specify that entities should use a discount rate reflecting the time value of money—represented by a risk-free rate—without adjustments for non-performance risk;
- require entities to use the same costs in estimating the future expenditure to settle an obligation as required in determining whether a contract is onerous; and
- provide additional examples and updates to the Guidance on implementing IAS 37, including an expanded decision tree.
The IASB’s Exposure Draft includes a Basis for Conclusions that may provide information to interested and affected parties.
Comments Requested
The AcSB encourages interested and affected parties in Canada to respond to the IASB on its Exposure Draft. Specific questions on which the IASB would like input are provided in the Invitation to Comment in its Exposure Draft. The AcSB requests that comment letters be sent directly to the IASB with a copy to the AcSB.
The AcSB would like input from Canadian respondents on the following additional question regarding the proposed amendments:
The IASB has developed the proposed amendments in accordance with its due process for application around the world. Assuming the Exposure Draft proposals are finalized and approved by the IASB in accordance with its due process, do you think that the proposals are appropriate for application in Canada? If not, please specify which aspects of the proposals, and what circumstances, make the accounting requirements proposed in the Exposure Draft inappropriate.
Send responses to this additional question directly to the AcSB.