Financial Statement Concepts

The Private Enterprise Advisory Committee continued discussions related to the AcSB’s project to improve Financial Statement Concepts in Part II of the CPA Canada Handbook – Accounting. The Committee provided feedback on whether each of the following topics from the International Accounting Standard Board’s (IASB) Conceptual Framework would be fit for purpose for Canadian private enterprises:

• the objectives of general purpose financial reporting;
• qualitative characteristics of useful financial information; and
• financial statements and the entity.

The Committee noted that the updated terminology and provisions in the IASB’s Conceptual Framework could enhance preparers’ and practitioners’ understanding of Financial Statement Concepts. These improvements may lead to greater consistency in applying the standards outlined in Part II of the Handbook, while also aiding the AcSB in the standard-setting process. The Committee also provided feedback on potential modifications and revisions to ensure these topics are suitable for Canadian private enterprises.

The AcSB will discuss the Committee’s feedback at its meeting in November 2024.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

The Not-for-Profit Advisory Committee continued discussions related to the AcSB’s project to improve Section 1001, Financial Statement Concepts for NFPOs, in Part III of the Handbook. The Committee provided feedback on whether each of the following topics from the International Accounting Standards Board’s (IASB) Conceptual Framework would be fit for purpose for Canadian NFPOs:

• the objectives of general purpose financial reporting;
• qualitative characteristics of useful financial information; and
• financial statements and the entity.

The Committee noted that the updated terminology and provisions in the IASB’s Conceptual Framework could enhance preparers’ and practitioners’ understanding of financial statement concepts. These improvements may lead to greater consistency in applying the standards outlined in Part III of the Handbook and aid the AcSB in the standard-setting process. The Committee also provided feedback on potential modifications and revisions to ensure these topics are suitable for Canadian NFPOs. The Committee identified differences between users of NFPO financial statements and users of for-profit financial statements prepared under Part II of the Handbook, which will need to be considered when developing the updated concepts.

The AcSB will discuss the Committee’s feedback at its meeting in November 2024.

For more information on the background and benefits of the Financial Statement Concepts project, please visit the following webpage: “What You Need to Know about Financial Statement Concepts.”

The Not-for-Profit Advisory Committee received an overview of the AcSB’s project to update Financial Statement Concepts in Parts II and III of the Handbook. This project will focus on:

• clarifying the purpose and intended use of Financial Statement Concepts; and
• ensuring Financial Statement Concepts are appropriate for private enterprises and not-for-profit organizations in Canada.

The Committee discussed the Board’s decision to move Financial Statement Concepts to a separate section within the Handbook outside of accounting standards. This is consistent with the approach used by other national and international standard setters for their conceptual frameworks. Committee members acknowledged that this decision is not likely to alter current practice. However, Committee members noted that it will be critical to retain the importance of Financial Statement Concepts as a foundational tool for understanding financial statements and accounting standards.

In October 2024, the Committee will begin to discuss topics to be updated in Financial Statement Concepts as part of this project.

The Private Enterprise Advisory Committee received an overview of the AcSB’s project to update Financial Statement Concepts in Parts II and III of the Handbook. This project will focus on:

• clarifying the purpose and intended use of Financial Statement Concepts; and
• ensuring Financial Statement Concepts are appropriate for private enterprises and not-for-profit organizations in Canada.

The Committee discussed the AcSB’s decision to move Financial Statement Concepts to a separate location within the Handbook outside of accounting standards. This is consistent with the approach used by other national and international standard setters for their conceptual frameworks.

Committee members acknowledged that this decision is not likely to alter current practice. Nevertheless, they emphasized the need to clearly communicate that this change does not diminish the significance of concepts nor signal a shift in the objectives of ASPE. The Committee also highlighted the necessity for additional educational materials to effectively convey the intended use and application of Financial Statement Concepts.

In October 2024, the Committee will begin to discuss topics to be updated in Financial Statement Concepts as part of this project. 

The Accounting Standards Board (AcSB) received a summary of research performed to date on Section 1000, Financial Statement Concepts, and Section 1001, Financial Statement Concepts for Not-for-Profit Organizations, in Parts II and III of the CPA Canada Handbook – Accounting, respectively. Additionally, the Board considered a comparison of Canadian domestic financial statement concepts to frameworks in other jurisdictions.

The AcSB discussed feedback from its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee regarding how financial statement concepts are currently used and the challenges with applying those concepts. Further, the Board discussed what the intended use of financial statement concepts should be and agreed that they should not be used to replace or override authoritative accounting standards.

The AcSB then discussed the benefits of a potential financial statement concepts modernization project. The Board agreed that financial statement concepts in Parts II and III of the Handbook should be reviewed to ensure they are fit for purpose for Canadian entities. Additionally, the Board agreed that such a project should take a phased approach to identify any areas for improvement.

The AcSB will discuss a project proposal at its June 2024 meeting.

The AcSB discussed a financial statement concepts project proposal for Parts II and III of the CPA Canada Handbook – Accounting. The Board approved the project to include:

• elements (definition of an asset, liability, revenue and net assets);
• recognition;
• measurement;
• presentation and disclosure; and
• unit of account.

The Board directed the staff to prioritize work on the definitions of an asset and liability in conjunction with its ongoing domestic projects.