The Accounting Standards Oversight Council (AcSOC) discussed the activities of the Public Sector Accounting Board (PSAB), the Accounting Standards Board (AcSB), and related matters.
At its virtual meeting held on February 11-12, 2021, AcSOC received presentations on, and discussed the following:
- Chair’s Opening Remarks
- PSAB Chair’s Report
- PSAB’s Draft 2021-2022 Annual Plan
- PSAB’s Terms of Reference and Statement of Operating Procedures
- AcSB Chair’s Report
- AcSB’s Draft 2021-2022 Annual Plan
- Monitoring Group Presentation
- Approval of AcSOC Minutes
Chair’s Opening Remarks
AcSOC Chair Miville Tremblay welcomed all attendees, including AcSB members Michel Charbonneau and Nancy Anderson.
PSAB Chair’s Report
Recent Activities
PSAB Chair Clyde MacLellan updated AcSOC on recent Board activities, including strategies, key files, public interest considerations, and governance and operations matters.
PSAB Key Strategies
International Strategy
At its meeting on May 5, 2020, PSAB voted to adopt Option 2 – Adapt International Public Sector Accounting Standards (IPSAS) principles when developing future standards as outlined in Consultation Paper 2, “Reviewing PSAB’s Approach to International Public Sector Accounting Standards.” The Board reviewed all feedback from its stakeholders and its Strategic Advisory Group. In June 2020, the Board publicly shared the decision on its website and, released an In Brief document explaining the decision. The Board approved the Basis for Conclusions and released in September 2020.
At its September 2020 meeting, PSAB reviewed and approved the Criteria for Modifying and Reviewing IPSAS Principles in preparation for the April 1, 2021, implementation date. Mr. MacLellan also highlighted that the Board has updated its due process documents to reflect the International Strategy decision, including updating the Board’s Terms of Reference, Due Process Procedures, and Due Process Manual, which have been presented to AcSOC for approval.
Conceptual Framework/Reporting Model
Mr. MacLellan said that on January 11, 2021, PSAB issued the following Exposure Drafts for public comment with a 120-day comment period:
He noted that these documents share interrelated concepts and principles. The Board also issued plain-language support material to assist stakeholders in navigating these documents.
Government Not-for-Profit Project
Mr. MacLellan informed AcSOC that PSAB issued its Government Not-for-Profit Strategy Consultation Paper II on January 11, 2021, with a 120-day comment period. The accompanying In Brief document provides a plain and simple overview of the Consultation Paper. He added that the Board released Consultation Paper II and the Conceptual Framework and Reporting Model at the same time to encourage stakeholders to read the documents together. The Conceptual Framework and Reporting Model contains proposals addressing some of the issues GNFP organizations raised. Comments on Consultation Paper II are due on May 12, 2021.
Strategic Plan
Mr. MacLellan reminded AcSOC that PSAB voted to defer issuing its upcoming Strategic Plan by one year due to the COVID-19 pandemic. The Board made this decision as a result of the significant pressures stakeholders face and its need to reassess its proposed strategic themes considering the uncertainty brought on by the pandemic. The Board also agreed to extend the timeline of its current 2017-2021 Strategic Plan by one year through a Notice of Intent statement posted on its website.
In the fall of 2020, a revised plan was tabled for PSAB input. The Board expects to release its Draft Strategic Plan in the spring of 2021, with a 150-day comment period.
Key Files
Employment Benefits
At its meeting on December 10, 2020, staff presented PSAB with a draft version of an exposure draft on employment benefits. The Board provided feedback to staff. The Board expects to approve the exposure draft at its meeting in March 2021.
Public Private Partnerships
Mr. MacLellan reminded AcSOC that PSAB transitioned its existing Public Private Partnership Task Force into a Group of Experts to facilitate approval of the final standard by December 2020. At its meeting on December 9, 2020, the Board approved Section PS 3160, Public Private Partnerships, the accompanying Basis for Conclusions, and the resulting consequential amendments. The Board expects to issue the standard in the PSA Handbook in April 2021. The effective date is for fiscal years beginning on or after April1, 2023, with early adoption encouraged.
Financial Instruments/ Foreign Exchange
Mr. MacLellan reminded AcSOC that on April 27, 2020, PSAB approved three narrow-scope amendments addressing specific issues the Canadian Council of Comptrollers raised. The Board agreed to pursue the development of additional narrow-scope amendments to address the following topics:
- presentation amendments on the fair value of derivatives; and
- foreign exchange amendments to expand the accounting treatment provided to the federal government to other public sector entities.
- Accounting for rate-setting transactions.
PSAB reviewed and approved two exposure drafts related to the presentation amendments on the fair value of derivatives and foreign exchange amendments to expand the accounting treatment provided to the federal government to other public sector entities.
The Exposure Drafts “Financial Instruments: Presentation Narrow-scope Amendments,” and “Financial Instruments: Foreign Exchange Narrow-scope Amendments,” were released in July 2020, each with a 90-day comment period. After a review of stakeholder feedback, the Board approved these narrow-scope amendments in December 2020.
PSAB is working on the third planned exposure draft on rate-setting transactions. The Financial Instruments Advisory Group will review this document, which the Board plans to issue in the summer of 2021. The Board expects to issue these amendments in the PSA Handbook prior to the effective date of April 1, 2022.
Public Interest Considerations
Public Sector Accounting Discussion Group
The Public Sector Accounting Discussion Group’s meeting on November 20, 2020, was livestreamed with simultaneous French translation. The Group discussed two issues related to the classification of government organizations as government not-for-profit organizations that could affect their financial reporting framework.
Consultation Paper on Sustainability Reporting
Mr. Maclellan noted that at its meeting on December 11, 2020, PSAB approved a response letter to the International Financial Reporting Standards (IFRS)® Foundation Trustees’ Consultation Paper on Sustainability Reporting. The letter indicated that the public sector should be considered in any initiative to set global sustainability reporting standards.
Governance and Operations
PSAB is currently hiring two principal positions, with a focus on bilingual candidates. The Board staff are also using project management software to improve operational efficiencies.
Compliance with Due Process
Mr. MacLellan reported there were no reportable departures from due process nor were there any unusual events in the application of due process for the reported period.
PSAB’s Draft 2021-2022 Annual Plan
AcSOC received PSAB’s 2021-2022 Annual Plan. Council members provided the Board Chair and the Director with their comments for the Board’s consideration.
Performance Review Committee Chair Tom Linsmeier informed AcSOC that the Committee reviewed PSAB’s 2021-2022 Annual Plan at its meeting on February 8, 2021. The Committee agreed that the Annual Plan would be the basis to assess the Board’s performance for the year ended March 31, 2022.
Mr. Linsmeier said the Performance Review Committee will conduct an offline fatal-flaw review of PSAB’ Annual Plan in mid-March 2021. The Board will consider comments from the Committee and AcSOC as it finalizes the Annual Plan prior to its publication in the spring of 2021.
PSAB’s Terms of Reference and Statement of Operating Procedures
AcSOC reviewed PSAB’s revised Terms of Reference, Due Process Procedures, and Due Process Manual, which have all been updated to reflect the Board’s International Strategy decision.
AcSOC members provided the PSAB Chair and the Director with their feedback and approved the Board’s revised Terms of Reference, Statement of Operating Procedures, and Due Process Manual.
AcSB Chair’s Report
Recent Activities
AcSB Chair Linda Mezon-Hutter briefed AcSOC on the impact of COVID-19 on the Board. She also commented on the Board’s recent activities related to its international work, its domestic projects, and its compliance with due process.
Impact of COVID-19
AcSB continues to monitor the COVID-19 pandemic closely to determine how to best respond and operate in this environment. The Board is focusing its discussions on ensuring stakeholders’ needs are addressed.
International Activities
The AcSB undertakes various activities to support Canadian preparers and auditors in implementing standards and addressing emerging accounting topics in practice.
At its meeting on December 17, 2020, the IFRS® Discussion Group discussed various requirements related to COVID-19 that may impact an entity’s year-end financial reporting in 2020. This included discussion related to:
- significant judgments and estimates;
- going concern and liquidity;
- impairment assessment of non-financial assets and financial assets;
- fair value measurements; and
- various disclosure topics.
On goodwill and impairment, the International Accounting Standards Board’s (IASB) Discussion Paper, “Business Combinations – Disclosures Goodwill and Impairment,” aims to improve disclosures of acquisitions and improve the accounting for goodwill. Ms. Mezon-Hutter added that this Discussion Paper will be relevant to many Canadian stakeholders as business combinations and goodwill are widespread throughout multiple industries across Canada. In December 2020, the AcSB responded to the IASB Discussion Paper expressing overall support for the IASB’s proposals.
With regards to Sustainability Reporting, the AcSB responded to the IFRS Foundation Trustees’ Consultation Paper Sustainability Reporting, which sets out possible ways the Foundation may contribute to developing global sustainability standards. The Board supported the Consultation Paper’s direction due to the urgent need for comparable sustainability reporting and noted the Foundation is uniquely positioned to play a role given its structure and current relationships with stakeholders.
On the Post-implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, Ms. Mezon noted that these IFRS Standards have been effective in Canada for annual reporting periods beginning on or after January 1, 2013. Consistent with the IASB’s due process, it is now time for the post-implementation review of these standards. As part of the first phase of this review, the IASB published a Request for Information seeking feedback to assess how the requirements affected the information provided to users of financial statements, preparers, and auditors of IFRS 10, IFRS 11, and IFRS 12. At its meeting on January 12, 2021, the Board discussed and approved a plan to respond to the Request for Information by the due date of May 10, 2021.
Domestic Activities
Ms. Mezon-Hutter reminded AcSOC that the AcSB considers the accounting for cloud computing arrangements a priority project with the two main issues to consider:
- the customers’ accounting for fees paid in a cloud computing arrangement; and
- the accounting for the related implementation costs.
When it met on December 16, 2020, the Board considered feedback from its Private Enterprise Advisory Committee and its Not-for-Profit Advisory Committee on the accounting treatment of various expenditures an entity might incur to implement a cloud computing arrangement. In the coming months, Board staff will analyze further the accounting for cloud computing arrangements to help inform the Board on whether standard-setting activity is needed.
The AcSB issued the Exposure Draft, “2021 Annual Improvements to Accounting Standards for Private Enterprises and Accounting Standards for Not-for-Profit Organizations,” on October 15, 2020, with comments due by December 14, 2020. The Board deliberated the feedback at its meeting on January 20, 2021, and plans to issue the final amendments in April 2021.
On the Combinations project, Ms. Mezon reminded AcSOC that the AcSB issued the Exposure Draft “Combinations – Initial Measurement and Related Disclosures,” in January 2020, with a 90-day comment period. In light of the COVID-19 pandemic, the Board extended the comment period deadline from April 14, 2020, to May 14, 2020. The Board deliberated the feedback at its meetings on July 15, 2020, and September 9, 2020, and concluded its deliberations at its meeting on October 27, 2020. The Board plans to issue the final standard in March 2021.
Compliance with Due Process
AcSOC members were advised by Ms. Mezon-Hutter that there were no reportable departures from due process nor were there any unusual events in the application of due process that arose during the October 1, 2020, to December 31, 2020, period.
AcSB’s Draft 2021-2022 Annual Plan
2020-2021 Interim Performance Report
Ms. Mezon-Hutter informed AcSOC that, despite the challenges the COVID-19 pandemic presented, the AcSB demonstrated resilience and focus. The Board acted quickly to support its stakeholders in response to the impacts of the pandemic by adapting its activities to its stakeholders’ evolving needs while achieving the main objectives of its 2020-2021 Annual Plan.
In discussing some of AcSB’s challenges, she noted that Accounting Standards is understaffed by one principal, a role that was not filled during CPA Canada’s 2020 hiring freeze. This role is expected to be filled when the principal returns from maternity leave in May 2021.
The Performance Review Committee met with the AcSB on February 9, 2021, to discuss the Board’s interim Performance Report
2021-2022 Draft Annual Plan
AcSOC received the AcSB’s Draft 2021-2022 Annual Plan. Council members provided the Board Chair and the Director with their comments for the Board’s consideration.
Mr. Linsmeier informed AcSOC that the Performance Review Committee reviewed the AcSB’s Draft 2021-2022 Annual Plan and agreed it would provide a basis for the Committee to assess the Board’s performance for the year ended March 31, 2022.
The Performance Review Committee will conduct an offline fatal-flaw review of the AcSB’ Draft Annual Plan in mid-March 2021. The Board will consider comments from the Committee and AcSOC as it finalizes its 2021-2022 Annual Plan before publication on April 1, 2021.
Monitoring Group Presentation
Stephenie Fox, Senior Vice-President of Standards for Financial Reporting and Assurance Standards Canada, provided AcSOC with an update on the Monitoring Group’s developments. She noted that in November 2017, the Group developed a public consultation to address perceptions related to the public interest, stakeholder confidence, and the timeliness of standard setting. The Monitoring Group received a total of 179 responses to this Consultation Paper. After carefully considering and analyzing the feedback, the Group issued its final report, Strengthening the International Audit and Ethics Standard-Setting System. In addition to proposals related to the purpose, structure, and process of standard setting, the report makes recommendations on public interest oversight, funding, and transition.
The Monitoring Group is working with stakeholders to develop a transition plan to implement its recommendations. This will result in changes in international audit and ethics standard setting.
Ms. Fox informed AcSOC that the Auditing and Assurance Standards Oversight Council (AASOC) has done a preliminary review of the Monitoring Group's recommendations and the potential impacts on the Auditing and Assurance Standards Board in Canada. However, AASOC ultimately believes these recommendations cannot be considered in isolation of the other Canadian standard-setting boards. Therefore, it is important AcSOC be aware of the report and its recommendations and consider the impact this report may have on the standard-setting ecosystem.
Approval of AcSOC Minutes
AcSOC approved the minutes of the meeting held on October 29-30, 2020.
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The Accounting Standards Oversight Council (AcSOC) is an independent, volunteer body established by the Canadian Institute of Chartered Accountants (CICA)* in 2000. It serves the public interest by overseeing and providing input on the activities of the Accounting Standards Board (AcSB), which sets financial reporting standards for profit-oriented enterprises and not-for-profit organizations, and the Public Sector Accounting Board (PSAB), which sets financial reporting standards for governments and their organizations. AcSOC’s responsibilities include appointing the AcSOC, AcSB and PSAB members. Reporting to the public and made up of representatives that include regulators, investors and other users, preparers, and auditors of financial reports, AcSOC brings a broad perspective to complex issues facing standard setters in both the private and public sectors.
*The CICA, CGA Canada and CMA Canada have since consolidated under the CPA Canada banner as the profession’s national body.