agreed that the additional work wasn’t appropriate, so the definition was changed to
align with IFRS.
We also expect two major changes to ASPE
to be issued in the third quarter of 2014 that
will be effective for fiscal years beginning on
or after January 1, 2016. One pertains to
subsidiaries and the other to accounting for
joint arrangements.
When we first introduced ASPE, we recognized that Accounting Guideline AcG-15,
“Consolidation of Variable Interest Entities,”
was complex and difficult to apply. AcG-15
just did not meet the cost/benefit test for
private enterprises, so we committed to replace it. We are doing this with new Section
1591, “Subsidiaries.” This carries forward
the current Section 1590 and incorporates
new guidance on identifying entities that are
controlled by means other than voting
rights. ASPE does not require private enterprises to consolidate subsidiaries, but we
think this new standard will benefit those
that wish to do so.
The other major change relates to accounting
for joint arrangements. We were concerned
that the current level of free choice is too extensive and could cause an interest in a joint
arrangement to be accounted for in a way
that does not provide clear information. For
example, under the current standard, an interest in a joint arrangement that, in substance,
reflects interests in individual assets and
liabilities could be accounted for by using the
equity method, which would not show the
liabilities. New Section 3056, “Joint Arrangements,” will, therefore, restrict the accounting
choices, and will require investors in jointlycontrolled assets and operations to account
for their interest in the individual assets and
liabilities.
At the same time, the new standard will likely
see most investments in jointly-controlled
enterprises accounted for using the equity or
cost method, unless the entity decides to do
additional analysis. If the facts provided by
the additional analysis support it, an interest
in a jointly-controlled enterprise may actually
provide an interest in the individual assets
and liabilities—and companies will have the
option to account for those as such.
One other major project relates to agriculture—an area that currently does not have a
standard to support its accounting needs.
“Different perspectives are important to the standardsetting process. I hope that my preparer’s perspective is
bringing more focus to potential difficulties when it
comes to applying the standards, including disclosure
implications. At the same time, it is critical to carry on
my predecessor’s mandate to ensure that the technical
aspects of each project the AcSB undertakes are sound.
“I’m excited to have the opportunity to lead the AcSB.
In particular, I greatly enjoy my interactions with
stakeholders to help ensure the standards we set are
the best they can be.”
Agriculture is also an example of a topic on
which the AcSB’s current thinking differs
from IFRS, as the latter requires biological
assets to be measured at fair value. A discussion
paper on agriculture is currently being developed, so stayed tuned.
In addition to major projects, the AcSB
issues annual improvements each year. These
are small changes to clarify the standards or
address unintended consequences. The 2014
improvements will be issued this fall. While
they are not required to be adopted until
2015, they may be helpful in preparing 2014
financial statements.
Reviewing accounting standards
for not-for-profits
There was a lot of activity regarding not-forprofit accounting standards last year, and there’s
much more to come. Standards for not-forprofit organizations (NFPOs) include the notfor-profit sections from previous Canadian
GAAP (now Part V of the CPA Canada
Handbook – Accounting). These NFPO standards are now in Part III of the Handbook. To
the extent that these standards do not address
reporting topics, an NFPO applies the standards in Part II.
Following the issuance of the Part III standards, we developed a statement of principles
(SOP) jointly with the Public Sector Accounting Board (PSAB) that addresses topics such
as contributions, controlled entities, capital
assets, and expense disclosures. This was issued
for public comment in 2013, and during the
comment period, we held extensive consultations t