CPABC in Focus September/October 2014 | Page 35

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