Accounting
International Financial Reporting Standards (IFRS)
Pronouncement effective for annual periods beginning on or after January 1, 2015
Entities with rate-regulated activities
Mandatory date for first-time adoption of IFRS by entities with
rate-regulated activities - fiscal years beginning on or after
January 1, 2015.
Pronouncements effective for annual periods beginning on or after January 1, 2016
IFRS 10 Consolidated Financial Statements and IAS 28
Investments in Associates and Joint Ventures
These standards were amended to eliminate an inconsistency between
IFRS 10 and IAS 28 in dealing with the sale or contribution of
assets between an investor and its associate or joint venture.
Subsequent to the amendments, a full gain or loss is recognized
when a transaction involves a business (whether it is housed in a
subsidiary or not) and a partial gain or loss is recognized when a
transaction involves assets that do not constitute a business, even
if these assets are housed in a subsidiary.
An Exposure Draft, discussed in the "Recently issued documents for comment" section below, was issued by the IASB in July 2015 proposing to defer the effective date.
IFRS 10 Consolidated Financial Statements, IFRS 12
Disclosure of Interests in Other Entities and IAS 28 Investments in
Associates and Joint Ventures
These standards were amended to clarify the application of the
requirement for investment entities to measure subsidiaries at fair
value instead of consolidating them.
IFRS 11 Joint Arrangements
Amendments add new guidance on how to account for the acquisition
of an interest in a joint operation that constitutes a
business.
IFRS 14 Regulatory Deferral Accounts
This interim standard permits first-time adopters to continue to
recognize amounts related to rate regulation in accordance with
previous GAAP requirements when they adopt IFRS. However, to
enhance comparability with entities that already apply IFRS and do
not recognize such amounts, the standard requires that the effect
of rate regulation must be presented separately from other items.
An entity that already presents IFRS financial statements is not
eligible to apply the Standard. Earlier application is
permitted.
IAS 1 Presentation of Financial
Statements
Amendments are designed to further encourage companies to apply
professional judgement in determining what information to disclose
in their financial statements. For example, the amendments make
clear that materiality applies to the whole of financial statements
and that the inclusion of immaterial information can inhibit the
usefulness of financial disclosures. Furthermore, the amendments
clarify that companies should use professional judgement in
determining where and in what order information is presented in the
financial disclosures.
IAS 16 Property, Plant and Equipment and IAS 38
Intangible Assets
Amendments clarify that the use of revenue-based methods to
calculate the depreciation of an asset are not appropriate because
revenue generated by an activity that includes the use of an asset
generally reflects factors other than the consumption of the
economic benefits embodied in the asset. The IASB also clarified
that revenue is generally presumed to be an inappropriate basis for
measuring the consumption of the economic benefits embodied in an
intangible asset. This presumption, however, can be rebutted in
certain limited circumstances.
IAS 16 Property, Plant and Equipment and IAS 41
Agriculture
These standards were amended to require bearer plants to be
accounted for in the same way as property, plant and equipment in
IAS 16 because their operation is similar to that of manufacturing.
Bearer plants are used solely to grow produce over several periods.
At the end of their productive lives they are usually scrapped.
Once a bearer plant is mature, apart from bearing produce, its
biological transformation is no longer significant in generating
future economic benefits. The only significant future economic
benefits it generates come from the agricultural produce it
creates. The amendments include bearer plants within the scope of
IAS 16 instead of IAS 41. The produce growing on bearer plants will
remain within the scope of IAS 41.
IAS 27 Separate Financial Statements
The standard was amended to allow entities to use the equity method
to account for investments in subsidiaries, joint ventures and
associates in their separate financial statements.
Annual Improvements 2012-2014 Cycle
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IFRS 5 Non-current Assets Held for Sale and Discontinued Operations |
Amendment stating that the same classification, presentation and measurement requirements continue to apply if there is a reclassification from being held for distribution to being held for sale or vice versa. |
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IFRS 7 Financial Instruments: Disclosures |
Clarification regarding servicing contracts and assessment of
'continuing involvement'. Clarification on applicability of
disclosure requirements in amendments to IFRS7 regarding Offsetting
Financial Assets and |
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IAS 19 Employee Benefits |
Clarification regarding the currency of bonds used in the
estimate of the discount rate for post-employment |
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IAS 34 Interim Financial Reporting |
Additional requirement to cross-reference the information disclosed 'elsewhere in the interim financial report' |
Pronouncements effective for annual periods beginning on or afterJanuary 1, 2018
IFRS 15 Revenue from Contracts with
Customers
The core principle of the new standard is for companies to
recognize revenue to depict the transfer of goods or services to
customers in amounts that reflect the consideration to which the
company expects to be entitled in exchange for those goods or
services. The new standard contains enhanced disclosures about
revenue, provides guidance for transactions that were not
previously addressed comprehensively (for example, service revenue
and contract modifications) and improves guidance for
multiple-element arrangements. IFRS 15 supersedes the following
standards: IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13
Customer Loyalty Programmes, IFRIC 15 Agreements for the
Construction of Real Estate, IFRIC 18 Transfers of Assets from
Customers, and SIC-31 Revenue—Barter Transactions Involving
Advertising Services.
IFRS 9 Financial Instruments
This new standard replaces the requirements in IAS 39 Financial
Instruments: Recognition and Measurement for classification and
measurement of financial assets. IFRS 9 is built on a logical,
single classification and measurement approach for financial assets
that reflects the business model in which they are managed and
their cash flow characteristics. IFRS 9 also incorporates
requirements for financial liabilities, most of which were carried
forward unchanged from IAS 39. Certain changes were made to the
fair value option for financial liabilities to address the issue of
own credit risk. IFRS 9 removes the volatility in profit or loss
caused by changes to the credit risk of liabilities elected to be
measured at fair value. Requirements related to hedge accounting,
representing a new hedge accounting model, have been added to IFRS
9. The new model represents a substantial overhaul of hedge
accounting, which will allow entities to better reflect their risk
management activities in financial statements. The most significant
improvements apply to those that hedge non-financial risk, so these
improvements are expected to be of particular interest to
non-financial institutions. In addition, a single, forward-looking
expected loss impairment model is introduced, which will require
more timely recognition of expected credit losses.
Recently issued documents for comment
Effective Date of Amendments to IFRS 10 and IAS
28
The IASB issued this ED in July 2015 to propose deferring
indefinitely the effective date of the amendment issued in
September 2014 to IFRS 10 and IAS 28 relating to the sale or
contribution of assets between an investor and it associate or
joint venture. The proposal to defer the effective date is due to a
research project undertaken by the IASB on the equity method of
accounting.
Comment period ends on October 9, 2015.
Clarifications to IFRS 15
The IASB published the ED in July 2015, proposing clarifications to
and transition reliefs for IFRS 15, stemming from discussions at
meetings of the Transition Resource Group (TRG), which was set up
to support companies in implementing the new revenue standard.
The ED proposes to clarify:
- How to identify the performance obligations in a contract,
- How to determine whether a party involved in a transaction is the principal (responsible for providing the goods or services) or the agent (responsible for arranging for the goods or services to be provided to the customer), and
- How to determine whether a licence provides the customer with a right to access or a right to use the entity's intellectual property.
In addition, the IASB proposes transition relief for:
- Modified contracts (modifications to a contract that occurred before transition to the new standard)
- Completed contracts (for entities electing to use the full retrospective transition method, accounting for a contract completed under previous standards before transition to the new standard)
Comment period ends on October 28, 2015.
Current status of documents previously issued for comment
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Insurance Contracts Final standard is expected to be issued in 2016. |
Project aimed at improving comparability through a coherent, principles-based framework and one accounting model for all types of insurance contracts and increase transparency. |
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Leases |
The objective of the project is to develop a new standard that establishes the principles that entities would apply to report useful information about the amount, timing and uncertainty of cash flows arising from a lease. To meet that objective, a lessee should recognise assets and liabilities arising from a lease. |
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Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments toIAS 12) ED issued by the IASB in August 2014. Currently in deliberations. |
ED clarifies how to account for deferred tax assets related to debt instruments measured at fair value. |
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Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13)
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ED clarifies that an entity should measure the fair value of quoted investments and quoted CGUs as the product of the quoted price for the individual financial instruments that make up the investments held by the entity and the quantity of financial instruments. Currently in deliberations. |
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Reporting the Financial Effects of Rate
Regulation |
This DP considers the common features of rate regulation and explores which of them, if any, creates a combination of rights and obligations that is distinguishable from the rights and obligations arising from activities that are not rate-regulated. |
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Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging Discussion Paper issued by the IASB in April 2014. Currently in deliberations. |
The DP explores a possible approach (portfolio revaluation approach) to better reflect dynamic risk management activities in entities' financial statements. |
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Disclosure Initiative (Proposed amendments to IAS 7) ED issued by the IASB in December 2014. Comment period closed on April 17, 2015. Currently in deliberations. |
Amendments proposed in this ED will require companies to provide a reconciliation between the opening and closing balances of liabilities and assets related to their financing activities and other non-cash changes (such as the effects of foreign exchange and changes in fair values), as well as disclose restrictions that affect management's decisions on how to use cash and cash equivalent balances. |
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Classification and Measurement of Share-based Payment
Transactions (Proposed amendments to IFRS 2) |
The ED addresses the effects of vesting conditions on the
measurement of a |
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Classification of Liabilities (Proposed amendments to IAS 1) ED issued by the IASB in February 2015. Comment period closed on June 10, 2015. Currently in deliberations. |
The goal is to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either current or non-current, specifically clarifying that the classification of a liability as either current or non-current is based on the entity's rights at the end of the reporting period and making clear the link between the settlement of the liability and the outflow of resources from the entity. |
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Conceptual Framework ED published by the IASB in May 2015. Related EDUpdating References to the Conceptual Frameworkwas published by the IASB in May 2015. Comment period for both EDs ends on November 25, 2015. |
The proposal aims to provide a more complete, clear and updated set of concepts that can be used by the IASB when it develops IFRSs and others to help them understand and apply those standards. The Updating References ED aims to provide transition to the revised Conceptual Framework. |
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Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan (Proposed amendments to IAS 19 Employee Benefits and IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements) ED published by the IASB in June 2015. Comment period ends on October 19, 2015. |
When a defined benefit plan is amended, curtailed or settled during a reporting period, the entity needs to update assumptions about its obligation and fair value of its plan assets to calculate costs related to these changes. The proposed amendments to IAS 19 specify that the entity is required to use the updated information to determine current service cost and net interest for the period followed by these changes. The proposed amendments to IFRIC 14 address how the powers of other parties, such as the Trustees of the plan, affect an entity's right to a refund of a surplus from the plan. |
Questions?
Here are some resources that will assist in the application of the standards.
Viewpoints
This series discusses views of the Oil and Gas Task Force and the
Mining Task Force on IFRS application issues relevant to junior oil
and gas companies and junior mining companies, respectively.
Recent issues: Reversal of Impairment Losses (Mining, July 2015) and Decommissioning Liabilities in a Business Combination (Oil & Gas, April 2015), Commodity Prices and Impairment (Oil & Gas, June 2015), Flow-Through Shares (Oil & Gas, May 2015), IFRS 11 and Direct Working Interests (Oil & Gas, May 2015)
IFRS Discussion Group Meeting Topics
Established by the AcSB, the IFRS Discussion Group implements and
maintains a regular public forum to discuss issues that arise in
Canada when applying IFRS. The Financial Reporting & Assurance
Standards Canada website allows for topics and issues discussed by
the IFRS Discussion Group to be searched and sorted. Find out
whether the Group has discussed an issue that you face in applying
IFRSs and get the meeting report extract and audio webcast for
each issue you find.
Accounting Standards for Private Enterprises (ASPE)
Pronouncement effective for annual periods beginning on or after January 1, 2015
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2014 Annual Improvements |
Amendments to Section 3856 to clarify the accounting for a hedging item when a reporting period ends between the date the hedged transaction occurs and the date the hedging item matures and to clarify that disclosure of the carrying amount of impaired financial assets is required for financial assets other than current trade receivables. |
Pronouncements effective for annual periods beginning on or after January 1, 2016
Subsidiaries, Section 1591
This new Section, which replaces Section 1590, Subsidiaries and
AcG-15, Consolidation of Variable Interest Entities, requires the
use of judgment to determine when control is obtained through means
other than equity interests. The guidance on accounting for
subsidiaries controlled through equity interests has been brought
forward from the previous standard unchanged.
Investments, Section 3051
This Section has been amended to clarify: investments subject to
significant influence and certain other non-financial instrument
investments are included in the scope of the standard, whereas
other investments (such as subsidiaries and interests in joint
arrangements) are excluded.
Interests in Joint Arrangements, Section
3056
This new standard, which replaces Section 3055,
Interest in Joint Ventures, specifies the accounting by an investor
for an interest in a joint arrangement according to whether it is
an interest in jointly controlled operations, jointly controlled
assets, or a jointly controlled enterprise. The option to account
for all types of joint arrangements using the proportionate
consolidation method, cost method or equity method is
eliminated.
Recent publications
Post-implementation Review: Section 3856, Financial
Instruments
The AcSB issued a Feedback Statement in September 2015 summarizing
the input and feedback received from stakeholders with respect to
the post-implementation review of Section 3856. While there was
overall support for the principles and most of the requirements in
the standard, concerns were raised with respect to:
- Challenges in determining the initial measurement of some financial instruments,
- Scope, initial and subsequent measurement of financial instruments issued between related parties, and
- Usefulness of some risk and uncertainty disclosures.
The AcSB's next steps are to further analyze the feedback and decide if any amendments should be considered.
Subsidiaries and Investments
The AcSB issued this ED in September 2015, proposing to amend
Section 1591, Subsidiaries and Section 3051, Investments, to
clarify the accounting for a subsidiary and an investment subject
to significant influence when the cost method is used. Comment
period ends on January 6, 2016.
Current status of documents previously issued for comment
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Redeemable PreferredShares Issued in a Tax Planning Arrangement Amendment to Section 3856 Financial Instruments; ED issued by the AcSB in October 2014. Currently in deliberations. In the ED, the proposed effective date was fiscal years beginning on or after January 1, 2016. However, due to the time needed to consider issues and comments raised during the comment period, the AcSB has decided that the effective date of any such change will be no earlier than January 1, 2018. |
Amendment to remove the current exemption of classifying redeemable preferred shares issued in a tax planning arrangement as equity resulting in such shares being presented as liabilities, which would be more consistent with other financial liabilities. |
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2015 Annual Improvements The amendments are expected to be issued in Q4 of 2015 and be effective for years beginning on or after January 1, 2016. |
Amendment to Section 1582 - clarification that disclosure of the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed (which is required when the subsidiary is consolidated) should also be required when a business combination is achieved through the acquisition of an asset or group of assets. Amendments to Sections 3051 and 3065 - clarification that disclosure of the amount of any impairment loss or reversal of a previously recognized impairment loss is required. Amendment to Section 3462 - clarification that the option to use a funding valuation can only be applied by entities that have at least one funded defined benefit plan. |
Questions?
Here are some resources that will assist in the application of the standards.
CPA Canada Reporting Alerts for ASPE
CPA Canada issues Reporting Alerts aimed at assisting companies in
determining the impact of new and revised standards on their
business. Reporting Alerts provide a summary of the standard,
highlight significant items, summarize key changes and address
common questions. The following alert has recently been issued: Section 1591, Subsidiaries.
Private Enterprise Advisory Committee
Established by the AcSB in 2010, the Committee assists the AcSB in
maintaining and improving accounting standards for private
enterprises and advises on the need for non-authoritative guidance
about the standards. At the request of the AcSB, the Committee may
also undertake research into the financial reporting needs of
private enterprises.
Click here to access recent meeting notes.
Accounting Standards for Not-for-Profit Organizations (ASNPO)
In the works...
What's next for accounting standards for private
sector not-for-profit organizations?
"Improvements to Not-for-Profit Standards" Statement of
Principles was issued by the AcSB and PSAB in April 2013,
presenting key principles that each Board expects to include in
future exposure drafts, aimed at revising ASNPO and PSA Handbook in
order to improve the existing standards for financial reporting by
not-for-profit organizations (NFPOs). Since then, the AcSB has
considered the feedback and reaffirmed its commitment to
continue:
- to maintain a separate set of standards for private sector not-for-profit organizations that addresses transactions and circumstances unique to such organizations;
- with the improvements process to review the standards in Part III of the Handbook and update the standards as necessary; and
- to work with PSAB, with the objective of achieving consistency between private and public sector standards for not-for-profit organizations when appropriate.
In May 2015, the AcSB approved the creation of a standing not-for-profit advisory committee to assist the AcSB with its standards improvements initiatives, as well as provide input on other standard-setting matters of interest to private sector not-for-profit organizations.
The AcSB also approved several projects to address all of the principles relating to private sector standards that were proposed in the Statement of Principles, with the first ED expected to be issued in 2016.
Public Sector Accounting (PSA)
Pronouncements effective for fiscal years beginning on or after April 1, 2016 (except for government organizations that applied CICA Handbook – Accounting prior to adoption of the CICA Public Sector Accounting Handbook, for which these pronouncements apply to fiscal years beginning on or after April 1, 2012)
Financial Statement Presentation, Section PS
1201
This section revises and replaces Financial Statement Presentation,
Section PS 1200. The new standard introduces a new statement for
reporting of remeasurement gains and losses.
Foreign Currency Translation, Section PS
2601
This section revises and replaces Foreign Currency Translations,
Section PS 2600. Definition of currency risk is aligned with the
new Financial Instruments Section, PS 3450. The new standard also
removes certain previously available exceptions to measurement of
items on initial recognition. The deferral and amortization of
foreign exchange gains and losses relating to long-term foreign
currency denominated monetary items, hedge accounting and
presentation of items as synthetic instruments are removed. In
addition, the new statement of remeasurement gains and losses
introduced in Section PS 1201 is used to reflect exchange gains and
losses until the period of settlement, rather than reflecting them
in the statement of operations.
Portfolio Investments, Section PS 3041
This section replaces Section PS 3040, Portfolio Investments. In
addition, Section PS 3030 is withdrawn as the distinction between
temporary and portfolio investments is removed with the issue of
Section PS 3041. The scope in the new standard is expanded to
include interests in pooled investment funds, while requirement for
application of cost method is removed. The new standard is also
aligned with the new Financial Instrument Section, PS 3450.
Financial Instruments, Section PS 3450
This new Section establishes standards for recognizing and
measuring financial assets, financial liabilities and non-financial
derivatives. The standard introduces two measurement categories:
fair value and cost or amortized cost. The statement of
remeasurement gains and losses will reflect gains and losses
arising on fair value remeasurement until an item is derecognized.
The standard also introduces new disclosure requirements of items
reported and the nature and extent of risks arising from financial
instruments.
Pronouncements effective for fiscal years beginning on or after April 1, 2017
Related Party Disclosures, Section PS
2200
This new Section defines a related party and establishes
disclosures required for related party transactions. Disclosure of
information about related party transactions and the relationship
underlying them is required when they have occurred at a value
different from that which would have been arrived at if the parties
were unrelated, and they have, or could have, a material financial
effect on the financial statements.
Inter-entity Transactions, Section PS
3420
This new Section establishes standards on how to account for and
report transactions between public sector entities that comprise a
government's reporting entity from both a provider and
recipient perspective.
Assets, Section PS 3210
This new Section provides guidance for applying the definition of
assets set out in Section PS 1000, and establishes general
disclosure standards for assets. Disclosure of information about
the major categories of assets that are not recognized is required.
When an asset is not recognized because a reasonable estimate of
the amount involved cannot be made, the reason(s) for this should
be disclosed.
Contingent assets, Section PS 3320
This new Section defines and establishes disclosure standards on
contingent assets. Disclosure of information about contingent
assets is required when the occurrence of the confirming future
event is likely.
Contractual rights, Section PS 3380
This new Section defines and establishes disclosure standards on
contractual rights. Disclosure of information about contractual
rights is required including description about their nature and
extent and the timing.
Pronouncements effective for fiscal years beginning on or after April 1, 2018
Restructuring transactions, Section PS
3430
This new Section defines a restructuring transaction as well as
establishes standards for recognizing and measuring assets and
liabilities transferred in a restructuring transaction. The main
features of the new Section are:
- A restructuring transaction is a transfer of an integrated set of assets and/or liabilities, together with related program or operating responsibilities without consideration based primarily on the fair value of the individual assets and individual liabilities transferred.
- The net effect of a restructuring transaction should be recognized as revenue or as an expense by entities involved.
- A recipient should recognize individual assets and liabilities received in a restructuring transaction at their carrying amount with applicable adjustments at the restructuring date.
- A transferor and a recipient should not restate their financial position or results of operations.
- A transferor and a recipient should disclose sufficient information to enable users to assess the nature and financial effects of a restructuring transaction on their financial position and operations.
Current status of documents previously issued for comment
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Retirement Obligations Statement of Principles Issued by PSAB in August 2014. Currently in deliberations. Exposure draft expected in Q2 of 2016. |
Subject to comments received, the PSAB proposes to expose a proposed new section on retirement obligations associated with tangible capital assets controlled by a public sector entity. |
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Revenue Statement of Principles Issued by the PSAB in August 2013. Currently in deliberations. ED to be issued in Q2 of 2016. |
PSAB proposes, subject to comments received, to expose a new Section on revenue. The Statement of Principles proposes definitions and principles applying to a broad range of revenues public sector entities report on. The proposals apply to exchange transactions involving the sale of goods or services and also cover other forms of revenue that do not involve an exchange, such as fines and penalties. |
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Improvements to Not-for-Profit Standards Statement of Principles Issued by the AcSB and PSAB in April 2013. |
Presents key principles that each Board expects to include in future exposure drafts, aimed at revising ASNPO and PSA Handbook, including the PS 4200 series of Sections, in order to improve the existing standards for financial reporting by not-for-profit organizations (NFPOs). |
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Financial Instruments: Transition ED issued by the PSAB in October 2014. Comment period closed on January 15, 2015. Currently in deliberations. Final amendments to be issued in Q4 2015. |
Proposes to clarify aspects of the Section's scope of application, specifically, the receivables and payables that the Section does not apply to, and add transitional provisions and new guidance relating to certain specialized forms of agreements. |
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Post-Implementation Review: Section PS 3410, Government Transfers Request for Information, issued by PSAB in November 2014. Comment period closed on May 15, 2015. Currently in deliberations. |
Now that stakeholders have had an opportunity to work through the issues related to Section PS 3410, PSAB is looking for comments on how those issues were dealt. Undertaking this post-implementation review will help PSAB assess any implementation challenges encountered by stakeholders, and the nature, extent and cause of any ongoing issues. |
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Conceptual Framework Fundamentals and theReporting Model Consultation Paper 3, issued by the PSAB in March 2015. Comment period ended on August 31, 2015. |
Proposes a new reporting model and draft principles on public sector characteristics, financial statement objectives, qualitative characteristics, elements, recognition, measurement and presentation. |
PSA Discussion Group Meeting Topics
Established by the PSAB, the PSA Discussion Group provides a public
forum for discussion of issues arising on the application of the
PSA Handbook. Summaries of topics and discussions from past meetings are available on the Financial
Reporting & Assurance Standards Canada website.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
