Accounting
International Financial Reporting Standards (IFRS)
Pronouncements effective for annual periods beginning on or after January 1, 2016
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 measuresubsidiaries 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 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 is 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 that 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
Several standards have been amended as follows:
- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – amendment stating that the same classification, presentation and measurements requirements continue to apply if there is a reclassification from being held for distribution to being held for sale or vice versa.
- 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 Financial Liabilities.
- IAS 19 Employee Benefits – clarification regarding the currency of bonds used in the estimate of the discount rate for post-employment benefit obligations.
- 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 after January 1, 2017
IAS 7 Statement of Cash Flows
Amendments will require entities to provide disclosures that enable
users of financial statements to evaluate changes in liabilities
arising from financing activities, including both changes arising
from cash flows and non-cash changes.
IAS 12 Income Taxes
Amendments clarify how to account for deferred tax assets related
to debt instruments measured at fair value.
Pronouncements effective for annual periods beginning on or after January 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
that was caused by changes in 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 the financial statements. The most
significant improvements apply to those that hedge non-financial
risk, and 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.
Pronouncement effective for annual periods beginning on or after January 1, 2019
IFRS 16 Leases
This new standard replaces IAS 17 Leases. The biggest change
introduced by the new standard is that leases will be brought onto
companies' balance sheets, increasing the visibility of their
assets and liabilities. IFRS 16 removes the classification of
leases as either operating leases or finance leases (for the
lessee—the lease customer), treating all leases as finance
leases. Short-term leases (less than 12 months) and leases of
low-value assets (such as personal computers) are exempt from the
requirements.
Pronouncement with effective date to be determined
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.
These amendments are available for application; however, the previous mandatory effective date of January 1, 2016 has been removed. The reason for postponing the effective date is that the IASB is planning a broader review that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.
Current status of documents previously issued for comment
Insurance Contracts Final standard is expected to be issued by the IASB in 2016. |
Project aimed at improving comparability through a coherent, principles-based framework and one accounting model for all types of insurance contracts and increased transparency. |
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) |
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. |
Reporting the Financial Effects of Rate
Regulation |
This DP considers the common features of rate regulation and explores which of them, if any, create a combination of rights and obligations that is distinguishable from the rights and obligations arising from activities that are not rate-regulated. |
Accounting for Dynamic Risk Management: a Portfolio
Revaluation Approach to Macro Hedging |
The DP explores a possible approach (portfolio revaluation approach) to better reflect dynamic risk management activities in entities' financial statements. |
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 cash-settled share-based payment, classification of share-based payment transactions with net settlement features and accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. |
Classification of Liabilities (Proposed amendments to
IAS 1) |
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. |
Conceptual Framework |
The proposal aims to provide a more complete,
clearer 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. |
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) |
When a defined benefit plan is amended, curtailed or settled during a reporting period, the entity needs to update the 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. |
Clarifications to IFRS 15 |
Clarifications to and transition reliefs for IFRS 15 are proposed, 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:
|
Uncertainty over Income Tax Treatments |
This draft IFRIC Interpretation gives guidance
on how uncertainty over income tax treatments should affect the
accounting for income taxes. This draft Interpretation
addresses:
|
Foreign Currency Transactions and Advance
Consideration |
This draft IFRIC Interpretation addresses which exchange rate should be used to report foreign currency transactions when payment is made or received in advance. |
Applying IFRS 9 Financial Instruments with IFRS 4
Insurance Contracts (Proposed amendments to IFRS 4) |
This ED proposes amendments designed to address the concerns of some interested parties about the different effective dates of IFRS 9 and the forthcoming new Insurance Contracts standard. In order to balance meeting the needs of those stakeholders with the needs of users of financial statements, the IASB has proposed the following amendments to IFRS 4. These proposals supplement existing options within IFRS 4 that could be used to address any accounting volatility that may arise:
|
Annual Improvements 2014-2016 Cycle |
This ED proposes the following amendments:
|
Application of Materiality to Financial Statements -
Draft IFRS Practice Statement |
This draft guidance has been developed in
response to concerns that management is often uncertain about how
to apply the concept of materiality and therefore uses the
disclosure requirements in the Standards as a checklist. This can
result in excessive disclosure of immaterial information that can
obscure useful information and also make financial statements
cluttered and less understandable. It can also lead to useful
information being left out. |
Transfers of Investment Property (Proposed amendment to
IAS 40) |
Proposed amendment clarifies the guidance on transfers to, or from, investment properties. Proposed amendment states that a transfer of property to, or from, investment property can only be done where there is a change in use supported by evidence. In addition, the list of examples of evidence that a change in use has occurred is re-characterized as non-exhaustive. |
Questions?
Here are some resources that will assist in the application of the standards.
CPA Canada Reporting Alerts for IFRS
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: IFRS 16 Leases – March 2016
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)
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 that 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 or 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.
2015 Annual Improvements
Several standards have been amended as follows:
- 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 3061 – wording modification to align the text with how the requirements are being applied in practice.
- Amendment to Section 3462 – the amendments clarify when an enterprise can use a funding valuation and add a decision tree for determining eligibility for using that funding valuation.
Current status of documents previously issued for comment
Redeemable Preferred Shares 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. |
Subsidiaries and Investments
Amendments to Section 1591, Subsidiaries and Section 3051, Investments. ED issued by the AcSB in September 2015. Comment period closed on January 6, 2016. Currently in deliberations. |
Amendments will clarify the accounting for a subsidiary and an investment subject to significant influence when the cost method is used. As an underlying principle, an interest in a subsidiary should initially be measured on a basis similar to other business combinations. The proposals include the following:
The proposals also include guidance on the subsequent measurement of an interest in a subsidiary. |
Agriculture This Discussion Paper was published by the AcSB in December 2015. Comment period ends on May 19, 2016. |
As a result of a lack of specific authoritative guidance, there is diversity in accounting by private enterprises for biological assets (i.e., living animals or plants) and agricultural produce (i.e., the harvested product of the enterprise's biological assets). This Discussion Paper aims to obtain broad input from stakeholders, in particular, those involved in the agricultural sector. This input will assist the AcSB in deciding whether to develop authoritative guidance, either by developing a new standard or amending existing standards, on accounting for biological assets and agricultural produce by private enterprises and, if so, the issues to be addressed and how they could be addressed. |
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: 2015 Annual Improvements to ASPE – March 2016
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)
Questions?
Here are some resources that will assist in the application of the standards.
Not-for-Profit Advisory Committee
Established by the AcSB in 2015, the committee's purpose is to
advise the AcSB on maintaining and improving ASNPO and in
identifying the need for non-authoritative guidance about the
standards. The committee makes recommendations to the AcSB but is
not authorized to interpret or provide authoritative guidance.
Click here to access recent meeting notes.
Public Sector Accounting (PSA)
Pronouncements effective for fiscal years beginning on or after April 1, 2019 (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
tems 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, and 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 of their nature and
extent and the timing.
Pronouncement effective for fiscal years beginning on or after April 1, 2018
Restructuring Transactions, Section PS
3430
This new section defines a restructuring transaction and
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.
Recent publication
Withdrawal of Disclosure of Related Party Transactions
by Not-for-Profit Organizations, Section PS 4260
This ED, issued by PSAB in January 2016, proposes to withdraw
section PS 4260 given the completion of PSAB's Related Party
Transactions project and amend the transitional provisions in
section PS 2200 Related Party Disclosures. Sections PS 2200 and PS
4260 are very similar and while some minor terminology differences
exist, the basic intent of each section is the same.
Comment period ends on April 29, 2016.
Current status of documents previously issued for comment
Retirement Obligations Statement of Principles |
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. |
Revenue Statement of Principles |
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 a sale of goods or services and also cover other forms of revenue that do not involve an exchange, such as fines and penalties. |
Financial Instruments: Transition ED issued by the PSAB in October 2014. |
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. |
Post-Implementation Review: Section PS 3410, Government Transfers Request for Information, issued by PSAB in November 2014. |
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. |
Conceptual Framework Fundamentals and the Reporting Model Consultation Paper 3, issued by the PSAB in March 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.
Click here for Part 2 of this Technical Bulletin.
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.