Accounting Standards Board
Decision Summary
May 11, 2005
This summary of Accounting Standards Board (AcSB) decisions has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussion on projects, which may change after further deliberations by the AcSB. Decisions to publish Handbook material are final only after a formal ballot process.
For more detailed information on AcSB projects, please refer to the project summaries under Projects, which will be updated within the month following an AcSB meeting. |
Asset Retirement Obligations
The AcSB decided not to amend Section 3110, Asset Retirement Obligations, as a result of the issuance of FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, as these two standards are not significantly different. The AcSB proposed that the EIC consider whether any additional guidance is necessary.
Deferral of Costs and Internally Developed Intangible Assets
The AcSB continued its discussion on internally developed intangible assets not addressed by other Handbook Sections. The scope of the project entails:
- amending Section 1000, Financial Statement Concepts, to eliminate paragraphs that might justify the recognition of items that do not meet the definition of financial statement elements;
- amending Section 3062, Goodwill and Other Intangible Assets, to include guidance for recognizing internally developed intangible assets based on criteria consistent with Section 3450, Research and Development Costs; and
- superseding EIC-27, Revenue and Expenditures during the Pre-operating Period.
These amendments would bring Canadian accounting requirements for start-up and similar costs substantially in line with both US GAAP and International Financial Reporting Standards. |
Disclosure Framework
The AcSB continued its development of a framework for determining the type of information to be included in financial statement note disclosures.
Financial Instruments
The AcSB discussed the recent decision by the IASB to modify IAS 39, Financial Instruments: Recognition and Measurement, to further specify the circumstances in which an entity may choose to designate a financial instrument, upon initial recognition as one to be measured at fair value with gains and losses in profit and loss (the fair value option). The AcSB decided to include similar material in the Basis for Conclusions to Section 3855, Financial Instruments — Recognition and Measurement, to illustrate the types of circumstances in which the fair value option might be used, but not to modify the Section to establish additional limitations on the circumstances in which the fair value option may be used.
The AcSB expects to commence work shortly to improve financial instrument disclosure requirements in Section 3861, Financial Instruments – Disclosure and Presentation in light of enhanced disclosure requirements expected to be forthcoming in IFRS 7, Financial Instruments: Disclosures. The AcSB expects that improved disclosures will include those related to the fair value measurement option that have not already been included in Section 3861. The AcSB also expects to commence work on a project on fair value measurement.
Income Taxes
The AcSB discussed recent decisions reached by the IASB and FASB in their short term convergence project on income taxes and the effect on Section 3465, Income Taxes. The AcSB decided to investigate the effect of changing the recognition of dividend refunds on investment income to the point at which an obligation is incurred to pay a dividend, rather than when the investment income is earned. The staff will continue to monitor decisions made in the IASB/FASB convergence project and bring those to the attention of the board.
The AcSB agreed to remove the exceptions for the recognition of:
- future income taxes created on inter-company transfers of inventory or other non-monetary assets remaining within the group;
- future taxes for taxable temporary difference on investments in domestic subsidiaries and investments in domestic joint ventures arising between the carrying amount of the investment and the tax basis of the investment when that difference will not reverse itself in the foreseeable future; and
- future income tax balances when foreign non-monetary assets are remeasured from local currency into the functional currency using historical exchange rates.
The AcSB also agreed to adopt those provisions of FASB Statement No.109, Accounting for Income Taxes, for intraperiod allocations when the original transaction giving rise to a tax asset or liability occurs in a period other than the current period. |
Issues Arising from Nortel’s Restatements
The AcSB considered whether there was a need to undertake any work in light of Nortel’s restatements. This matter is to be discussed by the Accounting Standards Oversight Council at its meeting in June. The AcSB will not make any decisions on this matter until it has had the opportunity to consider the views of the Oversight Council.
Measurement Objectives
The AcSB continued its development of a research discussion paper on measuring asset impairments.
Revenue Recognition
The AcSB received an update of the joint FASB/IASB revenue project and considered possible short-term convergence issues. The AcSB decided that no amendments to Section 3400, Revenue, are appropriate pending further progress on the joint project. It will refer the application of the percentage of completion method of accounting for long term contracts to the Emerging Issues Committee as a potential topic for clarification.
Stock-Based Compensation and Other Stock-Based Payments
The AcSB decided not to modify Section 3870, Stock-Based Compensation and Other Stock-Based Payments, at this time to harmonize it with FASB Statement No. 123R, Share-Based Payment for the measurement of awards that call for settlement in cash. The AcSB reiterated its intention to converge Section 3870 with corresponding FASB and IASB standards when they have been completely converged.
The AcSB decided to consider the classification of financial instruments resulting from stock-based compensation awards as liabilities or equity, in light of the withdrawal of Abstract EIC-71, Financial Instruments That May be Settled at the Issuer’s Option in Cash or its Own Equity Instruments.
Strategic Planning
The AcSB commenced discussion of matters arising from the proposed strategies in its Draft Strategic Plan, including:
- an identification of important issues that would need to be addressed in implementing the proposed strategies;
- the effects of the strategies on the AcSB’s current work program; and
- measures to be taken to improve familiarity with International Financial Reporting Standards in Canada.
These discussions will continue in future meetings. |
User Advisory Council
The AcSB considered matters raised in the recent meeting of its User Advisory Council.
International Activities
The AcSB received reports on recent meetings of the IASB and FASB (see www.iasb.org.uk and www.fasb.org, respectively). In particular, the AcSB noted that:
- the US Securities and Exchange Commission had issued a press release following a meeting between SEC Chairman William Donaldson and EU Internal Market Commissioner Charlie McCreevy, in which Mr. Donaldson reaffirmed his support for the convergence programme between the IASB and the FASB and set out a ‘roadmap’ for elimination of IFRS/US GAAP reconciliations by 2009; and
- the Committee of European Securities Regulators had published draft technical advice on the equivalence of Canadian, Japanese and US GAAP with IFRS. The draft technical advice finds Canadian, Japanese and US GAAP, taken as a whole, to be equivalent to IFRS, subject to some additional disclosures. Comments are requested by May 27, 2005.
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