Accounting Standards Board
Decision Summary
September 6-7, 2006

International Activities
The AcSB received reports on recent meetings of the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) (see www.iasb.org.uk and www.fasb.org, respectively). The AcSB noted that the IASB has added new projects to its agenda for leases, employee benefits and related party disclosures.

The AcSB also received reports on:

• a meeting in London between the AcSB Chair and Director of Accounting Standards, and the IASB Chairman and senior technical staff to discuss matters associated with Canada’s adoption of International Financial Reporting Standards (IFRSs) for publicly accountable enterprises; and
• the inaugural meeting of the AcSB’s IFRS Advisory Committee.

Private Business Strategy

The AcSB discussed summaries of the process followed in the investigation of the financial information needs of users of private company financial statements, and the results of the investigation.

The AcSB agreed that any further investigation was unlikely to result in significantly different views from those already obtained.

The AcSB noted that the IASB is close to completing an exposure draft of its proposed standard for small and medium-sized enterprises. The proposed standard will require careful study as a potential basis for financial reporting by private enterprises, as well as to provide comments to the IASB.

The AcSB considered possible next steps in carrying out its strategy for non-publicly accountable enterprises. No decisions were made. A number of issues were raised for further investigation by staff. The AcSB will continue to discuss possible courses of action at its next meeting.

Financial Instruments

Fees and Costs on Exchange or Modifications of Financial Liabilities
The AcSB agreed to amend Section 3855, Financial Instruments — Recognition and Measurement, to require that:

• when an exchange of debt instruments or modification of terms is accounted for as an extinguishment in accordance with paragraph 3855.50:
  • any fees be recognized as part of the gain or loss on the extinguishment; and
  • the entity adopt an accounting policy of either:
    

    —	recognizing any costs in net income; or
    —	adding any costs to the carrying amount of the new financial liability and amortizing them over its expected life;

• when an exchange or modification is not accounted for as an extinguishment and the liability is classified as held for trading, all fees and costs be recognized in net income for the period; and
• when an exchange or modification is not accounted for as an extinguishment and the liability is classified as other than held for trading:
  • any fees be added to the carrying amount of the modified financial liability and amortized over its remaining expected life; and
  • the entity adopt an accounting policy of either:
    

    —	recognizing any costs in net income; or
    —	adding any costs to the carrying amount of the modified financial liability and amortizing them over its remaining expected life.

In each case in which an entity makes an accounting policy choice, it applies its policy consistently to all similar transactions. The AcSB expects to issue these amendments in a Board Notice before the end of September 2006.

Hedges — Transition
The AcSB continued deliberating proposed amendments to the transitional provisions of Section 3865, Hedges. The AcSB expects to finalize the amendments and issue them in a Board Notice before the end of September 2006. The amendments will be effective immediately upon issuance.

Measurement Objectives

The AcSB discussed a summary of the comment letters received in response to the Discussion Paper, “Measurement Bases for Financial Accounting — Measurement on Initial Recognition,” prepared by staff and published by the IASB. Staff will present these constituents’ views on the Discussion Paper to the IASB and FASB on September 21 and 27, 2006, respectively (see the IASB’s Comment Letter Summary.

Conceptual Framework

The AcSB discussed the IASB and FASB Discussion Paper, “Preliminary Views on an Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information,” and noted matters that should be raised in responding to the Discussion Paper. To obtain additional views, staff will discuss the Discussion Paper with the AcSB’s Academic Advisory Council and User Advisory Council before developing a comment letter to the IASB and FASB.

Constituents are encouraged to share their views on the Discussion Paper with the IASB and FASB (see IASB Documents for Comment). The comment period ends November 3, 2006

Income Trusts

The AcSB noted that many income trusts currently do not make the disclosures about cash distributions that are specified in Cash Flow Statements, paragraph 1540.55. The AcSB agreed to consider whether it could clarify its disclosure requirements.

Employee Future Benefits

The AcSB considered a proposal to report the funded status of a company's post-retirement defined benefit plan on the balance sheet and to measure plan assets and obligations at the balance sheet date. This proposal converges with a similar FASB proposal. The AcSB plans to continue discussing this proposal at its October 2006 meeting.

Joint Ventures

The AcSB agreed to undertake a project to converge Canadian GAAP with an amended version of IAS 31, Interests in Joint Ventures, to be proposed by the IASB. The IASB proposal will require a change to the equity method of accounting for interests in jointly controlled entities from the currently required proportionate consolidated method. The IASB proposals will also address the difference between an interest in a jointly controlled entity, and a direct interest in the underlying individual assets and liabilities of a joint arrangement. The accounting for direct interests will not change.

The AcSB’s exposure draft is expected to be issued as soon as possible after the IASB’s exposure draft, which is expected in the fourth quarter of 2006 or the first quarter of 2007.