Emerging Issues Committee
Decision Summary
October 3, 2006

Draft Abstract Approved

D60, Definition of Fees and Costs In Section 3855

The Committee had previously agreed to withdraw the third issue of EIC-88, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments.” This was as a result of the AcSB’s decision to amend Section 3855, Financial Instruments — Recognition and Measurement, to address the treatment of fees and other costs incurred on the exchange or modification of a financial liability (see the October 2, 2006 AcSB Board Notice). The Committee also agreed to add a new issue to EIC-88: the definition of fees and of other costs related to an exchange or modification of a financial liability.

The Committee agreed to issue Draft Abstract D60. It is expected that D60 will be posted on the CICA website for public comment in mid-October.

D62, Accounting for Convertible Debt Instruments

The Committee continued its discussion of a potential Draft Abstract on the accounting for Instruments A and B (as defined in former EIC-158) under Section 3855, Financial Instruments — Recognition and Measurement. Section 3855 significantly affects the accounting for convertible debt instruments. The final Abstract will replace EIC-158 for entities that have adopted Section 3855.

The Committee agreed to issue Draft Abstract D62. It is expected that D62 will be posted on the CICA website for public comment by early November.

Potential Abstracts

D59, Income Taxes Arising from Partnership Income

The Committee considered the comments received on this Draft Abstract and agreed to include additional examples to illustrate the accounting for income taxes when the partnership interest is accounted for by the equity method.

The Committee will consider a revised Draft Abstract at its November 16, 2006 meeting.

Lessor’s Accounting for a Lease Valued at Above or Below Market Rates

The Committee discussed a paper on the above topic. It agreed that the same accounting should apply to all contracts for which the terms are above or below market rates at the date of acquisition and that this should not be industry specific. The Committee will consider the topic further at its November 16, 2006 meeting.

Issues Considered and Added to the EIC Agenda

Accounting Policy Choice for Transaction Costs on Initial Measurement — Paragraph 3855.57

The Committee agreed to add an item to its agenda on whether the accounting policy choice for transaction costs permitted under Financial Instruments — Recognition and Measurement, paragraph 3855.57, should be applied consistently to all of an entity’s financial instruments, or whether an entity could make different choices for different categories of financial instruments.

Customer Loyalty Programs

The Committee agreed to monitor IFRIC Draft Interpretation D20, “Customer Loyalty Programs.” Under a typical customer loyalty program, each time a customer buys a product or service, the customer is also awarded credits that can be redeemed for free or discounted goods or services. The Committee agreed to defer any action on the development of a Canadian version of this interpretation until the IFRIC interpretation is finalized.

Issue Removed from the EIC Agenda.

Identification of an Embedded Derivative

At a previous meeting, the Committee had discussed developing a Draft Abstract on the interpretation of Financial Instruments — Recognition and Measurement, paragraph 3855.36, using gold loans as an example. The Committee discussed this further and decided that the specific issue to be addressed occurred infrequently and did not meet the criteria for adding an item to its agenda.