Emerging Issues Committee
Decision Summary
March 22, 2007

Abstract Approved

EIC-165, Accounting by an Investor upon a Loss of Significant Influence

Draft Abstract D63, “Accounting by an Investor for its Proportionate Share of Accumulated Other Comprehensive Income of an Investee Accounted for Under the Equity Method upon a Loss of Significant Influence” (now EIC-165) was posted on the CICA website January 10, 2007 for public comment by February 9, 2007.

The Committee reviewed the comments received and made minor editorial changes. The Committee also agreed to amend the Basis of Application, which now reads as follows:

“The Committee reached a consensus that the accounting treatment in this Abstract should be applied retrospectively, with restatement of prior periods, to all financial statements for interim and annual reporting periods ending after June 30, 2007. Early adoption is encouraged.”

The Committee approved D63 as a final Abstract. It is expected that EIC-165 will be posted on the CICA website in early April 2007. D63 will remain on the website until EIC-165 is posted.

Potential Abstract

Applicability of Section 3855 for a Pension Plan Governed by Section 4100

Pension plans are required by Section 4100, Pension Plans, to measure their investments at fair value, but Section 4100 does not specifically discuss whether transaction costs might form part of fair value. Pension plans are scoped out of Section 3855, Financial Instruments — Recognition and Measurement, which excludes transaction costs from fair value. The definitions of fair value as per Sections 3855 and 4100 are identical.

The Committee tentatively decided that transaction costs for the acquisition of investments by pension plans are not a component of fair value and do not represent a separate asset that should be recognized in the balance sheet. The Committee also noted that the guidance in Section 3855 on how to determine fair value is relevant to pension plans in measuring financial instruments at fair value in accordance with Section 4100. The Committee will consider a proposed Draft Abstract at its next meeting.

Potential Amendment to Abstract

EIC-119, The Date of Acquisition in a Business Combination

EIC-119 was issued prior to Accounting Guideline AcG-15, Consolidation of Variable Interest Entities. The third issue of EIC-119 concerns the situation when an acquirer has paid for the shares of the acquiree but is prevented from exercising control over some or all of the acquired business pending regulatory approval. The Committee discussed whether, during the period until regulatory approval is received, the acquiree may be a variable interest entity that the acquirer should consolidate as the primary beneficiary. The Committee will continue its discussion at its next meeting.

Abstract to be Withdrawn

EIC-69, Recognition and Measurement of Financial Instruments Presented as Liability or Equity.

The Committee agreed to withdraw this Abstract as guidance is provided in Section 3861, Financial Instruments — Disclosure and Presentation, Section 3863, Financial Instruments — Presentation, and EIC-164, “Convertible and Other Debt Instruments with Embedded Derivatives”. (EIC-69 will remain in the CICA Handbook – Accounting XFI for entities that are not yet applying the new financial instruments standards.)

Issues Removed from the EIC Agenda

Accounting for Cash Payments by a Lessor to a Lessee for Improvements to the Leased Property

Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for a Customer to Receive Service from the Service Provider

Implications of Minority Rights on Whether Control Exists

The Committee discussed the above items in light of the AcSB’s decision to adopt IFRS for publicly accountable enterprises. The Committee noted that IFRS does not currently provide specific guidance on these topics, although the IASB does have current projects on leasing, revenue and consolidation. Abstracts on these issues would therefore have a limited period during which they would be applicable and, to the extent that they were not consistent with IFRS, would result in companies having to make two accounting policy changes between now and 2011. The Committee decided that the benefit of issuing Abstracts on these issues was offset by these considerations and that they should be removed from its agenda. The Committee also noted that in accordance with Section 1100, Generally Accepted Accounting Principles, companies could refer to US GAAP on these issues to the extent it is consistent with primary sources of Canadian GAAP.