Accounting Standards Board
Decision Summary
December 5-6, 2007

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). In particular, the AcSB noted the following:

• The AcSB’s Insurance Accounting Task Force had submitted a response to the IASB’s Discussion Paper, “Preliminary Views on Insurance Contracts.” Task Force members responded favourably to many of the preliminary views expressed by the IASB and generally supported the approach proposed in the Discussion Paper.
• Staff had submitted a response to the IASB’s Exposure Draft, “IFRS for Small and Medium-sized Entities (SMEs).” The response did not express a view on the overall suitability of the proposals for SMEs in Canada, but did provide information to the IASB on the results of the AcSB’s research and consultations with stakeholders.
• The FASB has issued a revised standard on business combinations and a new standard on non-controlling interests (FAS 141(R) and FAS 160, respectively). Both standards are effective for financial years beginning after December 15, 2008. The AcSB intends to converge with the IASB’s counterpart standards, which are substantially converged with those of the FASB, once they are issued.

Publicly Accountable Enterprises Strategy

Existing Canadian standards to be retained after the changeover to International Financial Reporting Standards (IFRSs)
The AcSB discussed standards that could be candidates for retention after the adoption of IFRSs into Canadian GAAP. The AcSB agreed that its standards on insurance contracts and guidance on the meaning of “substantively enacted” with regard to income taxes should be assessed to determine if there are any conflicts with IFRSs. Subject to any modifications required to avoid conflicts with IFRSs, the AcSB tentatively agreed that the standards on insurance contracts will be retained in the Handbook until replaced by the standard currently being developed by the IASB. Staff noted that a review of all EIC Abstracts is being undertaken to determine if any issues should be referred to the International Financial Reporting Interpretations Committee, or whether any other Abstracts should be retained in the Handbook. The AcSB requested that staff discuss with the Canadian Securities Administrators and with staff of the Auditing and Assurance Standards Board whether there is any reason to retain Section 4250, Future-Oriented Financial Information, beyond the changeover date.

Disclosure requirements of Section 1506 and their application to the transition to IFRSs
The AcSB has agreed that it will issue an “omnibus” exposure draft of the standards in the 2007 IFRS bound volume. Once the AcSB due process relating to this exposure draft is complete, those standards will become part of Canadian GAAP for publicly accountable enterprises, but not effective until some time after their issuance. Section 1506, Accounting Changes, requires disclosure of the effect of any new primary source of GAAP that is issued but not yet effective. The AcSB tentatively agreed that the requirements of paragraphs 1506.30-.31 are not meant to apply to a complete change in GAAP and therefore will not apply to the IFRSs being incorporated into Canadian GAAP through the omnibus exposure draft process.

Preamble to “omnibus” exposure draft of IFRSs
The AcSB considered a preliminary draft of the preamble to the “omnibus” exposure draft of IFRSs and confirmed its intention to issue this exposure draft for public comment in Canada in the first quarter of 2008. In addition to exposing the majority of the IFRSs to be adopted as Canadian GAAP, the omnibus exposure draft will provide information on key aspects of the changeover process.

Expected application of IFRS 1 on Canadian changeover to IFRSs
The AcSB discussed the exemptions and exceptions from retrospective application in IFRS 1, First-time Adoption of International Financial Reporting Standards, and assessed whether they need to be modified and whether additional exemptions or exceptions are necessary.

The AcSB noted that some of the IFRS 1 exemptions and exceptions provide relief from retrospective application prior to a specified date. The benefit of this relief can be significantly reduced if the specified date is several years before the transition to IFRSs. This issue arises with, for example, share-based payments and derecognition of financial assets and financial liabilities. The AcSB agreed to ask the IASB to modify IFRS 1 to replace the specific date with a reference to a date close to the date on which IFRSs are adopted.

The AcSB noted that full cost oil and gas companies face unique difficulties in adopting IFRSs and that an industry group is developing a proposal for consideration by the IASB to modify IFRS 1 to address those difficulties.

The AcSB stressed the importance of receiving input as soon as possible from Canadian constituents on anticipated transitional issues in moving from current Canadian standards to IFRSs (i.e., in sufficient time for the IASB to consider possible changes to IFRS 1). In early 2008, the AcSB expects to share Canadian concerns with other national standard setters adopting IFRSs, in order to determine whether they share these concerns, and then propose amendments to IFRS 1 to the IASB.

IASB Annual Improvements
The AcSB discussed the IASB’s “Exposure Draft of Proposes Improvements to IFRSs,” and agreed that no corresponding changes should be made to Canadian GAAP prior to the Canadian IFRS changeover date. The AcSB noted that the IASB’s proposed amendment to IAS 17, Leases, will, if finalized, create a significant new Canadian GAAP/IFRS difference in that, in accordance with IFRSs, it would no longer be as easy for a lease of land on which title is not expected to pass to the lessee by the end of the lease term to qualify as an operating lease.

Private Enterprises Strategy

The AcSB commenced discussion of responses to the Invitation to Comment (ITC) on Financial Reporting by Private Enterprises. The AcSB affirmed its tentative conclusion that it should not adopt a size test excluding any private enterprise from applying the standards to be developed for the sector. The AcSB also decided that the same fundamental accounting principles should be applied to private and publicly accountable enterprises.

The AcSB will continue discussion of the ITC responses at subsequent meetings.

Emerging Issues Committee (EIC)

The AcSB discussed further its tentative decision regarding the winding up of the EIC, following consultations with AcSOC and other parties. The AcSB decided to defer any decision on this until discussions on the strategies for private companies and not-for-profit organizations are further advanced. In the interim, the AcSB decided that decisions to add an issue to the EIC agenda should be approved by the AcSB.

The AcSB also agreed to consider at a future meeting whether to establish a new forum for the discussion of financial reporting issues arising from the application of IFRSs and, if so, what form it should take.

Planning

The AcSB began discussion of an annual plan for its operating year commencing April 1, 2008. The AcSB will continue the discussion in its January 3, 2008 meeting to develop a draft plan for review by the Accounting Standards Oversight Council.