Accounting Standards Board
Decision Summary
July 16-17, 2008

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 was informed that the IASB had approved IFRIC 15, Agreements for the Construction of Real Estate, and IFRIC 16, Hedges of a Net Investment in a Foreign Operation.

The AcSB noted that the IASC Foundation Trustees approved revisions to the first part of the Constitution Review proposals and agreed to publish the proposals for public comment with a comment deadline of September 20, 2008. The proposals include the expansion of the IASB by two members, to 16, with a revised geographic representation, and also the creation of a monitoring group to oversee the activities of the Trustees.

Publicly Accountable Enterprises Strategy

IASB Work Plan
The AcSB discussed the IASB work program as at June 30, 2008 (available at www.iasb.org ) and the projected timing of completion of active IASB projects relative to the date of changeover to IFRSs for Canadian publicly accountable enterprises. The AcSB:

• observed that, for many of the expected changes to IFRSs, the change from existing Canadian GAAP to the new IFRS would not be significant due to the relative similarity between the two; and
• confirmed that none of the amendments to the IASB work program would affect the changeover date or the AcSB’s decision to adopt IFRSs in full and without modification.

The AcSB noted that the IASB plans to issue several IFRSs in 2010 and 2011. The AcSB expects the mandatory effective date of these IFRSs to be no earlier than for annual periods beginning on or after January 1, 2012, in the case of standards issued in 2010, and for annual periods beginning on or after January 1, 2013, in the case of IFRSs issued in 2011. Accordingly, a Canadian enterprise would not be required to adopt these IFRSs on changeover. However, if the IASB permits their early adoption, it might elect to adopt them beforehand, in order to avoid two potential changes to its accounting policies — one at the changeover date and another at the effective date of the new IFRSs.

The AcSB asked staff to prepare a document to communicate to stakeholders the staff’s best estimates of when forthcoming IFRSs are expected to be published and effective. The document will also summarize expected changes to accounting requirements on those topics at changeover to IFRSs and subsequent adoption of new IFRSs, and whether two changes in accounting policies could be expected if an enterprise does not elect early adoption. The document would also identify those IFRSs not expected to change before the IFRS changeover date. The AcSB asked staff to update this document regularly once it has been published.

The AcSB will continue to monitor closely the IASB’s progress with its projects planned for completion close to the Canadian IFRS changeover date to identify any potential difficulties that might arise relative to the adoption of IFRSs by Canadian enterprises.

Second Omnibus Exposure Draft of IFRSs
The AcSB agreed to issue a second omnibus Exposure Draft of IFRSs in follow up to its April 2008 omnibus Exposure Draft, Adopting IFRSs in Canada (comments due by July 31, 2008). Among other things, this second omnibus Exposure Draft will expose all changes (with the exception of minor editorial corrections) made by the IASB to the IFRSs contained in the IASB’s 2007 Bound Volume, and deal with any carryforward items from the first omnibus Exposure Draft. The AcSB currently expects to issue the second omnibus Exposure Draft in the fall of 2008, with a view to incorporating the IFRSs exposed in both omnibus Exposure Drafts into the Handbook no earlier than the second quarter of 2009. The AcSB understands that some entities would like to adopt the new standards in 2009, and intends to complete its due process expeditiously.

Accounting Implications of Credit Risk

The AcSB discussed proposals and projects recently announced by the IASB and the FASB seeking to improve the stability of global markets for financial instruments subject to credit and liquidity risks. These include FASB proposals to:

• change the derecognition model for assets transferred in a securitization (FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities), including elimination of the “qualifying special purpose entity” concept;
• concurrently change the consolidation model for special purpose entities (FASB Interpretation 46R, Consolidation of Variable Interest Entities); and
• increase disclosures about:

  —	consolidation decisions, particularly those associated with securitization programs; and
  —	credit derivatives and guarantees used by program sponsors.

The AcSB also discussed IASB projects to:

• accelerate changes to the consolidation model (IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation — Special Purpose Entities);
• reconsider the derecognition model (IAS 39, Financial Instruments: Recognition and Measurement); and
• enhance disclosures about consolidations and fair value measurement.

The AcSB noted that the IASB has established an expert advisory group to provide guidance on the fair value measurement of illiquid financial instruments.

The AcSB agreed that the issues of greatest concern in Canada are those that affect investors holding illiquid asset-backed commercial paper (ABCP) in measuring the value of their assets, in particular as those securities are expected to be restructured. The AcSB will ensure that guidance is provided to Canadians on the fair value measurement of illiquid ABCP. This guidance will take into account the results of the various IASB and FASB initiatives listed above, and will be developed in consultation with securities and financial institution regulators, investors, preparers and auditors. The AcSB also intends to monitor the progress and status of IASB and FASB disclosure projects, undertaking a detailed comparison of new IASB and FASB requirements to Canadian GAAP to ensure Canadian standards are consistent with international best practice in providing information to financial statement users.

The AcSB decided that it will not amend AcG-12, Transfers of Receivables, or AcG-15, Consolidation of Variable Interest Entities, should the FASB proceed with the proposed revisions of its Statement 140 and Interpretation 46R. The AcSB concluded that amending its corresponding standards would not significantly improve the accounting treatment of financial instrument transactions in Canadian markets, particularly ABCP, in the short term. This decision reflects the AcSB’s concern that any action it takes to meet the needs of investors should not divert resources away from initiatives by Canadian enterprises to adopt IFRSs in 2011.

Financial Reporting by Private Enterprises

The AcSB discussed progress by the Private Enterprises Advisory Committee in developing a standalone set of standards for this sector.

EIC Abstracts
The AcSB decided that principles in EIC Abstracts that are relevant to this sector will be incorporated into the standards for private enterprises but the Abstracts will not be retained separately as primary sources of GAAP. This decision is consistent with the withdrawal of EIC Abstracts for publicly accountable enterprises, on adoption of IFRSs.

Sections and Guidelines to be excluded from the standards
The AcSB reviewed a number of Sections and Guidelines that the Advisory Committee believes should be excluded from the standards for private enterprises, and referred one back to the Committee for further consideration.

Classification of Callable Debt
The AcSB agreed with the Advisory Committee’s proposal not to change the classification of callable debt. The AcSB discussed adding a non-authoritative illustrative example that sets out a presentation of callable debt that would clearly distinguish such debt from other current liabilities.

Selective Application
The AcSB agreed with the tentative conclusion of the Advisory Committee that the standards for private enterprises should provide for a free choice of alternative treatments, in at least some areas. The specific areas for selective application will be evaluated on an issue-by-issue basis.

Timeline
The AcSB was updated with respect to the progress of the Advisory Committee in other areas, including the current expectation of finalizing an exposure draft of the proposed standards for private enterprises in the first quarter of 2009. The Advisory Committee does not expect the final standards to be available in time to be applied in the preparation of an enterprise’s 2008 financial statements. The AcSB noted that the system being developed could be a long-term solution but is expected to have a lifespan of at least 5 years, during which its success can be evaluated.

Insurance

The AcSB received input from its Insurance Accounting Task Force and the Office of the Superintendent of Financial Institutions (OSFI), on the effect of the transition to IFRSs on current Canadian standards on insurance. The AcSB directed staff to consult further with OSFI.

Financial Statement Presentation

The AcSB noted the expected release in September 2008 of an IASB Discussion Paper on Phase B of its joint project with the FASB on financial statement presentation, and the importance of this topic to all reporting entities. The AcSB tentatively agreed on a plan for responding to the Discussion Paper once it has been issued. The AcSB noted its concern over recent reductions in the scope of the project, in particular the decision not to consider further the appropriateness of other comprehensive income and the recycling mechanism.

Not-for-Profit Organizations

The AcSB continued discussions on the future direction for setting accounting standards applicable to not-for-profit organizations. The AcSB considered the relevance of the proposed new set of GAAP standards for private enterprises to many, if not most, not-for-profit organizations. The AcSB continues to encourage not-for-profit organizations to monitor its private enterprise initiative. The AcSB also requested its Not-for-Profit Organizations Advisory Committee to consider further the applicability of IFRSs to not-for-profit organizations, and how that issue should be addressed in the Invitation to Comment on the AcSB’s strategy for setting standards for this sector. The AcSB expects to issue the Invitation to Comment later in 2008.