Accounting Standards Board
Decision Summary
February 3, 2009

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 and www.fasb.org, respectively).

The AcSB noted that:

• a comment letter to the IASB on its Exposure Draft, “Additional Exemptions for First-time Adopters (proposed amendments to IFRS 1),” had been submitted, strongly supporting those proposals;
• the AcSB staff had submitted comment letters to the IASB on its Exposure Drafts, “Embedded Derivatives” and “Investments in Debt Instruments.” AcSB staff supported the proposal in the first Exposure Draft that embedded derivatives should be separated on reclassification of the host contract, but were not convinced of the appropriateness of the timing of separation or by aspects of the proposed transition and effective date. AcSB staff expressed a number of concerns with the proposals in the second Exposure Draft; and
• the AcSB staff had submitted a comment letter on the IASB’s Exposure Draft, “Discontinued Operations (proposed amendments to IFRS 5).” AcSB staff supported the IASB’s objective of working towards a converged definition of a discontinued operation but cited concerns with some of the disclosure requirements, the disclosure exemption for businesses classified as held for sale on acquisition, and possible implications for first-time IFRS adopters.

Economic Environment

The AcSB reviewed recent accounting developments relating to current economic and financial market circumstances, including the initial meeting of the IASB/FASB Financial Crisis Advisory Group and the publication by AcSB staff of a fourth Financial Reporting Commentary dealing with the recent restructuring of non-bank-sponsored asset-backed commercial paper.

The AcSB also decided, in common with the IASB and FASB, not to proceed presently with any proposal to enhance disclosures about impairment of debt securities classified as available for sale, debt securities classified as held to maturity, loans and long-term receivables.

Private Enterprises Strategy

The AcSB substantially completed its discussions of the technical aspects of the proposed GAAP standards for private enterprises, including the new financial instruments standard, subject to any final issues arising on review of the draft text. The AcSB expects to issue its exposure draft of the entire set of proposed standards for private enterprises by March 31, 2009.

The AcSB agreed on the substance of a new standard on financial instruments for private enterprises, after a discussion that focused on impairment of financial assets. The proposed standard would require an entity to review its financial assets at each reporting date for indicators of impairment. Significant assets would be assessed individually, but assets that are individually insignificant could be assessed in groups on the basis of similar credit risk characteristics. An impairment loss would be recognized when the carrying amount of the asset at the assessment date exceeds the highest of:

• the present value of the future cash flows expected from holding the asset;
• the net amount that could be realized from selling the asset; and
• the net amount that could be realized from exercising any rights to collateral.

When there has been an improvement in the factors that previously indicated impairment of an asset, the entity would reverse a previously recognized loss. The carrying amount of the asset would be increased to an amount no greater than the amount at which it would have been measured if there had been no impairment.

The AcSB discussed transition issues related to the proposed standards for private enterprises. The AcSB concluded that a standard corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, should be developed, providing for retrospective application of the new standards to comparative figures for prior periods with limited exceptions.

Publicly Accountable Enterprises Strategy

The AcSB continued to consider a draft Introduction for the Handbook, which will address the application of Canadian GAAP by various categories of entities following implementation of the AcSB’s Strategic Plan. The AcSB tentatively agreed that a publicly accountable enterprise choosing to adopt IFRSs before the mandatory changeover date should adopt IFRSs in its first annual financial statements, unless the enterprise is required or elects to present an interim financial statement in accordance with IFRSs. The AcSB expects to issue the draft Introduction for public comment in the first quarter of 2009, as part of its second omnibus exposure draft of IFRSs.

The AcSB reconfirmed its previous decision not to amend current Canadian GAAP standards to maintain convergence with certain changes recently made or proposed by the IASB and FASB. Corresponding changes will come into effect in Canada as part of the changeover to IFRSs. The AcSB recognized that delays in adopting globally accepted requirements would not be sustainable beyond 2011, but were necessary in the short term to facilitate the transition.

Consolidated Financial Statements

The AcSB discussed the IASB’s Exposure Draft ED 10, “Consolidated Financial Statements.” AcSB members considered the proposed single model, based on control, to be a promising improvement compared to existing consolidation standards. The AcSB noted that staff has arranged a roundtable on February 19, 2009 to discuss the application of the consolidation proposals in Canada. In addition, AcSB staff are consulting with persons familiar with complex reporting structures in Canada and with AcSB advisory committees. The discussions will assist the AcSB in developing an informed comment letter to the IASB.

The AcSB also noted the publication of its Exposure Draft proposing that the final IASB consolidation standard be incorporated into Canadian GAAP as part of the adoption of IFRSs by publicly accountable enterprises in 2011, rather than beforehand.

Although the AcSB has concluded that it will consider separately whether to adopt the new consolidation standard for application to private enterprises and not-for-profit organizations, the AcSB encourages all entities to evaluate the proposals and provide comments. Comments on the IASB Exposure Draft are due by March 20, 2009 and on the AcSB Exposure Draft by April 20, 2009.

Emerging Issues Committee (EIC) Agenda Issues

The AcSB approved the addition of an issue to the EIC agenda to consider modifying EIC-142, Revenue Arrangements with Multiple Deliverables, in light of changes being made to FASB EITF 00-21, Revenue Arrangements with Multiple Deliverables.

International Accounting Standards Committee Foundation’s (IASCF) Constitution Review

The AcSB discussed aspects of the IASCF's Invitation to Comment as input to a response letter expected to be submitted to the IASCF by the Accounting Standards Oversight Council.