Accounting Standards Board
Decision Summary
May 5, 2010

International Activities

Consolidation — Investment Company Exemption
The IASB decided, in February 2010, that an investment company should be exempted from the requirement to consolidate investments in entities it controls and should account for those investments at fair value. In April 2010, the IASB decided on the criteria for an entity to qualify as an investment company. The IASB is expected to complete its deliberations and approve the exposure draft of the investment company exemption in its May 17-20, 2010 meetings. The IASB will also consider providing an exemption in IFRS 1 First-time Adoption of International Financial Reporting Standards to permit an investment company that is a first-time adopter to report controlled investees at fair value in accordance with its previous GAAP, pending completion of the new consolidations standard. The IFRS 1 exemption will be exposed separately from the investment company exemption and is expected to be finalized in the fourth quarter of 2010.

Various Canadian stakeholders, including regulators and those from the investment and insurance industries, have raised concerns about the implications of the IASB’s project plan for Canada’s transition to IFRSs. The IASB has decided that investment companies should account for investments in controlled investees at fair value, subject to comments received on exposure, but the standards may not be revised before the current mandatory adoption date by Canadian publicly accountable enterprises. An investment company would then be required to consolidate controlled investees under existing IAS 27 Consolidated and Separate Financial Statements. To provide for the contingency that IFRSs are not revised in time, the AcSB has decided to take action to keep Canadian investment companies from having to change their current accounting treatment for controlled investees while the IASB completes its standards.

The AcSB has decided to propose that entities currently applying Accounting Guideline AcG-18, Investment Companies, can continue to apply existing Canadian standards in Part V of the CICA Handbook – Accounting until fiscal years beginning on or after January 1, 2012, although earlier application would be permitted.

By permitting early adoption, the AcSB’s proposal would allow an investment company unaffected by the consolidation of controlled investees to adopt IFRSs in Part I of the CICA Handbook – Accounting for 2011 as originally planned. Other investment companies would also be able to adopt IFRSs for 2011 if either the proposed IFRS 1 exemption or the new IFRS on consolidated financial statements is issued before the company’s first 2011 interim financial statements are released.

The AcSB will expose the proposed amendment shortly.

Liabilities – Improving IAS 37
The AcSB approved a comment letter to the IASB on its working draft of the new standard “Liabilities” that is to replace IAS 37 Provisions, Contingent Liabilities and Contingent Assets and includes the IASB’s Exposure Draft “Measurement of Liabilities in IAS 37.” The AcSB noted that there has been significant debate amongst stakeholders about the implications of the recognition requirements in the case of legal disputes and the inclusion of a profit margin when measuring obligations an entity will fulfill by performing a service. To address these concerns, the AcSB’s recommendations to the IASB will include revising the proposals by:

• adding a “more likely than not” threshold when an entity is determining the existence of a present obligation; and
• requiring obligations that will be fulfilled by performing a service to be measured at the expected present value of the resources the entity expects to expend.

The AcSB also recommends that if the IASB cannot complete this project expeditiously, it should defer the project and focus on developing and issuing high-quality standards in its projects that are part of the Memorandum of Understanding with the US Financial Accounting Standards Board.

Forthcoming IASB Exposure Drafts
The AcSB discussed exposure drafts the IASB expects to issue in the next few months on the following topics:

• Consolidation — investment company exemption
• Derecognition
• Financial instruments with characteristics of equity
• Financial statement presentation — replacement of IAS 1 and IAS 7
• Leases
• Insurance contracts
• Revenue recognition

The AcSB decided that, for each topic:

• it should issue an exposure draft reflecting the IASB’s proposals, following their release; and
• the staff should develop a response to the IASB’s exposure draft, after meeting with relevant committees of the AcSB, consulting with expert individuals or groups and, when appropriate, holding public roundtables to learn the views of stakeholders.  

AcSB Stakeholder Surveys

The AcSB discussed the results of surveys of its stakeholders and volunteers for 2009-2010. Those results will be reported to the Accounting Standards Oversight Council as part of its review of the AcSB’s performance.

AcSB Strategic Plan 2011-2014

The AcSB discussed an initial draft of a new strategic plan for 2011-2014 and agreed to submit it to the Accounting Standards Oversight Council's June 3-4, 2010 meeting for the Council's input. An exposure draft of the plan will be issued for public comment after the AcSB has considered the Accounting Standards Oversight Council’s input.

Financial Instruments

The AcSB discussed the development of its response to the IASB Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.” The AcSB decided that, rather than focusing on the details of the proposals, it should highlight its main concern that the IASB and the FASB are not fulfilling their objective of developing a single global standard for financial instruments that reduces the complexity in current standards and produces financial statements that are more easily understood.

Not-for-Profit Organizations Strategy

The AcSB discussed plans for the second phase of implementing its strategy for future financial reporting by not-for-profit organizations, subject to the responses to its current Exposure Draft.  Subject to a similar conclusion being reached by the Public Sector Accounting Board, the AcSB decided to form a joint task force with that Board that would develop recommendations for revised standards to meet the needs of not-for-profit organizations in both the private and public sectors.