Asset-backed Commercial Paper
On February 2, 2009, AcSB staff issued a commentary “ Non-bank-sponsored Asset-backed Commercial Paper: Implementing the Restructuring Plan,” to provide companies with guidance on how to apply financial instrument accounting requirements and report to investors on their holdings of asset-backed commercial paper.
- On June 30, 2009, AcSB Staff withdrew three financial reporting commentaries that provided guidance to help companies apply GAAP requirements when dealing with this country’s own liquidity environment because the commentaries referred to US guidance that has been replaced. The commentaries withdrawn were:
- “Non-bank-sponsored Asset-backed Commercial Paper: Estimating Fair Value,” issued April 18, 2008
- “Non-bank-sponsored Asset-backed Commercial Paper: Year end Reporting Issues,” issued January 18, 2008
- “Non-bank-sponsored Asset-backed Commercial Paper,” issued October 29, 2007
Determining Fair Values in Inactive Markets
AcSB Staff Commentary
On November 21, 2008, AcSB staff issued a financial reporting commentary on “Estimating Fair Value of Financial Instruments in Inactive Markets,” much of which is drawn from the previous commentaries on Asset-backed Commercial Paper, as well as US and IASB clarifications discussed below.
IASB Expert Advisory Panel
In response to the April 2008 report from the Financial Stability Forum to the G7 group of Finance Ministers and Central Bank Governors making recommendations for Enhancing Market and Institutional Resilience, the IASB created an Expert Advisory Panel. The Expert Advisory Panel, consisting of preparers and users of financial statements, as well as regulators and auditors, is to assist the IASB in reviewing best practices in the area of valuation techniques, and formulating any necessary additional guidance on valuation methods for financial instruments and related disclosures when markets are no longer active.
On October 31, 2008, the IASB’s Expert Advisory Panel published educational guidance on “Measuring and Disclosing the Fair Value of Financial Instruments in Markets that Are No Longer Active.” The document provides non-authoritative guidance about the processes used, and the judgments made, when measuring and disclosing fair values for entities applying IFRSs.
Clarifications from SEC’s Office of the Chief Accountant and FASB Staff
On September 30, 2008, the US Securities and Exchange Commission’s (SEC’s) Office of the Chief Accountant and the staff of the Financial Accounting Standards Board (FASB) issued “Clarifications on Fair Value Accounting.” The FASB followed up, on October 10, 2008, by issuing a FASB Staff Position No. 157-3 to clarify the application of its Statement of Financial Accounting Standards No. 157, Fair Value Measurements, in respect of several of the same matters. AcSB staff has reviewed those clarifications and considers them consistent with Canadian accounting standards on financial instruments, just as IASB staff considers them consistent with equivalent IFRSs.
AcSB Media Release
On October 2, 2008, the AcSB Chair, Paul Cherry, issued a statement on fair value accounting to reinforce that those clarifications issued by SEC’s Office of the Chief Accountant and the staff of the FASB on fair value accounting are consistent with Canadian accounting standards.
Reclassification of Financial Assets
On October 24, 2008, the AcSB issued a typescript of amendments to Sections 3855, Financial Instruments — Recognition and Measurement, and 3862, Financial Instruments — Disclosures. The amendments, now included in the Handbook, are similar to those that the International Accounting Standards Board (IASB) made on October 13, 2008 to corresponding provisions in IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7, Financial Instruments: Disclosures, modified only to reflect pre-existing differences between Canadian standards and IFRSs. The amendments allow reclassification of financial assets in specified circumstances. They are being made to ensure consistency of Canadian standards with International Financial Reporting Standards (IFRSs) and US GAAP.
These amendments are effective for reclassifications made on or after July 1, 2008, but only for periods for which annual or interim financial statements have not been issued previously.
Disclosures about Fair Value Measurements and Liquidity Risk
The IASB has issued the final amendments, Improving Disclosures about Financial Instruments, Amendments to IFRS 7 Financial Instruments: Disclosures, in March 2009. These amendments enhance disclosures about fair value measurements and the liquidity risk of financial instruments. The AcSB has approved the adoption of these amendments into Section 3862, Financial Instruments — Disclosures (and also the version of IFRS 7 to be incorporated into the Handbook later this year as part of the AcSB’s IFRS adoption strategy). For more information click here.
- Transfer of Financial Assets and Consolidation
The FASB has issued: - amendments to its Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, and Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” intended to improve disclosures about credit derivatives;
- an Exposure Draft proposing amendments to its Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FAS 140), intended to improve disclosures about transfers of financial assets (including through securitization transactions);
- an Exposure Draft proposing amendments to the guidance contained in Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (FIN 46(R)), for determining whether an enterprise must consolidate a special purpose entity (SPE), including those previously considered qualifying SPEs; and
- an Exposure Draft proposing amendments to FAS 140 and FIN 46(R) to require public entities to provide additional disclosures about transfers of financial assets, and their involvement with variable interest entities, respectively, in order to improve disclosures in both areas until the pending amendments to FAS 140 and FIN 46(R) are effective.
In July 2008, the AcSB decided that it will not amend Accounting Guidelines AcG-12, Transfers of Receivables, or AcG-15, Consolidation of Variable Interest Entities, should the FASB proceed with the proposed revisions of its FAS 140 and FIN 46(R). 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.
- As part of its response to current market conditions, the IASB’s consolidation project is to develop a single IFRS on consolidation to replace IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation — Special Purposes Entities, by:
- revising the control definition in order to apply the same control criteria to all entities with the focus on, but not be limited to, the consolidation of structured entities, and
- enhancing disclosures about consolidated and non-consolidated entities, including enhancing disclosures about the nature of and risks associated with an entity’s involvement with structured entities that it does not control.
The IASB published an Exposure Draft of its consolidation proposals in December 2008. The comment deadline was March 20, 2009. These proposals will not immediately be converged with US GAAP. The AcSB has issued similar proposals in Canada.
Derecognition of Financial Assets
Jointly with the FASB, the IASB has a project on derecognition of financial assets. The objective of the project is to identify an approach that improves existing standards on derecognition and is more consistent with the concepts of financial reporting. The IASB has also accelerated this work and issued an Exposure Draft (rather than a Discussion Paper) in March 2009 for comment by July 31, 2009.
This could be significant to the Canadian changeover because of the substantial differences between North American and IFRS standards on this topic. AcSB staff is monitoring developments closely, with a view to updating the AcSB in more detail at the appropriate time. It is possible that a faster-track solution to derecognition could make life easier for the Canadian changeover to IFRSs, avoiding a possible double change, depending on the exact timing of finalizing new standards in this area.
Financial Instruments
The IASB has commenced a project to replace IAS 39, Financial Instruments: Recognition and Measurement. Details about that project can be found here.
Related Information
AcSOC Media Release
On November 11, 2008, Canada’s Accounting Standards Oversight Council (AcSOC) issued a media release endorsing the recent actions by the AcSB to address the challenges faced by the current turmoil in the financial markets.
SEC Report on Mark-to-Market Accounting
On December 30, 2008, the US Securities and Exchange Commission issued its report to Congress on Mark-to-Market Accounting.
IASB/FASB Financial Crisis Advisory Group
On December 30, 2008, The IASB and FASB announced the membership of the Financial Crisis Advisory Group (FCAG). The FCAG is the high-level advisory group set up by the boards to consider financial reporting issues arising from the global financial crisis.
Contact Information
Questions or comments should be directed to:
Rebecca Villmann, CA
Principal, Accounting Standards
Telephone: +1 (416) 204-3464
Fax: +1 (416) 204-3412
Canadian Accounting Standards Board
277 Wellington Street West
Toronto ON M5V 3H2 Canada
