International Activities

The AcSB considered 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 that the IASB has issued an Exposure Draft proposing to amend International Financial Reporting Standard IAS 23, Borrowing Costs, to require an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.  The option of immediately recognizing those borrowing costs as an expense would be removed.  Comments are requested by September 29, 2006. Also released for public comment by the IASC Foundation was a consultation document, "Due Process of the International Financial Reporting Interpretations Committee."  Comments are requested on that document by September 30, 2006.

Conceptual Framework

The AcSB received an update on the IASB/FASB project to develop a converged and updated conceptual framework.  The IASB and the FASB will shortly issue a "preliminary views" document, "Conceptual Framework for Financial Reporting: Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information," for a 120-day comment period. Preliminary views document are used to solicit comment on the preliminary views of the Boards, and are then followed by exposure drafts.  The AcSB decided to encourage Canadian constituents to participate in the IASB comment process.

To adopt a converged conceptual framework in Canada, the AcSB will develop an exposure draft based on the IASB exposure draft.  The AcSB will solicit comments on whether any additional guidance is required for common Canadian transactions or other events that have not been addressed in the IASB proposals.

The AcSB decided to continue monitoring the deliberations of the IASB/FASB Conceptual Framework Project and to provide comments as appropriate.

Private Business Reporting

The AcSB discussed a status report on research conducted to date regarding the financial reporting needs of users of private company financial statements.  The AcSB also discussed planned research regarding user needs and provided input regarding the process for soliciting views on this topic.  The AcSB did not consider possible conclusions to be drawn from the research findings to date pending the completion of the remainder of the planned research. The AcSB directed staff to investigate further in a number of areas, and identified additional perspectives that should be sought.

Financial Instruments

The AcSB considered possible clarifications to recently issued Sections 3855, Financial Instruments — Recognition and Measurement, and 3865, Hedges. The AcSB decided the following:

• To issue a proposal on the accounting for fees and costs incurred in conjunction with the exchange of a debt instrument or the modification of its terms. The AcSB proposes that when an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any fees incurred are recognized as part of the gain or loss on the extinguishment. When the exchange or modification is not accounted for as an extinguishment, any fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability. The entity should adopt an accounting policy for costs other than fees of either:
  

  —	recognizing them in net income; or
  —	adding costs directly applicable to the modification to the carrying amount of the financial liability.

• To amend the transition requirements of Section 3865 by way of a Board Notice, to clarify the AcSB's intent regarding gains and losses on cash flow hedges previously deferred or not previously recognized.  The accounting for a cash flow hedging relationship entered into prior to transition will be consistent with that for a new cash flow hedging relationship, provided the relationship meets the conditions of Section 3865 as at the transition date.
• To amend Section 3865, by way of a Board Notice, to delete paragraph 3865.54. This would allow for the possibility that an entity might apply one method to assess hedge effectiveness while using another method to measure ineffectiveness.  However, the assumptions used for both must be consistent in accordance with paragraph 3865.08.

The AcSB also considered further the concerns of certain life insurance enterprises about the implications of implementing Section 3855 and Section 4211, Life Insurance Enterprises — Specific Items. The AcSB decided that no changes to the Handbook are required.

Internally Developed Intangible Assets

The AcSB discussed the implications of the new Strategic Plan on the future direction of this project, and the related comments received on the December 2005 Exposure Draft.  The AcSB will consider at a future meeting whether to maintain the original scope of the project or whether the project should be modified to achieve a closer alignment with International Financial Reporting Standard IAS 38, Intangible Assets.  As a result of these discussions, the effective date of proposed changes will not be earlier than the latter part of 2007.

Fair Value Measurement

The AcSB discussed certain revisions made to the proposed FASB standard on fair value measurements, and reaffirmed the plan to formulate Canadian guidance harmonized with that of the FASB and IASB.  The AcSB and IASB expect to issue proposals for comment in the fourth quarter of 2006.

Uncertain Tax Positions

The AcSB discussed decisions reached by the FASB since January 2006 in its project on accounting for uncertain income tax positions. None of the changes made by the FASB were considered sufficiently significant to cause the AcSB to change its previous decision not to adopt the FASB approach.  Instead, the AcSB plans to review the IASB’s proposal on uncertain tax positions (to be included in its forthcoming Exposure Draft on income taxes, expected in the fourth quarter of 2006) and to make similar proposals.  The FASB expects to issue a final interpretation at the end of June 2006. 

Liabilities and Equity

The AcSB considered differences between existing AcSB standards on the classification of financial instruments as liabilities or equity with those of existing and proposed IASB standards. It was also updated on the progress of FASB and IASB efforts to converge and improve standards on this topic.

The AcSB decided that existing differences were not significant enough to warrant initiating a project to fully harmonize Canadian standards with IASB standards at this time. Staff was instructed to continue to monitor developments on this topic, and to develop a possible amendment to, or interpretation of, Canadian standards to clarify the classification of derivatives that may be settled with the reporting entity’s own equity securities.