Accounting Standards Board

Decision Summaries
July 12, 2006

International Activities

The AcSB received reports on recent meetings of the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) (see http://www.iasb.org.uk/ and http://www.fasb.org/, respectively).  In particular, the AcSB noted that the IASB has issued an Exposure Draft, "Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation," which is to improve the financial reporting of particular types of financial instruments that have characteristics similar to ordinary shares, but are at present classified as financial liabilities. The IASB proposals would more closely converge International Financial Reporting Standards (IFRSs) on this subject with Canadian GAAP, although they would not be identical. Comments are requested by October 23, 2006. 

Also released for public comment by the IASB and FASB were the first draft chapters of the joint Conceptual Framework that define the objectives of financial reporting and qualitative characteristics of decision-useful information.  Comments are requested on this document by November 3, 2006.

Employee Future Benefits

The AcSB received an update on the FASB Phase I proposal to:

• reflect the financial status of obligations (and assets) related to post-retirement benefit plans on the balance sheet of the plan sponsor; and
  
• require measurement of plan assets and obligations at the balance sheet date.

The update included the key issues raised in comment letters on the FASB Exposure Draft.

A proposed IASB project on employee future benefits was also discussed. The AcSB noted with concern that while the FASB and IASB have the intent of converging their standards on this topic, these current projects are separate and are addressing different aspects of accounting for employee future benefits. The AcSB will make its best effort to encourage the IASB and the FASB to continue discussions on formulating a joint project.

The AcSB expects to continue discussions on whether to maintain the current convergence with US GAAP on accounting for employee future benefits. The AcSB considered the alternative of adopting the current IASB standard on employee future benefits, but decided not to do so at this time, because it provides for two alternative treatments and prohibits the “recycling” into net income of amounts previously reported in other comprehensive income. Pending further developments, the AcSB will continue to consider adopting proposals similar to those of the FASB.

Joint Ventures

The AcSB discussed a submission from constituents proposing that a venturer use the equity method to account for interests in certain jointly controlled enterprises. It noted that the IASB is undertaking a project to remove the main difference between US GAAP and IAS 31, Interests in Joint Ventures, by requiring the equity method for the accounting for interests in all jointly controlled entities and removing the existing option of proportionate consolidation. That project will also address the difference between an interest in a joint venture entity and a direct interest in underlying individual assets and liabilities of a joint arrangement. The AcSB agreed to continue to monitor the IASB project and to consider converging Canadian GAAP with the amended IAS 31.  Accordingly, the AcSB decided that no changes to Section 3055, Interests in Joint Ventures, should be made at this time.

Fair Value Measurement

The AcSB received an update on recent developments in the FASB and IASB projects.  In particular, in June 2006, the IASB decided to publish the FASB's final fair value measurement standard first as a discussion paper, before proceeding to an exposure draft. The AcSB decided to encourage Canadian constituents to comment on the IASB  discussion paper.  To adopt a converged fair value measurement standard in Canada, the AcSB will develop an exposure draft based on the IASB exposure draft.  At that time, the AcSB will solicit comments on whether any additional guidance is required for common Canadian transactions or other circumstances that have not been addressed in the IASB proposals. As decided last month, the AcSB does not propose to issue an exposure draft on fair value measurement at the same time that the FASB issues its standard.

Earnings per Share

The AcSB discussed the future of this project in the context of its Strategic Plan to adopt International Financial Reporting Standards (IFRSs) for publicly accountable enterprises. The AcSB decided to change the direction of the project to harmonize with IAS 33, Earnings per Share. Previously, it had focused on maintaining harmonization with US GAAP. The AcSB noted that in the short term, the IASB is expected to publish an Exposure Draft of amendments to IAS 33.  The AcSB also noted that IAS 33 is substantially harmonized with US GAAP and that several of the differences between IAS 33 and US GAAP relate to circumstances in which underlying IFRSs differ from underlying US GAAP but are converged with Canadian GAAP.

The AcSB agreed to develop an exposure draft of a revised Canadian standard based on IAS 33, including the amendments to be proposed shortly by the IASB.  The AcSB’s exposure draft is expected to be issued in the fourth quarter of 2006, with finalization expected in the first half of 2007. The typescript of amendments to Section 3500, Earnings per Share, posted on the AcSB’s website has been withdrawn.