Accounting Standards Board
Decision Summary
November 8, 2007

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.uk and www.fasb.org, respectively).

The AcSB noted that the FASB has decided to defer, indefinitely, the effective date of AICPA Statement of Position (SOP) 07-1 dealing with investment companies. The AcSB had previously decided not to amend AcG-18, Investment Companies, to conform with SOP 07-1.

The AcSB also noted the issue by the IASB of the first annual improvements exposure draft proposing amendments to various International Financial Reporting Standards (IFRSs) to remove redundant transitional provisions, make minor wording changes to clarify meaning and address unintended consequences. The Exposure Draft was issued on October 11, 2007. Comments are due by January 11, 2008.

The AcSB noted that the IASB and FASB are expected to issue new standards on Business Combinations in the near future. The AcSB expects to incorporate these standards into Canadian GAAP, following exposure of the material dealing with non-controlling interests. These new requirements are expected to be effective for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after January 1, 2009.

Publicly Accountable Enterprises Strategy

The AcSB reviewed plans for public roundtable discussions to receive input on the extent of progress in establishing the infrastructure for the implementation of IFRSs for publicly accountable enterprises for years beginning on or after January 1, 2011. Details of these discussions, to take place in late November and early December 2007 in Calgary, Halifax, Montreal, Toronto and Vancouver, are available from the AcSB web site at www.acsbcanada.org.

The AcSB considered a report on presentations to the Accounting Standards Oversight Council (AcSOC) by Financial Executives International Canada, the Canadian Bankers’ Association and representatives from the oil and gas industry. More information about these presentations is available in the report on the AcSOC meeting.

The AcSB noted recent developments in the United States regarding adoption of IFRSs, including testimony provided to the US Senate Sub-committee on Securities, Insurance and Investment of the Committee on Banking, Housing and Urban Affairs by the FASB Chairman and others on October 24, 2007. The FASB Chairman’s testimony included a call for establishment of a “blueprint” for a transition to an improved version of IFRSs for use by US public companies. The AcSB also noted that the US Securities & Exchange Commission expects to consider, at its meeting on November 15, 2007, whether to allow foreign companies to submit financial statements to the Commission using IFRSs without reconciling the data to US GAAP.

In addition, the AcSB received updates on a recent meeting with the Canadian Securities Administrators to discuss aspects of the AcSB’s strategy for publicly accountable enterprises and with representatives of Canadian pension plans to discuss whether pension plans should adopt IFRSs in 2011.

The AcSB reviewed the findings of a study of first-year implementation of IFRSs in the European Union conducted by the Institute of Chartered Accountants in England and Wales. The main message from the study is that the first-year implementation of IFRSs in Europe was “challenging but successful”, with no general loss of confidence in financial reporting. IFRS implementation was generally seen as a positive development for financial reporting across the European Union. The study is available at www.icaew.com.

No decisions were made.

Private Enterprises Strategy — Owner Managed Enterprises

The AcSB received a presentation on the Canadian Institute of Chartered Accountants’ initiative to propose a financial reporting framework for owner managed enterprises; that is, enterprises without significant external users. The relationship of the framework to GAAP and the AcSB’s possible involvement with the proposed framework will be discussed following a review of the comments on the AcSB’s Invitation to Comment on Financial Reporting by Private Enterprises.

Financial Instruments — Recognition and Measurement

Definition of a Derivative
The AcSB decided not to proceed with its proposed amendment to the definition of a derivative in Section 3855, Financial Instruments — Recognition and Measurement, to remove the reference to contracts based on a “non-financial variable … not specific to a party to the contract.” The change to paragraph 3855.19(e) was meant to clarify the AcSB’s original intention regarding the application of Section 3855. However, subsequent to the September 2007 meeting, information became available suggesting that this change could cause unintended consequences for some entities.

Embedded Prepayment Options
The AcSB agreed to issue an exposure draft proposing an amendment to paragraph 3855.A32(g), which provides guidance on when a put, call, surrender or prepayment option embedded in a host debt instrument is closely related to the host. The effect of the proposed amendment is that an embedded prepayment option that compensates the lender for loss of interest would be considered closely related to the host.

Differential Reporting
The AcSB continued its discussion of issues raised by the Differential Reporting Advisory Committee in respect of Section 3855. In addition to the proposed changes decided on in September 2007, the AcSB agreed to propose an additional exemption for non-publicly accountable enterprises, as defined in Section 1300, Differential Reporting. Under this exemption, a non-publicly accountable enterprise need not apply Section 3855 to some contracts to buy or sell non-financial items. This exemption applies when the risks of the contract are limited to

• changes in the price of the non-financial item;
• changes in foreign exchange rates; or
• a default by one of the counterparties.

However, contracts to buy or sell non-financial items would not be exempt if the contract can be settled net in cash or equivalent, except for contracts that meet the entity’s expected purchase, sale or usage requirements.

Following final drafting and a written ballot, the AcSB expects to publish an exposure draft before the end of 2007. The proposals would be effective when finalized, as early as possible in 2008.

Intangible Assets

The AcSB reviewed comments received on its July 2007 Re-exposure Draft, Intangible Assets. The AcSB approved, subject to written ballot, amendments to Section 1000, Financial Statement Concepts, the issuance of new Section 3064, Goodwill and Intangible Assets, to replace Section 3062, Goodwill and Other Intangible Assets, and the withdrawal of Section 3450, Research and Development Costs, substantially as exposed. As a result of these changes, the AcSB will also amend Accounting Guideline AcG-11, Enterprises in the Development Stage. The changes will be effective for fiscal years beginning on or after October 1, 2008, with earlier adoption encouraged.

Not-For-Profit Organizations

The AcSB considered a report from the Not-for-Profit Organizations Advisory Committee (AdCom) with respect to the status of the not-for-profit standards improvements project, including responses received to date on the Exposure Draft for which the comment period ends on November 15, 2007. The AdCom Chair also discussed with the AcSB plans for considering whether to propose any additional improvements to the 4400 series of Handbook Sections.

The AdCom reported it had begun the process of developing material for inclusion in an Invitation to Comment on the future direction for setting accounting standards applicable to not-for-profit organizations, in light of the AcSB’s strategies for publicly accountable enterprises and private enterprises. The Invitation to Comment will address accounting issues, possible approaches and a proposed timeframe for the adoption of any proposed changes. The Invitation to Comment is expected to be issued in mid-2008.

Asset-Backed Commercial Paper

The AcSB considered developments related to the financial reporting implications of the recent disruption in the Canadian market for non-bank-sponsored asset-backed commercial paper. The AcSB suggested that the Chair should discuss potential year-end reporting issues with interested parties.

Emerging Issues Committee

At its September 2007 meeting, the AcSB tentatively decided to begin a process for an orderly winding up of its Emerging Issues Committee (EIC) and to consult with AcSOC and other interested parties before finalizing these plans. The AcSB began a discussion of the results of these consultations, which will continue in its December meeting.

The AcSB decided that a review of all current EIC Abstracts should be undertaken to determine if any issues addressed in the Abstracts should be referred to the International Financial Reporting Interpretations Committee. The review will also consider whether any Abstracts should be retained in Canadian GAAP because they address issues relevant to not-for-profit organizations or non-publicly accountable enterprises, or issues affected by specific Canadian legal, tax, regulatory or other circumstances that do not apply in other countries and that therefore will not be addressed by the IASB.