Accounting Standards Board
Decision Summary
April 23, 2008

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 the issue by the IASB of three Discussion Papers:

• “Financial Instruments with Characteristics of Equity” — The paper considers the distinction between equity financial instruments and other financial instruments (non-equity instruments). The comment deadline is September 5, 2008.
• “Reducing Complexity in Reporting Financial Instruments” — The paper examines the main causes for the complexity in reporting financial instruments under IFRSs today and proposes possible intermediate approaches to improve and simplify measurement. The paper also presents a discussion of possible long-term approaches. The comment deadline is September 19, 2008.
• “Preliminary Views of Amendments to IAS 19 Employment Benefits” — The paper contains the IASB’s preliminary views on the removal of options for the deferred recognition of gains and losses in defined benefit plans, and introduces a new classification of benefit promises into contribution-based promises and defined benefit promises, with a new attribute for contribution based promises. The comment deadline is September 26, 2008.

The AcSB staff submitted a favourable response to the IASB’s Exposure Draft of proposed amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards, and IAS 27, Consolidated and Separate Financial Statements, regarding the cost of an investment in a subsidiary, jointly controlled entity or associate. A favourable response was also issued by the AcSB staff on the IASB’s Exposure Draft of proposed amendments to IFRS 2, Share-based Payment, clarifying that vesting conditions are service and performance conditions only.

The AcSB received an update on submissions to the IASB regarding possible future changes to IFRS 1, noting that matters discussed by the IASB in March had largely been accepted. AcSB staff expects to discuss additional matters with the IASB in May 2008, with a view to the IASB issuing an Exposure Draft later in the year. Issues expected to be discussed in May include:

• derecognition of financial assets and financial liabilities;
• property, plant and equipment of entities subject to rate regulation with embedded elements of cost that are not in accordance with IFRSs; and
• accounting for related party transactions.

The AcSB noted that the FASB has added to its agenda a project that will consider improvements to disclosures about credit derivatives. The AcSB anticipates that Section 3862, Financial Instruments — Disclosures, which is converged with IFRS 7, Financial Instruments: Disclosures, will improve the transparency of transactions involving credit derivatives. Hence, it decided not to take on an equivalent project, but requested staff to monitor the FASB’s activities on this topic.

The AcSB also noted the FASB’s decision to remove the concept of a qualifying special-purpose entity from Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities. As there is presently no assurance that the FASB proposals will be IFRS-compatible, and to avoid multiple changes, the AcSB reaffirmed its previous decision not to amend AcG-12, Transfers of Receivables, and AcG-15, Consolidation of Variable Interest Entities, prior to the adoption of IFRSs in Canada.

Private Enterprises Strategy

The AcSB commenced discussion of the principles to be used in developing GAAP standards for private enterprises. The AcSB tentatively decided that:

• the existing CICA Handbook − Accounting will be used as a starting point for drafting purposes;
• the same conceptual framework will apply as for publicly accountable enterprises;
• reducing the volume of material will be a secondary goal in its development;
• issues in the existing Handbook that have caused significant concern to private enterprises will be reconsidered; and
• disclosure requirements will be substantially reduced.

The AcSB approved the formation of a new Advisory Committee to aid in the development of private enterprise standards. The AcSB will continue its discussions at its next meeting.

Financial Instruments

Embedded Prepayment Options

The AcSB decided to defer review of the comments received on the January 2008 Exposure Draft, Financial Instruments ― Embedded Prepayment Options, pending reconsideration by the IASB of comparable proposed amendments to IAS 39. The IASB expects to discuss its proposed amendment in May 2008. AcSB staff will consider providing non-authoritative guidance to assist in the application of the existing provisions to instruments with embedded prepayment options.

Non-publicly Accountable Enterprises

The AcSB reviewed the comments received on the January 2008 Exposure Draft, Financial Instruments ― Non-publicly Accountable Enterprises. The AcSB considered whether to proceed with finalizing these amendments or to further delay application of the standards to non-publicly accountable enterprises (NPAEs). It concluded that the amendments addressed the areas of greatest concern and, hence, no delay is warranted. The AcSB decided to amend the following standards:

• Section 1535, Capital Disclosures, as exposed. A non-publicly accountable enterprise (NPAE) with externally imposed capital requirements would only be required to disclose information about those requirements. An NPAE without externally imposed capital requirements would be exempt from the standard.
• Section 3855, Financial Instruments — Recognition and Measurement, such that NPAEs and Not-for-Profit Organizations would make an accounting policy choice whether to apply the provisions of the standard to non-financial contracts or to derivatives embedded in non-financial contracts and contracts that are otherwise excluded from the scope of the standard (e.g., leases and insurance contracts). The AcSB will consider the implications of this amendment on the disclosures required by Section 3862, Financial Instruments — Disclosures, at its May 2008 meeting.
• Section 3855 such that an NPAE may elect to identify embedded derivatives only in contracts entered into after the day it first applied that Section.
• Section 3862 as exposed. An NPAE would not be required to provide certain quantitative risk disclosures.

These changes would be effective as of the date that eligible entities first apply the relevant standards.