May 6-7, 2008

Accounting Standards Board
Decision Summary
May 6-7, 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 that the Office of the Superintendent of Financial Institutions Canada published a letter on April 25, 2008 indicating that all federally regulated financial institutions (FRFIs) will be considered to be publicly accountable enterprises and be required to report in accordance with International Financial Reporting Standards (IFRSs) when adopted by the AcSB. The letter also indicates that FRFIs will not be allowed to adopt IFRSs prior to the 2011 effective date.

The AcSB also noted that on June 16, 2008, the FASB, together with the Financial Accounting Foundation, will host a forum entitled “High-Quality Global Accounting Standards: Issues and Implications for US Financial Reporting.” Further information, including participating panelists, the issues expected to be discussed, and how to register as an observer or view by web cast, is available at www.fasb.org/forms/Convergence_forum.shtml.

Financial Reporting by Private Enterprises

The AcSB continued discussion of proposals for developing stand-alone financial reporting standards available to all private enterprises, based on the existing standards in the CICA Handbook – Accounting .

The AcSB confirmed that Section 1000, Financial Statement Concepts, will be retained as the underpinning for the new set of standards. The AcSB agreed on the following:

• The majority of the recognition and measurement standards in the Handbook, other than those that give rise to contentious issues, are relevant to the sector and will be retained with few, if any, modifications.
• An advisory working group will review those standards that give rise to contentious issues and propose solutions appropriate for the sector, based on cost/benefit considerations.
• Section 1400, General Standards of Financial Statement Presentation, and Section 1505, Disclosure of Accounting Policies, will provide the basis for developing appropriate disclosure requirements for the sector, and specific disclosure requirements will be considerably fewer than in the existing Handbook.

As soon as possible, the AcSB will post on its website, a description of the objective, approach and timetable of the project to develop the new set of standards, as a basis for further communication with stakeholders. As they are developed, the AcSB plans to post drafts of the proposed individual standards with the current expectation that this process may be completed by the end of 2008. Preliminary consultations with interested parties on the approach to developing the new standards are expected to commence this summer.

Publicly Accountable Enterprises Strategy

IASB Discussion Papers
The AcSB noted the recent release by the IASB of Discussion Papers dealing with the distinction between liabilities and equity, simplifying the current accounting for financial instruments, and accounting for employee benefits. The AcSB noted the importance of commenting to the IASB on proposals in Discussion Papers, this being the most likely stage of the IASB's standard-setting process at which directions are likely to be influenced by stakeholders. The AcSB agreed on plans for responding to each of these Discussion Papers, including consultation with stakeholders likely to be most affected. The AcSB also noted that stakeholders should be encouraged to respond directly to these papers. The Discussion Papers are available from www.iasb.org (see Open to Comment).

EIC Abstracts Review — IFRS Adoption
The AcSB considered the recommendations of the EIC Abstracts Review Task Force. The AcSB agreed that formal interpretations of the issues addressed by the current EIC Abstracts will not be required for publicly accountable enterprises once IFRSs are adopted in Canada. Consequently, none of the EIC Abstracts will be retained for publicly accountable enterprises after adoption of IFRSs.

The Task Force proposed that guidance should be provided on the issues addressed by EIC-111, “Determination of Substantively Enacted Tax Rates under CICA 3465,” EIC-146, “Flow-Through Shares,” and EIC-160, “Stripping Costs Incurred in the Production Phase of a Mining Operation.” The AcSB decided that:

• the issues addressed by EIC-111 should be considered by the AcSB’s planned forum for the discussion of financial reporting issues arising from the application of IFRSs;
• the issues addressed by EIC-146 should be included in staff’s review of the IASB’s exposure draft on income taxes, which is expected to be issued this summer; and
• the issues addressed in EIC-160 should be referred to the International Financial Reporting Interpretations Committee as there is a lack of guidance in IFRSs on accounting for stripping costs.

The AcSB previously decided that, on adoption of IFRSs, GAAP financial statements for pension plans should continue to be prepared in accordance with Section 4100, Pension Plans, rather than IAS 26, Accounting and Reporting by Retirement Benefit Plans. EIC-116, “Pension Plans — Disclosure Requirements for Income from Investments in Segregated Funds,” and EIC-168, “Accounting by Pension Plans for Transaction Costs,” will therefore be retained.

Issues in some EIC Abstracts might be helpful in the development of current IASB projects and, as a result, AcSB staff was requested to communicate these issues to the appropriate IASB staff.

Not-for-Profit Organizations

The AcSB continued discussions on the future direction for setting accounting standards applicable to not-for-profit organizations. The AcSB noted that its present initiative to establish a new set of GAAP standards applicable to private enterprises may result in standards that could be beneficially applied by many, perhaps the majority of, not-for-profit organizations as well. Therefore, the AcSB encourages not-for-profit organizations to consider the outcome of that project and its application to their own situations.

Financial Instruments — Recognition and Measurement

The AcSB continued discussing details of the accounting policy choice for non-publicly accountable enterprises and not-for-profit organizations approved at its April 23, 2008 meeting. These entities may elect to exclude from the scope of Section 3855, Financial Instruments — Recognition and Measurement, non-financial contracts or derivatives embedded in non-financial contracts, leases and insurance contracts. The AcSB decided that an eligible entity will:

• apply the choice for all similar transactions consistent with Generally Accepted Accounting Principles, paragraph 1100.31A; and
• disclose details of the election in accordance with Section 1505, Disclosure of Accounting Policies.

The AcSB also agreed that the requirements of Section 3862, Financial Instruments — Disclosures, will not apply to contracts excluded from Section 3855 through exercise of the accounting policy choice.

Discontinued Operations

The IASB and the FASB have agreed to develop a converged definition of discontinued operations whereby a disposal would be reported as a discontinued operation only if it meets the definition of an operating segment. The definition of an operating segment in Section 1701, Segment Disclosures, is identical to that in IFRS 8, Operating Segments, and FASB Statement No.131, Disclosures about Segments of an Enterprise and Related Information. The IASB and the FASB also agreed to require converged disclosures related to disposals of components of an entity.

The AcSB noted that this change would result in global convergence in the accounting for discontinued operations and that it would simplify the reporting of discontinued operations for preparers. It agreed to develop an exposure draft proposing to modify Section 3475, Disposal of Long-Lived Assets and Discontinued Operations, to adopt the same definition of a discontinued operation as is being proposed by the IASB and the FASB.

Emerging Issues Committee (EIC)

The AcSB considered but did not accept two proposed EIC agenda items.