| This summary of Accounting Standards Board (AcSB) projects has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further deliberations by the AcSB. Decisions to publish Handbook material are final only after a formal ballot process. |
Status: AcSB Exposure Draft (PDF) issued with a comment deadline of August 23, 2010. To provide for the contingency that the IFRS on consolidated financial statements is not revised in time, the AcSB has issued an Exposure Draft proposing that investment companies as defined in and applying Accounting Guideline AcG-18, Investment Companies, can continue to apply pre-changeover standards in Part V of the CICA Handbook – Accounting until annual periods beginning on or after January 1, 2012. Earlier application would be permitted. The AcSB expects to finalize the proposed amendment in September 2010 After deliberating comments received on exposure, the IASB and the AcSB expect to issue in the third or the fourth quarter of 2010 a limited scope exposure draft proposing that IFRSs require investment companies to measure all investments in entities that it controls at fair value. Final disclosure and consolidation standards from the IASB and AcSB are expected in the fourth quarter of 2010. Background
Activities to Date
Next Steps
Related Information
Contact Information - Background
The objective of the IASB’s consolidation project is to improve financial reporting by: - simplifying the accounting guidance, by providing a single definition of control for assessing whether a reporting entity controls another entity; and
- enhancing disclosures about consolidated and unconsolidated entities.
Given the recent global financial turmoil and the recommendations of the Financial Stability Forum, the IASB decided to accelerate the consolidation project and proceed directly to publication of an exposure draft. Activities to Date Consolidation
The IASB has issued Exposure Draft 10, “Consolidated Financial Statements,” proposing a new standard to replace the consolidation requirements in IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation — Special Purpose Entities. Comments are requested by March 20, 2009. The AcSB has also issued an Exposure Draft proposing to incorporate the new consolidation standard proposed by the IASB into Canadian GAAP as part of the IFRSs to be adopted by publicly accountable enterprises upon changeover to IFRSs. Early adoption of IFRSs, including the proposed new consolidation standard, will be permitted. As the AcSB continues to deliberate the appropriate financial reporting models for private enterprises and not-for-profit organizations (NFPOs), the AcSB concluded that it will consider, separately, whether to adopt these proposals for those entities. As the proposed standard might be applicable to private enterprises and NFPOs in the future, the AcSB encourages all entities to evaluate the proposals and provide comments. To solicit and discuss the views of Canadians on the application of the IASB’s proposals in Canada, the AcSB staff held roundtables on February 19, 2009. IASB staff attended to hear the views of Canadians on this topic. Over forty-five interested parties participated in a discussion about the proposals. On November 5, 2009, the IASB and FASB reaffirmed their commitment to a Memorandum of Understanding to achieve convergence of IFRSs and US GAAP, and agreed to conduct their respective projects on consolidation jointly to produce improved and converged consolidation standards. The Boards agreed that ideally the standards for consolidation would include objectives and principles for assessing control that would be applied consistently to all types of entities and would produce globally comparable results. The IASB agreed to amend its project schedule to deliberate jointly some application differences between their respective consolidation projects. After deliberating those issues, including comments received on the IASB’s Exposure Draft, the FASB will publish an exposure draft in the second quarter of 2010. The IASB will then make available a staff draft of its proposed final standard and publish a request for views on the FASB’s proposals. The IASB and FASB will then deliberate comments received with the expectation that they will produce improved and converged standards in the fourth quarter of 2010. Disclosures
In February 2010, the IASB decided to combine the disclosure requirements for subsidiaries, joint ventures and associates within a comprehensive disclosure standard that would address a reporting entity’s involvement with other entities when such involvement is not within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments. The IASB expects to issue the final disclosure standard in the fourth quarter of 2010. Investment companies
As well, the IASB tentatively agreed to exempt an investment company from the requirement to consolidate investments in entities it controls. Investment companies would be required to measure those investments at fair value. This reversal from the IASB’s previous position is based on the unanimous agreement of users consulted that investment companies should measure all investments at fair value and its decision to develop converged consolidation principles with the FASB. Thus, the IASB decided to develop the exemption based on existing guidance in US GAAP, Codification Topic 946 (formerly the AICPA Investment Company Guide). The FASB agreed to make corresponding amendments to Topic 946. As the IASB has reversed its position on this issue, it is expected that it will re-expose the proposal in the third or the fourth quarter of 2010. In May 2010, the IASB decided not to provide an exemption in IFRS 1 First-time Adoption of International Financial Reporting Standards to permit an investment company that is a first-time adopter to report controlled investees at fair value in accordance with its previous GAAP, pending completion of the new consolidations standard. The IASB also tentatively decided not to extend the proposed exemption from the requirement to consolidate controlled investees to the parents of investment companies that are not themselves investment companies. Various Canadian stakeholders, including regulators and those from the investment and insurance industries, have raised concerns about the implications of the IASB’s project plan for Canada’s transition to IFRSs. Given that the revised IFRS on consolidated financial statements, including the proposed investment company exemption, may not be issued in time for Canada’s transition to IFRSs, an investment company would be required to consolidate controlled investees under existing IAS 27 Consolidated and Separate Financial Statements. To provide for that contingency, the AcSB has decided to take action to keep Canadian investment companies from having to change their current accounting treatment for controlled investees while the IASB completes its standards. On May 5, 2010, the AcSB decided to propose that entities currently applying Accounting Guideline AcG-18, Investment Companies, can continue to apply existing Canadian standards in Part V of the CICA Handbook – Accounting until interim and annual periods financial statements related to annual periods beginning on or after January 1, 2012. Earlier application would be permitted. Given subsequent decisions of the IASB, the AcSB concluded, at its June 16, 2010 meeting, that the proposed deferral of the IFRS changeover date should be limited to those entities expected to qualify for the IASB’s proposed exemption from consolidation. Accordingly, parents of investment companies applying the AcG-18 exemption from consolidation would not qualify for the deferral of the IFRS changeover date unless they are themselves investment companies. By permitting early adoption, the AcSB would allow an investment company unaffected by the consolidation of controlled investees to adopt IFRSs in Part I of the CICA Handbook – Accounting for 2011 as originally planned. Investment companies within the scope of the proposal would also be able to adopt IFRSs for 2011 if the new IFRS on consolidated financial statements is issued before the company’s first 2011 interim financial statements are released. The Exposure Draft “Adoption of IFRSs by Investments Companies” proposing a one-year deferral of IFRS changeover date for investment companies has been issued. Comments are requested by August 23, 2010. Next Steps - In 2010, the staff expects the AcSB to issue the following documents:
- an exposure draft of the IASB’s proposed investment company exemption;
- the final new standard for disclosures about unconsolidated special purpose entities and structure entities;
- after receipt and analysis of the comments letters, a revised introduction to Part I of the Handbook to require investment entities applying AcG-18 to adopt IFRSs for annual periods beginning on or after January 1, 2012, although earlier application is encouraged; and
- the final new standard to replace IAS 27.
Related Information Contact Information Questions or comments on this project should be directed to: Rebecca Villmann, CA
Principal, Accounting Standards
Telephone: +1 (416) 204-3464
Fax: +1 (416) 204-3412
Canadian Accounting Standards Board
277 Wellington Street West
Toronto ON M5V 3H2 Canada |