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What's New in Accounting Standards?

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Fall 2016

What’s New in Accounting Standards? October 4, 2016 | Vancouver Presenters Linda Mezon, FCPA, FCA, CPA (MI)

Linda F. Mezon is the Accounting Standards Board Chair and has served in this capacity since July 1, 2013. Combined with her previous board experience as a volunteer member, she has over 11 years of experience as a standard setter.

Prior to her appointment as Chair, Linda was the Chief Accountant of the Royal Bank of Canada (RBC), responsible for the interpretation and application of IFRS and U.S. GAAP. She also monitored compliance with Canadian regulatory requirements on financial disclosure and was responsible for auditor independence. Before RBC, Linda held other senior positions in industry, including four years of experience in public accounting. Linda is a member of the Board of Directors of the Toronto Rehabilitation Institute Foundation and the Dancer Transition Resource Centre, and their finance committees. Paul Hargreaves, CPA, CMA

Paul Hargreaves has been with the BC Dairy Association since 2001 where he is responsible for financial reporting, budget planning and controls. He previously worked as a consultant and as Executive Director at a community-based childcare and youth services provider. Paul’s community involvement is extensive, having acted as President of the Parkgate Community Services Society, a not-for-profit organization delivering community recreation, youth outreach and childcare programs. He has been Treasurer for the BC Agricultural Research and Development Corporation, and is a member of the Finance and Audit Committee of the BC Agriculture Council. He is also the Chair of the AcSB’s Not-for-Profit Advisory Committee.

Kathryn Ingram, CPA, CA

Kathryn Ingram is a Principal with the Accounting Standards Board (AcSB). Her work includes improving Accounting Standards for Private Enterprises by leading the projects on Agriculture and Subsidiaries and Investments. Kathryn contributes to the ongoing development of International Financial Reporting Standards (IFRS) by soliciting the views of Canadians and developing well-reasoned comment letters. She also assists the AcSB in the consideration of IFRS implementation issues in Canada.

Prior to joining the staff of the AcSB, Kathryn worked for several public accounting firms.

What’s New in Accounting Standards?

Linda Mezon, FCPA, FCA

Chair, Accounting Standards Board

Paul Hargreaves, CPA, CMA

Member, Accounting Standards Board

Kathryn Ingram, CPA, CA

Principal, Accounting Standards

October 4, 2016

The views expressed in this presentation are those of the presenters, not necessarily those of the AcSB.

Agenda

• AcSB’s 2016-2021 Strategic Plan– How the Accounting Standards Board (AcSB) is

working for Canadians

• Standard-setting in Canada

• Developments in Canadian GAAP

– For Private Enterprises

– For Not-for-Profit Organizations (NFPOs)

– For Publicly Accountable Enterprises

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2016-2021 Strategic Plan

• Visit www.frascanada.ca

3

AcSB Strategy for Private Enterprises

Maintain the standards established in 2011• No intention to converge to IFRS

Key principles in managing ASPE:• Focus on cost/benefit for preparers and

users in the private enterprise sector• Changes should significantly improve

standards• Monitor events in other jurisdictions• Provide sufficient guidance but not “rules-

based”4


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AcSB Strategy for NFPOs

• Maintain separate set of standards that address specific needs of users of NFPOs

– For non-unique transactions and circumstances, direct NFPOs

to Part II of the CPA Canada Handbook –Accounting

• Cost/benefit considerations

• Symmetry with public sector standards is desirable when user needs are aligned

• Looking at global environment for sector and examining best practices

5

AcSB Strategy for Publicly Accountable Enterprises

• Support the application in Canada of IFRS

– Influence the development of IFRS

• Recognize some entities apply U.S. GAAP instead

– Permitted by Canadian securities regulators for dual-listed companies

• Regardless of framework, add value for publicly accountable enterprises

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Changing Role of Standard-setters

• Focus on application and monitoring implementation

• Make evidence-based decisions

– Gathering data about the different types of enterprises in Canada

• Adapt to changing marketplace

– More complex transactions

– Greater globalization

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Private Businesses in Canada

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Construction12%

Manufacturing4%

Wholesale trade5%

Retail trade12%

Transportation and warehousing

5%

Professional, scientific and

technical services12%

Administrative and support, waste management and remediation services

4%

Health care and social assistance

9%

Accommodation and food services

7%

Other services (except public administration)

9%

Other21%

1.2 Million Private Businesses in

Canada


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Alberta9%

Atlantic Canada5%

British Columbia

10%

Other11%

Ontario43%

Quebec22%

Percentage of Total Revenues

NFPOs in Canada

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Alberta12%

Atlantic Canada 8%

British Columbia 13%

Other10%Ontario

28%

Quebec29%

Number of NFPOs by Province

160,000 private and

public sector

NFPOs in Canada

• About 3,600 entities listed on Canadian stock exchanges– Over 90% are only listed in Canada and use IFRS

• Foreign Private Issuers (FPIs) filing with the SEC – Canada leads by wide margin

– As of December 31, 2015 there are 923 FPIs filing with the SEC

○ 292 Canada (32%)

○ 119 Cayman Islands (13%)

○ 127 European Economic Area – 39 United Kingdom (4%) and 24 Netherlands (3%)

○ 87 Israel (9%)

Note: Canadian stock exchanges include the Toronto Stock Exchange, TSX Venture Exchange and the Canadian Securities Exchange.

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Publicly Accountable Enterprises in Canada


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• At December 31, 2015, total market capitalization of 281 of the 292 FPIs domiciled in Canada is $1.4 trillion

– 63% of the total domestic market

– 70% of companies apply IFRS and 30% apply US GAAP

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Publicly Accountable Enterprises in Canada

Note: Of the 292 FPIs in Canada, only 281 had a market cap reported by the TMX and YCharts as at December 31, 2015. Two companies of the 281 were excluded as they did not file annual reports. This data was compiled by the AcSB’s staff based on publicly available information.

$1.0 Trillion(200)

$363 Billion (79)

0

200

400

600

800

1,000

1,200

IFRS‐IASB US GAAPMarket Cap

italizaiton (Billions of $CAD)

Total Market Capitalization of FPIs Domiciled in Canada

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Hearing from Canadians


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AcSB Committees

• Private Enterprise Advisory Committee– Advises the AcSB on changes to ASPE

• Not-for-Profit Advisory Committee– Advises the AcSB on changes to Accounting

Standards for NFPOs in the private sector

• IFRS Discussion Group – Public meetings to:

○ Raise awareness of Canadian application issues○ Recommend to the AcSB issues to refer to the IASB

or IFRS Interpretations Committee– Revisiting the Group’s mandate & effectiveness

13

Standard-setting Phases

14

Research Discussion Paper

Project Plan Approval

Exposure Draft Final Standard

Post‐implementation

Review


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Standard-setting Work Plans

15

ASPE NFPO IFRS

Major improvements

Interpretations n/a n/a

Narrow‐scope amendments

Annual improvements

Post‐implementation Review

Part II – Private Enterprises

• Changes effective in 2016

• Significant projects

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ASPE – Changes Effective in 2016

• Subsidiaries (Section 1591)

− New guidance on determining if control exists other

than through equity interests

○ Control by contractual terms

○ Approach based on concepts in IFRS 10

− Accounting policy choice retained

− Replaces AcG-15

− Refer to Project Page for further details

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• Joint arrangements (Section 3056)

− Free choice in accounting for joint arrangements

eliminated

− Jointly controlled operations/assets

○ Cost/equity methods no longer permitted

− Jointly controlled enterprises

○ Choice between cost/equity method or to analyze if actually

an interest in assets and liabilities

− Refer to Project Page for further details

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• Investments (Section 3051)

− Scope includes investments subject to significant influence

and other non-financial instrument investments

○ Does not include other investments

− Guidance on contributions and other transactions between

an investor and an equity-accounted investee

○ Consistent with guidance in Section 3056

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2015 Annual Improvements:

• Business Combinations (Section 1582)

− Clarifies disclosure requirement

• Investments (Section 3051) and Leases (Section 3065) − Adds disclosure of impairment losses or reversals

• Property, Plant and Equipment (Section 3061)

− Amends a disclosure requirement to align with practice

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2015 Annual Improvements:

• Employee Future Benefits (Section 3462)

− Applies to defined benefit plans

− Clarifies accounting for measuring a defined benefit

obligation

21

Research Discussion Paper Project plan approval Exposure Draft Final StandardPost‐implementation

Review

ASPE Project – Clarifications to Subsidiaries and Joint Arrangements• Exposure draft issued in May 2016• Amendments propose to clarify:

– Applicability of transition provisions

– Accounting for voting interest

– Requirement to assess control through contractual

arrangements

• Final amendments to be issued in Q4 2016 – Effective January 1, 2017 or 2018 (can early adopt)

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Review

ASPE Project – Subsidiaries and Investments

• Final standard to be issued in Q4 2016 – Effective January 1, 2018 (can early adopt)

• Provides guidance on how to apply the cost method• Address diversity in practice

• Refer to the Project Page for further details

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ASPE Project – 2017 Annual Improvements

• Exposure Draft issued – comments due by December 15, 2016

• Amendments proposed relate to:– Disclosures: accounting policies, impaired lease

receivables

– Clarifications to Section 1521, Balance Sheet and Section 1651, Foreign Currency Translation

• Final amendments to be issued in July 2017– Effective January 1, 2018 (can early adopt)

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Research Discussion Paper Project plan approval

Exposure Draft Final StandardPost‐implementation

Review


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Review

ASPE Project – Redeemable Preferred Shares• Extensive deliberation of input received

– Further outreach conducted

• Exploring viability of conditions for classification exception– Field testing being performed


25


Review

ASPE Project - Agriculture

• Discussion Paper issued in Q4 2015

– Cross-country roundtables underway

• Themes emerging from feedback

– Purchased agricultural produce should be within scope

– Concerns expressed over using cost to measure unharvested

crops and bearer animals


26


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ASPE – Standards Update

Questions?

27

Part III – Not-for-Profit Organizations

• Changes effective in 2016


28


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NFPO – Changes Effective in 2016

Narrow-scope amendments to standards:

• Reporting Controlled and Related Entities by Not-for-Profit Organizations (Section 4450)

− Adds definition of proportionate consolidation from former

Interests in Joint Ventures, Section 3055 in Part II

• Consider changes to ASPE

29


Review

NFPO Project – Improvements Project

• Upcoming Exposure Draft

– Recognize write-downs of tangible and intangible assets

– Recognize collections at cost or nominal value


30


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Review

NFPO Project – Contributions –Revenue Recognition

• Diversity in practice today because have two methods– Only jurisdiction with multiple methods

• Purpose of project is to improve comparability across the sector


31


Review

NFPO Project – Reporting Controlled and Related Entities

• Project will consider whether to require:– Consolidation of controlled NFPOs

– Equity method for controlled profit-oriented enterprises


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NFPO – Other Potential Projects

• AcSB is considering whether to add other projects to its agenda including:

– Related party transactions

– Combinations between NFPOs

• Monitor the Project Work Plan

33

NFPO – Standards Update

Questions?

34


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Part I – IFRS

• Major changes effective in 2018 and 2019


• Appendix– Other changes effective in 2016

○ Regulatory Deferral Accounts (IFRS 14)

○ Series of narrow scope amendments and annual improvements

– Other changes effective in 2017 and 2018

– Implementation and research projects

35

IFRS – Major Change Effective in 2018

• Financial Instruments (IFRS 9)– New impairment model

○ Changes when impairment losses are recognized and

information that must be considered when measuring losses

○ Estimate and account for expected credit losses, starting

from when money is first lent or invested

– Some changes to classification and measurement– Refer to Project Summary and Project Page for

further details– Refer to IDG report extracts on Impaired Assets on

Transition and Transition

36


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• Revenue (IFRS 15)– New criteria for when revenue is recognized

○ When customer has control of goods or services

– Contracts with multiple deliverables

○ Disaggregate

○ Allocate revenue

– Refer to Implementation page for further details including Project Summary and links to webcasts

– Narrow-scope clarifications also effective in 2018

– Refer to IDG report extract on Transition

37


• Leases (IFRS 16)– Comparable reporting under FASB and IASB

Standards for most aspects

○ Primary difference is lease expenses in income statement

and cash flows in cash flow statement

– Eliminates the classification of leases as either operating or finance leases for a lessee

○ Recognize lease assets and liabilities instead

– Refer to Implementation page for further details including the Project Summary and links to a number of webcasts

38


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Review

IFRS Project – Insurance

• No standard on insurance– Existing IFRS allows insurers to maintain current

accounting practices on transition to IFRS– Standards around the world varied and are low quality

• New standard has elements in common with key aspects of current Canadian methodology– Current value model versus cost model

• IASB conducting field testing • New standard expected in early 2017

– Related deferral of effective date of IFRS 9• Refer to the Project Page for further details

39

Research Discussion Paper Project plan approval Exposure Draft Final FrameworkPost‐implementation

Review

IFRS Project – Conceptual Framework

• Expected to be issued in 2017

• Why does the project matter?– Will affect future standard-setting projects for new and

revised standards– Is used to interpret or develop policy when no

standard applies to a transaction or event


40


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Research Discussion Paper Project plan approval

Exposure Draft Final StandardPost‐implementation

Review

IFRS Project – Rate-regulated Activities

• IASB deliberations ongoing following September 2014 Discussion Paper

• AcSB is increasing its level of activity on the project– Compiling evidence on the decision-usefulness of

financial information that reflects the economics of rate-regulated activities

– AcSB paper to be discussed at international meetings this month

• Refer to Project Page for more details

41


Review

IFRS Project – Disclosure Initiative

• Objective– Improve guidance to help entities provide more

relevant disclosures

• Research project on Principles of Disclosure– Discussion Paper expected in December 2016

• Other topics– How to make judgements about materiality

– Better guidance on distinguishing changes in accounting policies with changes in estimates


42


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Upcoming IASB Visit

IASB members and staff involved in various activities throughout the week including:

• IFRS Update Webinar on October 12 – AcSB Chair, Linda Mezon will moderate

– IASB member, Stephen Cooper will provide an update on IFRS

– Submit questions in advance as part of registration

• IFRS 15 Panel Discussion on October 14

43

IFRS – Standards Update

Questions?

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Reporting How we Work for Canadians

• Visit www.frascanada.ca

45

How to Get Involved

• Let us know what you think– Respond to proposals

– Attend public roundtables / conference calls

• Volunteer for an Advisory Group

– Watch website or contact us:

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Staff Contact Phone Email

ASPE Kelly Khalilieh (416) 204‐3453 [email protected]

NFPO Grace Lang (416) 204‐3478 [email protected]

IFRS Kathryn Ingram (416) 204‐3475 [email protected]


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Stay Up-to-Date

47

Email updates – www.frascanada.ca/subscribe

• Tailor your subscription

Stay Up-to-Date

Website – www.frascanada.ca/AcSB

48


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Appendix

IFRS: Other Changes and Projects

49

IFRS – Changes Effective in 2016

New standard:

• Regulatory Deferral Accounts (IFRS 14)

− Provides interim guidance on rate-regulated activities

− Allows entities to continue previous accounting policies for

regulatory deferral account balances

50


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• Consolidated Financial Statements (IFRS 10, IFRS 12 and IAS 28)

− Clarifies three issues associated with investment entities

• Joint Arrangements (IFRS 11)− Adds new guidance on how to account for acquiring a joint

operation that is a business

51



• Presentation of Financial Statements (IAS 1)

− Clarifies disclosures and encourages judgment

• Property, Plant and Equipment and Intangible Assets (IAS 16 and IAS 38)− Clarifies use of revenue-based methods of depreciation

and amortization

52


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Narrow-scope amendments effective January 1, 2016:

• Separate Financial Statements (IAS 27)

− Permits equity method to account for investments in

subsidiaries, joint ventures and associates

• Agriculture (IAS 41)− Changes accounting for bearer plants to be property, plant

and equipment

53


Annual Improvements 2012–2014:

• Non-current Assets Held for Sale and Discontinued Operations (IFRS 5)

− Clarifies accounting for a change in a disposal plan

• Financial Instruments: Disclosure (IFRS 7)− Clarifies disclosures about the continuing involvement in

transferred assets for servicing agreements

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Annual Improvements 2012–2014:

• Employee Benefits (IAS 19)

− Clarifies the accounting for currencies when there is no

deep market in high quality corporate bonds

• Interim Financial Reporting (IAS 34)− Requires cross-reference to information disclosed outside

of the interim financial statements (for example, the MD&A)

55



• Income Taxes (IAS 12)

− Clarifies how to account for deferred tax assets related to

debt instruments measured at fair value

• Statement of Cash Flows (IAS 7)− Requires entities to provide disclosures that enable

users of financial statements to evaluate changes in

liabilities arising from financing activities

56


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• Revenue from Contracts with Customers (IFRS 15)

− Clarifies some requirements and provides additional

transitional relief for companies that are implementing the new

standard

57



• Share-based Payment (IFRS 2)

− Provides requirements on the accounting for:

○ The effects of vesting and non-vesting conditions on the

measurement of cash-settled share-based payments

○ Share-based payment transactions with a net settlement

feature for withholding tax obligations

○ A modification to the terms and conditions of a share-based

payment that changes the classification of the transaction

from cash-settled to equity-settled

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IFRS – Implementation Projects

59

Project Next Step

Classification of Liabilities Issue IFRS Amendment

Transfers of Investment Property Issue IFRS Amendment

Annual Improvements 2014‐2016 Issue IFRS Amendments

Foreign Currency Transactions and Advance Consideration

Issue IFRIC Interpretation

Definition of a Business and Accounting for Previously Held Interests

Consider Feedback from Public Consultation

Uncertainty over Income Tax Treatments Decide Project Direction

Remeasurement at a Plan Amendment, Curtailment or Settlement / Availability of a Refund of a Surplus from a Defined Benefit Plan

Decide Project Direction

IFRS – Implementation Projects

60

Project Next Step

Changes in Accounting Policies and Estimates Publish Exposure Draft

Clarifications to IFRS 8 arising from the Post‐Implementation Review

Publish Exposure Draft

Annual Improvements 2015‐2017 Publish Exposure Draft

Post‐implementation review of IFRS 10, IFRS 11 and IFRS 12 relating to consolidated financial statements, and joint arrangements

Initiate Review

Post‐implementation review of IFRS 13 Fair Value Measurement

Initiate Review


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IFRS – Research Projects

Project Next Step

Disclosure Initiative: Principles of Disclosure

Publish Discussion Paper

Business Combinations under Common Control


Dynamic Risk Management Publish Discussion Paper

Financial Instruments with Characteristics of Equity


Share‐based Payment Publish Research Summary

Discount Rates Publish Research Summary

Primary Financial Statements Decide Project Scope

Goodwill and Impairment Decide Project Direction61


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What's New in Accounting Standards? - pd.bccpa.ca · to Part II of the CPA Canada Handbook –Accounting ... Post‐implementation Review Part II ... Questions? 27