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Accounting Standards Improvements for NFPOs - NFP Advisory Committee

Date recorded:

At its meeting on January 6, 2016, the Committee discussed the following:

Tangible and Intangible Assets

Whether there are unique circumstances regarding tangible and intangible assets of NFPOs that necessitate retaining the accounting requirements in Section 4431, Tangible Capital Assets Held by Not-for-Profit Organizations, and Section 4432, Intangible Assets Held by Not-for-Profit Organizations. The Committee agreed to suggest to the AcSB that any guidance in Section 4431 that is duplicative to Part II be removed. However, any guidance in Sections 4431 or 4432 that is unique to Part III (for example, material related to contributed assets) be retained.

Whether NFPOs should be required to recognize partial impairments of tangible and intangible assets. The Committee agreed to request that the AcSB consider requiring NFPOs to recognize partial impairments of tangible and intangible assets to reflect a decline in the value of the assets.

Works of Art, Historical Treasures and Similar Items Not Part of a Collection

Whether the current accounting requirements in Part III for works of art, historical treasures and similar items not part of a collection should be maintained. The Committee agreed to request that the AcSB consider continuing to require NFPOs to recognize works of art, historical treasures and similar items not part of a collection in the same manner as other assets (i.e., as capital assets or as inventory type items).

Collections

Their experiences in accounting for collections held by NFPOs and the various types of works of art, historical treasures and other items that are part of collections under Section 4440, Collections Held by Not-for-Profit Organizations, which allows but does not require the recognition of collections held by NFPOs.  The Committee noted that as a result of not requiring the recognition of collections, practice varies.  Some collections are not recorded, some are recorded at nominal values, some are recorded at cost, and others are recorded on a variety of bases. The Committee will continue to discuss the recognition and measurement of collections at a future meeting.

Disclosure of Related Party Transactions by NFPOs

Whether NFPOs should be required to follow Section 3840, Related Party Transactions, with the exception of the measurement provisions in Section 3840. The Committee noted that diversity in practice exists for measuring related party transactions by NFPOs since there are no specific recognition and measurement requirements for related party transactions by NFPOs in either Parts II or III. The Committee also discussed concerns with the definition of a related party and with the measurement of business combinations under common control. The Committee agreed to suggest to the AcSB that the definition of a related party be clarified (for example, whether a director is a related party) and that a separate project on related party transactions for NFPOs be initiated.

Disclosure of Allocated Expenses

Whether NFPOs should continue to apply Section 4470, Disclosure of Allocated Expenses by Not-for-Profit Organizations. The Committee noted that because allocation decisions are entity specific, allocations vary among NFPOs so that information about allocated expenses is not comparable between NFPOs. The Committee agreed to request that the AcSB re-examine Section 4470 to ensure that the information required is useful to financial statement users of NFPOs.

Review the summary of discussions.

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