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News

PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

PCAOB Posts Resources for Auditors on Implementation of New Auditing Standards

May 18, 2020

On May 18, 2020, the Public Company Accounting Oversight Board (PCAOB) posted additional resources for auditors as they begin to implement new requirements on “Auditing Accounting Estimates, Including Fair Value Measurements” and on “Auditor's Use of the Work of Specialists”.

Providing useful, timely, and accessible information is a key objective of the Board's strategic plan. The new materials, along with other previously posted staff guidance, aim to assist auditors ahead of the implementation of these standards.

Resources that may be useful to auditors as they begin to implement new requirements include:

  • Staff Presentation on Auditing Accounting Estimates, Including Fair Value Measurements. This presentation provides an overview of the new standard on auditing estimates and highlights key aspects of the new requirements. 
  • Staff Presentation on Auditor's Use of the Work of Specialists. This presentation describes amended requirements for an auditor’s use of the work of a company's specialists as audit evidence and using the work of an auditor's specialist.
  • Staff Guide to Accessing Amended Estimates and Specialists Standards. This document is intended to assist auditors and others in navigating the PCAOB's website to access the amended versions of the related PCAOB auditing standards and auditing interpretations. It provides users with an overview of the amended standards, a tutorial on how to navigate to the new standards on the PCAOB website, and links to the implementation pages for Auditing Accounting Estimates, Including Fair Value Measurements and Auditor's Use of the Work of Specialists.
  • Staff Guidance on Auditing Accounting Estimates. This publication illustrates relevant considerations for certain key areas of the revised standard, including certain information from the adopting release.
  • Staff Guidance on Auditing the Fair Value of Financial Instruments. This publication illustrates relevant considerations for auditing the fair value of financial instruments, especially when pricing information from pricing services, brokers and dealers, and other third party sources is used, including certain information from the adopting release.
  • Staff Guidance on Supervising or Using the Work of an Auditor's Specialist. This publication illustrates relevant considerations for the auditor when supervising the work of an auditor-employed specialist or using the work of an auditor-engaged specialist, including certain information from the adopting release.
  • Staff Guidance on Using the Work of a Company's Specialist. This publication illustrates relevant considerations for the auditor when evaluating the work of a company's specialist including certain information from the adopting release.
IFRS - IASB Image
covid1 Image

IASB votes to finalize IFRS 16 amendment

May 15, 2020

On May 15, 2020, in a supplementary meeting, the International Accounting Standards Board (IASB) considered the feedback it received on its April 24 exposure draft "Covid-19-Related Rent Concessions (Proposed amendment to IFRS 16)" that contained a proposed amendment that would provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The 14-day comment letter period closed on May 8, 2020 and the Board received 110 comment letters (including late submissions).

Deviating slightly from the original proposal but not changing the core practical relief, the Board decided to allow the expedient to be applied to COVID-19-related rent concessions to payments originally due on or before 30 June 2021. The Board also decided to require disclosure of the amount recognised in profit or loss to reflect changes in lease payments that arise from COVID-19-related rent concessions. Finally, the Board decided that in the reporting period in which a lessee first applies the amendment, it is not required to disclose the quantitative information required by paragraph 28(f) of IAS 8. All decisions were supported by 13 Board members.

The amendment will have an effective date of June 1, 2020 with early application permitted. Despite the wording "annual reporting periods" the amendment would also be available for interim reports.

For lessors, the Board decided take no further action. It argued that as many entities face significant challenges at the moment, there needs to be sufficient reason to undertake standard-setting, which the Board did not see enough evidence for. This decision was supported by all 14 Board members.

The Board did not see a need for re-exposure and no Board member intends to dissent from the issuance of the amendment. The Board is satisfied that it has complied with the applicable due process requirements and gave permission to begin the balloting process for the amendment. These decisions were supported by all 14 Board members.The staff expect issuing a final amendment on or around May 28, 2020.

IAASB - Assurance Image

IAASB Publishes Covid-19-related guidance on Audit Considerations for Subsequent Events

May 15, 2020

On May 15, 2020, the In­ter­na­tional Au­dit­ing and As­sur­ance Stan­dards Board (IAASB) is­sued a Staff Audit Practice Alert, entitled “Subsequent Events in the Current Evolving Environment - Audit Considerations for the Impact of Covid-19”.

Re­view the press re­lease and guid­ance on the IAASB's web­site.

IFRS - IASB Image

IASB issues amendments to IAS 16 regarding proceeds before intended use

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)" regarding proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management.

 

Background

The issue was initially raised with the IFRS Interpretations Committee that had originally intended to develop an interpretation of IAS 16, Property, Plant and Equipment to deal with it. However, during the course of discussions the Committee concluded that a narrow-scope amendment to IAS 16 would be a better solution. The IASB developed an exposure draft published in June 2017 and has now finalized the amendments.

 

Changes

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss.

 

Effective date and transition

The amendments published today are effective for annual periods beginning on or after  January 1, 2022. Early application is permitted. An entity applies the amendments retrospectively only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments.

 

Additional information

 

IFRS - IASB Image

IASB concludes the 2018-2020 annual improvements cycle

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) issued "Annual Improvements to IFRS Standards 2018–2020". The pronouncement contains amendments to four International Financial Reporting Standards (IFRS Standards) as result of the IASB's annual improvements project.

Annual Improvements to IFRS Standards 2018–2020 makes amendments to the following standards:

Standard Subject of amendment

IFRS 1

First-time Adoption of International Financial Reporting Standards

Subsidiary as a first-time adopter. The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs.

IFRS 9

Financial Instruments

Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
IFRS 16 Leases Lease incentives. The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
IAS 41 Agriculture Taxation in fair value measurements. The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13.

The amendments to IFRS 1, IFRS 9, and IAS 41 published today are all effective for annual periods beginning on or after January 1, 2022. Early application is permitted. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.

Review the press release on the IASB's website.

IFRS - IASB Image

IASB publishes amendments to IFRS 3 to update a reference to the Conceptual Framework

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Reference to the Conceptual Framework (Amendments to IFRS 3)" with amendments to IFRS 3, "Business Combinations" that update an outdated reference in IFRS 3 without significantly changing its requirements.

 

Background

In March 2018, the IASB issued the 2018 Conceptual Framework and most references to the Framework included in IFRSs were updated to the 2018 Framework at that time. However, paragraph 11 of IFRS 3, Business Combinations, which continued to refer to the 1989 Framework, was not updated as this could have caused conflicts for entities applying IFRS 3.

Potential conflicts occur as the definition of assets and liabilities in the 2018 Framework differ from those in the 1989 Framework potentially leading to day 2 gains or losses post-acquisition for some balances recognized.

In a May 2019 exposure draft, the IASB identified three possible amendments to IFRS 3 that would update IFRS 3 without significantly changing its requirements. These amendments have now been finalized.

 

Changes

The changes in Reference to the Conceptual Framework (Amendments to IFRS 3):

  • update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
  • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
  • add to IFRS 3 an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination.

 

Effective date

The amendments published today are effective for annual periods beginning on or after January 1, 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier.

 

Additional information

 

IFRS - IASB Image

IASB finalizes amendments to IAS 37 regarding onerous contracts

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)" amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

 

Background

The IFRS Interpretations Committee received a request to clarify what costs an entity considers in assessing whether a contract is onerous. The Committee’s research revealed that, for some contracts, differing interpretations of the onerous contract requirements in IAS 37, Provisions, Contingent Liabilities and Contingent Assets could have a material effect on entities that enter into those contracts. Consequently, the Committee recommended that the Board clarifies the onerous contract requirements in IAS 37. The Board supported the Committee’s suggestion and published an exposure draft of proposed clarifications in December 2018, which were finalized today.

 

Changes

The changes in Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

 

Effective date and transition requirements

The amendments published today are effective for annual periods beginning on or after January 1, 2022. Early application is permitted.

Entities apply the amendments to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated.

 

Additional information

 

IFRS - IASB Image
IFRS - EFRAG Image

Outreach event on primary financial statements

May 14, 2020

On May 14, 2020, a web-based outreach event on primary financial statements co-hosted by FSR – Danish Auditors and the Confederation of Danish Industry (DI) with participation of IASB and EFRAG representatives drew a wide international audience. A recording of the event is now available.

The event was organized into a general introductory section and the discussion of five key topics (each again introduced by IASB and EFRAG) that were then opened to questions from the audience. The agenda below indicates where during the two-and-a-half hour recording the individual topics were discussed:

  • Opening and welcome
  • General introduction to the IASB exposure draft General Presentation and Disclosures (begins at about 5:00 minutes)
  • EFRAG’s view on the topic (begins at about 12:00 minutes)
  • Key Topic 1 – Defined lines and subtotals in the income statement – improved comparability or imposed uniformity? (begins at about 21:00 minutes)
  • Key Topic 2 – Looking at the new subtotals – what is the impact and will they work for all industries? (begins at about 1:20:00 hours)
  • Key Topic 3 – Management performance measures – definition, disclosure and unusual items: Will management still be able to explain the overall performance / generation of income in the context of the activities and business strategy? (begins at about 1:42:00 hours)
  • Key Topic 4 – Principles of aggregation and disaggregation – new proposals expected compared to how companies disaggregate information today (begins at about 2:19:00 hours)
  • Key Topic 5 – Statement of cash flows – change to the starting point, new disaggregation due to new line items introduced and removal of classification choice for interest and dividends (begins at about 2:27:00 hours, introduction by IASB and EFRAG only, no discussion due to reasons of time)

The recording of the outreach event is available here. You can also access the slides for the event on the EFRAG website.

IFRS - IASB Image

IFRS Foundation Trustee discusses sustainability reporting

May 13, 2020

On May 13, 2020, the International Accounting Standards Board (IASB) released a speech given by Teresa Ko, IFRS Foundation Trustee, in a virtual presentation at the Green and Sustainable Finance Cross-Agency Steering Group meeting. In her speech, she discussed the possible roles the IFRS Foundation may have for the development of internationally recognized standards on sustainability reporting.

Specifically, Ms. Ko discussed:

  • Background on how the IFRS Foundation started and its role in the development of the IFRS Standards.
  • Current state of sustainability report where there are over 650 different metric available and the desire by many to consolidate the metrics into a global comparable framework.
  • Actions taken by (1) the IASB which include the update to its Practice Statement Management Commentary and (2) the Trustees which include the establishment of a working group to determine the role of the IFRS Foundation in sustainability reporting.

Review the full presentation on the IASB’s website.

ASPE_AcSB Image

Effects of COVID-19 on the Financial Statements of Private Enterprises

May 13, 2020

On May 13, 2020, the Accounting Standards Board (AcSB) released a publication on how the COVID-19 pandemic has had a significant economic impact on Canadian businesses, including private enterprises applying ASPE.

This resource highlights topics that may be relevant for private enterprises to consider when preparing financial statements in accordance with Part II of the CPA Canada Handbook – Accounting.

Review the publication on the AcSB's website.

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