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Debt modification accounting

May 06, 2020

On May 6, 2020, the Accounting Standards Board (AcSB) released a publication on the implications of COVID-19 on debt modification accounting.

Are you negotiating a debt agreement with your lender? Debt modification versus extinguishment assessment under IFRS 9 can be tricky. This overview provides some useful tips on performing this assessment and other key considerations on debt modification accounting for both borrowers and lenders.

Review the publication on the AcSB's website.

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Accounting considerations for insurers

May 06, 2020

On May 6, 2020, the Accounting Standards Board (AcSB) released a publication on the implications of COVID-19 for insurers.

COVID-19 pandemic affects insurance companies in many ways – from market volatility on investment portfolios to changes in cash flow estimates relating to insurance liabilities.

Review the publication on the AcSB's website.


IASB proposes to defer effective date of IAS 1 amendments

May 04, 2020

On May 4, 2020, the International Accounting Standards Board (IASB) published an exposure draft "Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1)" proposing to defer the effective date of the January 2020 amendments to IAS 1 by one year. Comments are requested by June 3, 2020.



On January 23, 2020, the IASB issued Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) providing a more general approach to the classification of liabilities under IAS 1, Presentation of Financial Statements based on the contractual arrangements in place at the reporting date. The amendments currently have an effective date of 1 January 2022.

In April 2020, the IASB held a supplementary IASB meeting to consider COVID-19-related matters including the Board's timelines in view of the COVID-19 pandemic. The Board tentatively decided to delay by one year the effective date of Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023.

The proposed amendment published today is solely seeking to delay the effective date of the January 2020 amendments by one year.


Suggested changes

The changes proposed in ED/2020/3 Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1) would defer the effective date of Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023. Earlier application of the January 2020 amendments would continue to be permitted.


Comment period

Comments on the exposure draft are requested by June 3, 2020. The shortened comment period of 30 days was approved in a DPOC meeting on April 16, 2020.


Additional information


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Basis for Conclusions – Identifying and Assessing the Risks of Material Misstatement

May 04, 2020

On May 4, 2020, the Auditing and Assurance Standards Board (AASB) released this document, which summarizes the process the AASB followed in revising CAS 315, Identifying and Assessing the Risks of Material Misstatement.

The AASB did not propose any Canadian amendments in ED-CAS 315, as no situations met the amendment criteria as stated in Appendix 1 to the CPA Canada Handbook – Assurance. Also, there were no public interest considerations identified particular to Canada that would require a Canadian amendment. The Board reviewed the changes made from the Exposure Draft to the final standard and concluded the changes would not require a Canadian amendment. Therefore, CAS 315 contains no amendments to the ISA wording.

Reviews the Basis of Conclusions on the AASB’s website.

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Canadian securities regulators provide temporary relief to public companies with delayed annual meetings due to COVID-19

May 01, 2020

On May 1, 2020, the Canadian Securities Administrators (CSA) announced it is providing public companies with temporary blanket relief from certain filing and delivery requirements, which are generally tied to the sending of materials for annual general meetings (AGMs).

With this conditional temporary relief, the CSA is giving public companies until December 31, 2020 to file their executive compensation disclosure. The CSA is also providing companies with temporary relief from the requirements to send, or send upon request, copies of their annual or interim financial statements and management’s discussion and analysis (MD&A) to investors within certain time periods.

Under securities legislation, public companies must meet several deadlines tied to sending investors a management information circular for their AGM. These include requirements to file executive compensation disclosure within 140 days (non-venture companies) or 180 days (venture companies) of their year end. Additionally, public companies that have not sent an annual request form must, within 140 days of their year end, send copies of their annual financial statements and MD&A. Upon request, public companies must also send copies of their annual or interim financial statements and MD&A to investors.  

The CSA is implementing the relief through local blanket orders that are substantially harmonized across the country. Market participants can view these orders on CSA members’ websites.

Companies that intend to delay filing their executive compensation disclosure must first issue a news release disclosing that they intend to do so and should consult the blanket orders to ensure that they comply with the conditions for the relief. Companies are expected to provide investors with sufficient lead time to review executive compensation disclosure before their AGM.

Review the press release and publication on the CSA's website.

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Responses to Accountancy Europe cogito paper show strong support for a global solution to non-financial reporting

Apr 30, 2020

In December 2019, Accountancy Europe published a paper describing and calling for a global solution to interconnected standard-setting that can meet the need for reliable, consistent information in non-financial reporting that is interconnected with financial reporting. The comment deadline for the paper has now ended and the responses received show strong support for a global approach to standard setting in this area.

The paper had noted that the hundreds of non-financial information (NFI) reporting initiatives available are leading to confusion and the potential for greenwashing. For an effective response to these global issues and stakeholder demands, NFI reporting needs to be harmonized and interconnected with financial reporting. The paper then explored four approaches how this can be achieved, being (1) an international non-financial reporting standards board within the IFRS structures, (2) regional consolidation, (3) separate governance structure for financial and NFI reporting; and (4) global corporate reporting structure.

The responses so far made available on the Accountancy Europe website (17 responses that can be accessed here) show strong support for approach number four.

Of the large accounting organisations, ACCA very much supports overall the content and conclusions of the paper and agrees that approach 4 represents the best model for setting the standards needed to address the issues at hand. IFAC states that a global approach to international standard-setting is an optimal solution and notes: "IFAC strongly supports a global, versus regional or local, approach to “non-financial” standard setting, including the process of establishing a conceptual framework and standards, for the same reasons international standards were critical for the maturity of financial reporting. A regional or local approach ultimately leads to inefficiency and increased costs — for both companies and investors and might be challenging to retrofit at an international level."

The majority of national standard-setters also support the global approach. The German standard-setter ASCG states: "[W]e do not share the view of those that believe Europe should be first, go regional and create its own non-financial reporting environment. The reporting requirements are primarily targeting companies that are sourcing, selling and doing business beyond Europe's borders" and the Dutch standard-setter DASB believes that for any global initiative, clear support of major national and international stakeholders and jurisdictions is essential and notes that approach four may be most appropriate given the fact that also the United Nations have made promising progress in developing their SDGs.

The sustainability and integrated reporting organisations, apart from promoting their own standards and frameworks, favour global solutions as well. The CDSB warns that a "regional approach may not be the best method to develop a global standard. This problem is further exacerbated by the issue that jurisdictions outside of Europe may be hesitant to adopt regional concepts", GRI notes that a "globalized system will unlock the value of the information by easing comparability and analysis while minimizing reporting burden", and the IIRC comments: "We endorse the approach taken by Accountancy Europe in encouraging dialogue between stakeholders that will lead to a globally coordinated solution involving many different constituents on an inclusive basis."

Responses from academia offer careful analysis of all approaches and general statements in the paper. One comment letter notes: "Approach 4 has much greater potential with respect to global acceptance. It is unrealistic to expect global adoption of an approach that is designed and controlled locally. [...] This is especially important for NFI because the underlying challenges are global. [...] By creating barriers to global acceptance, Approach 2 risks undermining the EU’s policy ambition in this regard. Conversely, if the EU were to initiate, promote and support Approach 4, and commit to adopting the resulting standards (with appropriate endorsement process), then it would be in a strong position to ensure that the specific implementation of Approach 4 would reflect the EU’s views, against criteria such as public accountability and balanced member ship of the standard-setting body."

The responses from audit firms all support a global solution as well. Our Deloitte comment letter notes: "We agree that there is a need for a global solution in view of the global flow of capital and the urgent need to address issues such as climate change which have no borders. We urge capital market regulators and multi-lateral authorities to engage urgently in putting a robust global systemic solution in place."

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IAASB publishes guidance on auditor considerations relating to going concern in light of changing environment due to the COVID-19 pandemic

Apr 29, 2020

On April 29, 2020, the International Auditing and Assurance Standards Board (IAASB) issued their official guidance on auditor considerations relating to going concern in light of changing environment due to the COVID-19 pandemic.

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

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Leadership during the coronavirus

Apr 29, 2020

In April 2020, the Harvard Business Review (HBR) released a series of articles on how to lead during this pandemic.

Review these articles:

How to be an inclusive leader through a crisis?

Leaders are under extraordinary pressure right now. They are expected to make decisions quickly with incomplete and rapidly evolving information. And unfortunately, being in crisis mode can cause even the most intentional and well-meaning leaders to fall into patterns of bias and exclusion. Research shows that when we’re stressed, we often default to heuristics and gut instincts, rather than making deliberate and goal-oriented decisions. And yet, leaders must prioritize inclusion right now, more than ever.


Build your team’s resilience — From home

To make it through the current crisis and return to a new normal, you and your team will need to be resilient. The good news is that leaders can help create the conditions that make this possible. We’ve done multiple studies with U.S. Navy recruits that show how this can best be done—and, recently, in studying how leaders are responding to the crisis, we’ve come across valuable stories of how they can achieve this even when team members are working remotely.


What good leadership looks like during this pandemic?

The speed and scope of the coronavirus crisis poses extraordinary challenges for leaders in today’s vital institutions. It is easy to understand why so many have missed opportunities for decisive action and honest communication. But it is a mistake to think that failures of leadership are all we can expect in these grim times.


The agile C-Suite

Building an agile enterprise does not mean replacing traditional operations with agile teams everywhere. Agile is primarily for innovation, and the testing and learning it involves can compromise critical operating processes. Building an agile enterprise means finding the right balance between standardizing operations and pursuing (sometimes risky) innovations.


Begin with trust

Trust is also one of the most essential forms of capital a leader has. Building trust, however, often requires thinking about leadership from a new perspective. The traditional leadership narrative is all about you: your vision and strategy; your ability to make the tough calls and rally the troops; your talents, your charisma, your heroic moments of courage and instinct. But leadership really isn’t about you. It’s about empowering other people as a result of your presence, and about making sure that the impact of your leadership continues into your absence.


The case for a Chief of Staff (CoS)

Most new CEOs pay little attention to a key factor that will help determine their effectiveness: the administrative system that guides day-to-day operations in their offices. This system ensures that leaders make the most of their limited time, that information arrives at the right point in their decision-making process, and that follow-up happens without their having to check. Many new CEOs default to the system they’ve inherited, even if it is poorly suited to their style or to the operational changes they must make. Often there’s a better way to handle the information flow necessary for a CEO to succeed—and very often a chief of staff (CoS) can play an essential role.


Keep your people learning when you go virtual

The COVID-19 pandemic is bound to leave behind lasting changes in the way work and business take place. Learning will be the foundation of our survival, then, for both organizations and the individuals who make them up. As the world shifts to online work and businesses struggle to reinvent themselves, organizations need to learn what kinds of new products and services will appeal to their consumers and learn how to create them. Leaders must learn how to keep a distributed workforce focused, energized, and attuned to customers’ changing needs. Whether you are a CEO, senior manager, or junior professional, if you neglect learning, you stop adapting and forego leading.




IASB Chair discusses annual cohorts

Apr 28, 2020

On April 28, 2020, the International Accounting Standards Board (IASB) issued an article by IASB Chair Hans Hoogervorst explaining the reasons supporting the IASB’s recent decision to uphold the annual cohort requirement in IFRS 17 for grouping insurance contracts to measure and recognize profit.

In the article, In Brief: IFRS 17 Insurance Contracts — why annual cohorts?, Mr. Hoogervorst states:

The Board is particularly concerned that financial reporting presents fairly the financial performance of businesses in each period and how profitability changes over time. As emphasized by the Board’s Conceptual Framework, IFRS Standards must result in useful information about financial performance as well as financial position. Much of existing insurance contract accounting is founded on prudential regulation that has a primary focus on solvency. We believe the dual focus of IFRS Standards on financial performance and financial position greatly enriches the information provided in financial statements. The statements of financial performance often serve as a canary in the coal mine. An erosion of profits may be a foreboding of problems to come.

Mr. Hoogervorst goes on to discuss:

  • most financial reporting is applied at the individual contract level;
  • why accounting for individual insurance contracts is not appropriate;
  • annual cohorts essential for prudent planning;
  • objections to annual cohorts raised during the recent consultation, including:
    • Do annual cohorts fail to reflect intergenerational sharing of risk?
    • Do annual cohorts result in arbitrary allocations?
    • Are annual cohorts too costly for contracts with intergenerational sharing of risks?
  • deliberations and redeliberations; and
  • implementing the standard.

Review the press release and article on the IASB's website.

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Impairment of non-financial assets

Apr 28, 2020

On April 28, 2020, the Accounting Standards Board (AcSB) released a publication on the implications of COVID-19 on the impairment of non-financial assets.

This publication provides an overview of the implications and includes a list of helpful resources to support you as you navigate your impairment assessment.

Review the publication on the AcSB's website.

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