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AcSB response Financial Instruments with Characteristics of Equity

Feb 19, 2019

On February 19, 2019, the Accounting Standards Board (AcSB) response to the International Accounting Standards Board’s (IASB) Discussion Paper, which seeks to address the current application challenges with IAS 32, "Financial Instruments: Presentation", was published by the IASB.

The AcSB commends the IASB for striving to address the current application challenges and agree that standard setting activity is required to address issues that currently arise with the application of IAS 32.

Overall, their response letter clearly articulates that they are of the view that the IASB’s preferred approach is not robust enough to address all the challenges identified in practice. The new terminology introduces very complex concepts that are likely to create additional application challenges.

Although they appreciated the IASB’s effort to expand the disclosures for equity instruments, they did not agree with the proposal to expand the attribution of income and expenses to equity instruments other than ordinary shares.

The AcSB welcomed some of the IASB’s proposals – especially on the retention of the puttable exception and the disclosure of terms and conditions of financial instruments, especially as it relates to equity instruments.

Review the press release on the AcSB's website and the full letter on the IASB's website.

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A Podcast Series – AcSB in Conversation

Feb 15, 2019

On February 15, 2019, the Accounting Standards Board (AcSB) released a series of poscasts where members of the AcSB discuss key topics relevant to IFRS Standards, Accounting Standards for Private Enterprises, and Not-for-Profit Organizations. Discussions also include updates on the AcSB’s current projects and its many activities.

The podcasts include:

  • Financial Instruments with Characteristics of Equity
  • Section 3856, Financial Instruments
  • IFRS Standards – Implementation Matters and Other Hot Topics
  • Insurance Contracts
  • Primary financial statements and better communication
  • Revenue and Combinations

Listen to the podcasts on the AcSB's website.

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AASB defers disclosure of engagement partner name for audits of certain MJDS filers

Feb 15, 2019

On February 15, 2019, the Auditing and Assurance Standards Board (AASB) published an update on the issue of naming the engagement partner on the auditor’s report and why they deferred its application for one year.

Are you an MJDS filer who has audits that comply with both Canadian GAAS and PCAOB accounting standards, or Canadian GAAS only?

The AASB deferred application of paragraph 46 for one year for audits of financial statements conducted in accordance with Canadian GAAS when the name of the engagement partner is submitted on Form AP for filing with the PCAOB. As a result, paragraph 46 does not apply to audits of financial statements of affected filers for periods ending before December 15, 2019. The AASB will monitor and support the activities of stakeholders to resolve the issue during the deferral period.

Review the update on the AASB's website.


IASB posts webcast on IFRS 15

Feb 14, 2019

On February 14, 2019, the International Accounting Standards Board (the Board) posted a webcast, by Board member Nick Anderson and investor engagement member Sid Kumar, that provides an overview on IFRS 15, "Revenue from Contracts with Customers".

In addition, the webcast discusses performance obligations, value transferred, when to recognize revenue, contract asset and liability, and disclosure requirements.

View the webcast on the Board's website.

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Where does XBRL go from here? SEC Commissioner Jackson shares his vision on structured data

Feb 13, 2019

On February 13, 2019, Toppan Merrill published its latest issue of "Dimensions", which included an article where Robert J. Jackson Jr., one of the three SEC commissioners appointed in 2018, recently added his voice in support of expanding the use of XBRL in disclosure and improving XBRL quality in SEC filings.

He was the keynote speaker at the Investor Forum 2018: Powering Fintech. To outline his vision for the future of structured data, Mr. Jackson presented three specific paths for improving or expanding the role of XBRL data in financial disclosure:

  1. fix the incomprehensible public data;
  2. expand the use of XBRL;
  3. encourage data analysis, not extraction.

Notably, his recurring theme was a collaborative approach in which the market guides the SEC on where to focus.

The commissioner told the audience that “we’re making a mistake as an investing public about what kinds of data we actually have.” A conventional view would recognize two types of corporate financial data: private data—especially about privately owned companies—that must be purchased; and data from public SEC filings. He identifies a third type: data that is “public but completely incomprehensible.” Much of the publicly available data in filings accessible on the SEC’s website is essentially hidden, because mining it is “costly, time-consuming, and error-prone.” With this understanding, one of his goals “for the SEC and for all of you in the XBRL community is that we are going to eliminate that third kind of data.”

Review the full article on Toppan Merrill's website.

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AcSB Chair’s Term Extended

Feb 13, 2019

On February 13, 2019, the Accounting Standards Oversight Council (AcSOC) announced the extension of the term of the Chair of the Accounting Standards Board (AcSB).

Linda F. Mezon, FCPA, FCA, CPA (MI), CGMA has been the AcSB’s Chair since July 1, 2013. Her second term, which was originally set to end March 31, 2021, has been extended to June 30, 2023. This means that Ms. Mezon will serve ten years as Chair of the AcSB, ensuring continuity at a time of significant activity in accounting standard setting, both globally and in Canada.

Review the press release on the AcSB's website.


Updated IASB work plan — Analysis

Feb 11, 2019

On February 11, 2019, the International Accounting Standards Board (the Board) updated its work plan following its February 2019 meeting.

Below is an analysis of all changes that were made to the work plan since our last analysis on January 25, 2019.

Stan­dard-set­ting projects

  • No changes

Main­te­nance projects

  • 2019 Comprehensive Review of the IFRS for SMEs Standard — This project has been added to the work plan. A request for information is expected in H2 2019.

Research projects

  • No changes

Other projects

  • Due Process Handbook Review — This project has been added to the work plan. An exposure draft is expected in the second quarter of 2019.

The revised IASB work plan is available on the Board's website.

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In Brief Podcast – The impact of the AASB’s Exposure Draft on Reporting on Controls at a Service Organization on Practitioners reporting in both Canada and the United States

Feb 11, 2019

On February 11, 2019, the Auditing and Assurance Standards Board (AASB) released a podcast that provides an overview, in light of the recently released exposure draft, of key considerations for practitioners required to report on controls at a service organization under both Canadian and U.S. standards.

Practitioners required to report under both Canadian and U.S. standards need to understand how their approach to these engagements will change should the proposed standard become effective.

There are two key changes that practitioners should be aware of:

  • The AICPA introduced two new overarching standards required to be applied by practitioners, in addition to their standalone service organization standard.
  • There are some areas within proposed CSAE 3416 where the AASB concluded that additional requirements, beyond those in the AICPA equivalent standard, are necessary.

Listen to the podcast and review the transcript on the AASB's website.

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AcSB Research Update – Extractive Activities

Feb 08, 2019

On February 8, 2019, the Accounting Standards Board (AcSB) published an overview of the results of their research on the accounting challenges faced in the extractive sector.

The AcSB also outlines developments since the International Accounting Standards Board (IASB) Discussion Paper, Extractive Activities, was published in 2010. Their findings are to assist the IASB in identifying topics it should consider as it starts research on extractive activities.

Key research findings include:

  • A weak commodity price environment and pipeline capacity constraints are placing additional pressures on the extractive sector.
  • The decline in commodity prices reduces the profitability prospects and attractiveness of the sector.
  • These pressures have caused a decrease in the number of publicly traded entities as a result of mergers, acquisitions and bankruptcies.
  • Other than that, there have been no significant changes or developments in the Canadian extractive sector since 2010.
  • Many preparers, practitioners and regulators say that there are areas of accounting complexity both within and outside of the scope of IFRS 6.
  • However, non-authoritative guidance on many of these challenges are available, e.g. by CPA Canada Mining and the CPA Canada Oil and Gas Task Forces.

Review the press release and overview on the AcSB's website.


IASB member discusses returns, reinvestment opportunities and dividend distribution

Feb 08, 2019

On February 8, 2019, the International Accounting Standards Board (the Board) released an article by Board member Nick Anderson, which discusses corporate performance and how investors seek to understand the quality of the profit number, not just the amount of earnings.

When assessing the sustainability of future profits of an entity, Mr. Anderson notes that investors will consider questions such as:

  • How much capital has the business deployed to generate its level of profit?
  • How persistent are earnings likely to be into the future?
  • Does net profit include gains or expenses that are unlikely to reoccur?
  • Is the pattern of future profits likely to exhibit volatility or cyclicality?
  • To what extent are profits supported by cash flow generation?
  • What are the long-term risks faced by the business, including material environmental and social factors?

And while they draw on the financial statements, management commentary and multiple other information sources, "no number in isolation can adequately capture corporate performance".

He goes on to discuss cash flows, dividend regulations, and accounting requirements, noting that while accounting is an important piece of information it is just "one piece of the jigsaw". Dividend policy reflects many other factors such as reinvestment opportunities, financing needs, the risks faced by the company, legal constraints and incentive arrangements - and all of these factors differ by company, by jurisdiction and over time. Therefore, Mr. Anderson notes, responsibility to determine whether dividend payments are appropriate is beyond the remit of the Board. But he concludes:

However, there is no impediment to complementing high quality financial statements prepared in accordance with IFRS® Standards by providing additional disclosures about dividend policies and dividend payments, including any disclosures needed to meet jurisdiction requirements.

Review the full article on the Board's website.

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