Statement of Principles, Improvements to Not-for-Profit Standards in the private sector [Completed]

Effective date:

N/A – Statement of Principles only

Last updated:

January 2016


The Accounting Standards Board (AcSB) and Public Sector Accounting Board (PSAB) are working together to improve not-for-profit standards to better meet users' needs. Certain not-for-profit standards have requirements that differ from the conceptual frameworks on which Part III of the CPA Canada Handbook and the Public Sector Accounting (PSA) Standards Handbook are based. As a result, the two Boards developed a Joint Not-for-Profit Task Force to review the standards in the 4400 series of Sections in Part III of the CPA Canada Handbook (applicable to NFPOs in the private sector) and the PS 4200 series of Sections in the PSA Handbook (applicable to government NFPOs). The joint review will result in recommended improvements to those accounting standards, which are used by not-for-profit organizations in both the private and public sector. Areas being reviewed include the accounting for: contributions, tangible capital assets, collections of works of art and historical treasures and controlled entities.

The main features affecting both private and public sector NFPOs are as follows:

  1. A contribution would be recognized as an asset, when the NFPO has control of the contribution, would exercise that control if necessary and can reasonably estimate the amount to be received. A contribution would be revenue, except when the contribution gives rise to an obligation that meets the definition of a liability. The proposals replace the deferral and restricted fund methods and would affect the recognition of contributions by NFPOs in both the private and public sectors. The proposals could also have a significant impact on the accounting for contribution pledges and endowment contributions (Principles 1 to 3).
  2. A capital asset would be recognized by an NFPO on its statement of financial position regardless of the size of the NFPO, thereby removing the size exemption currently available for NFPOs in both the private and public sectors (Principle 7).

The main features affecting private sector NFPOs only are as follows:

  1. The accounting for tangible capital assets by a private sector NFPO would follow the standards for private enterprises in Part II of the CPA Canada Handbook - Accounting. The proposals would add guidance on accounting for partial write-downs for both tangible and intangible capital assets (Principles 5 and 6).
  2. Collections of works of arts and historical treasures would be accounted for at either cost or nominal value in the statement of financial position (Principle 8).
  3. Controlled NFPOs would be consolidated, subject to an exclusion for a large number of individually immaterial organizations, and controlled profit-oriented enterprises would be accounted for by the equity method (Principle 10).
  4. Financial statement presentation by a private sector NFPO would follow the standards in Part II. The proposals would require expenses to be presented by both function and object (nature) rather than on one of the two bases (Principles 13 and 14).

Other developments

January 2016

In January 2016, the initial meeting of the AcSB’s Not-for-Profit Advisory Committee took place to continue this initiative to the next stage under the following three projects: (i) Accounting Standards Improvements for NFPOs (Tangible, Assets, Intangible Assets and Other Items); (ii) Contributions – Revenue Recognition and Related Matters; and (iii) Reporting Controlled and Related Entities by Not-for-Profit Organizations.

February 2014

As of February 2014, the AcSB and PSAB have received a substantial number of responses from a broad variety of stakeholders in the private and public sectors. Stakeholders have provided the Boards with a variety of carefully considered positions on each of the principles described in the SOP. Out of the 290 comment letters received to date, approximately 190 provided responses to the AcSB, 45 to PSAB and 55 to both Boards

August 2013

On August 21, 2013, the AcSB issued a Request for Input from stakeholders as to whether the reporting currently required by Part III of the CPA Canada Handbook – Accounting adequately meets the needs of users of private sector NFPOs’ financial statements.

July 2013

On July 15, 2013, the AcSB and the PSAB extended the comment deadline on the SOP from September 15, 2013 to December 15, 2013.

April 2013

On April 10, 2013, the AcSB (jointly with the PSAB) issued a Statement of Principles (SOP) which includes 15 proposed principles which should underlie accounting standards for NFPOs.

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