Overview

The following summarizes the proposed significant amendments:

• Income Statement, Section 1520

Section 1520 identifies the items to be presented separately in the income statement as well as items that may be either presented separately in the income statement or disclosed in the notes to the financial statements. Section 1520 is a compilation of the requirements of other standards; it does not include any additional requirements. The proposed amendment eliminates inconsistencies between Section 1520 and other standards in Part II of the CPA Canada Handbook - Accounting.

• Business Combinations, Section 1582

Section 1582 requires acquisition-related costs to be expensed, with the exception of the costs to issue equity securities that are recognized in accordance with Section 3610, Capital Transactions. A business acquisition may be financed through the issuance of debt or equity securities. The proposed amendment extends the exception to the general requirement to expense acquisition costs to the cost of issuing debt securities, and requires those costs to be recognized in accordance with Section 3856, Financial Instruments. 

• Subsidiaries, Section 1590

Section 1590 provides an accounting policy choice for an entity to consolidate its subsidiaries or to account for them using either the cost or equity methods. There is no guidance on the accounting for acquisition costs or contingent consideration when the entity’s subsidiaries are accounted for using the cost or equity methods. The AcSB decided that the initial accounting for a subsidiary should be the same, regardless of which accounting policy choice is selected for subsequent periods. Consequently, the proposed amendments require accounting for acquisition costs and contingent consideration for subsidiaries accounted for using the cost or equity methods that is consistent with the requirements in Section 1582. The proposals require acquisition costs for subsidiaries accounted for using the cost or equity methods to be expensed, except for costs to issue debt or equity securities. The proposals also require contingent consideration to be measured at fair value at the date of acquisition and accounted for as part of the investment in the subsidiary. In subsequent periods, contingent consideration is also measured on the same basis as required in Section 1582.

• Foreign Currency Translation, Section 1651

The proposed amendments to Section 1651, Foreign Currency Translation, remove an inconsistency with Section 1602, Non-controlling Interests, when an entity’s interest in a self-sustaining foreign operation changes. Section 1602 requires a change in a parent’s interest in a consolidated subsidiary that does not result in a loss of control to be accounted for as an equity transaction. However, Section 1651 requires an appropriate part of the foreign exchange gains and losses accumulated in a separate component of shareholders’ equity to be included in net income when there is a reduction in the net investment. The proposed amendments also clarify the accounting for foreign exchange gains and losses accumulated in a separate component of shareholders’ equity for different scenarios involving a full or partial reduction in an entity’s interest in a foreign operation.

• Investments, Section 3051

Section 3051 does not provide guidance on the accounting for dilution gains and losses that result, for example, when an investee issues additional shares to third parties. The proposed amendment would require gains and losses resulting from the dilution of an entity’s interest in an investee accounted for using the equity method to be recognized in income. This is consistent with the accounting for a gain or loss arising from the sale of a portion of an investment.

Recent activities

November 2012

On November 14, 2012, the AcSB issued a Background Information and Basis for Conclusions document in respect of these changes.

July 2012

At its July 11, 2012 meeting, the AcSB approved (subject to minor modifications, drafting improvements and a written ballot) the proposed amendments to improve accounting standards for private enterprises set out in the March 2012 ED.

March 2012

On March 8, 2012, the AcSB issued an ED for comment entitled, 2012 Improvements to Accounting Standards for Private Enterprises.