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Accounting for Related Party Financial Instruments and Significant Risk Disclosures (Proposed Amendments to Section 3856, Financial Instruments) [Completed]

Effective date:

The amendments to Section 3856 are effective for fiscal years beginning on or after January 1, 2021 (was for fiscal years beginning on or after January 1, 2020), with earlier application permitted.

Last updated:

April 2020

Reach out to our Section 3856 Specialist

Kerry Danyluk


Based on feed­back re­ceived from re­spon­dents to its Post-im­ple­men­ta­tion Re­view of Sec­tion 3856, Fi­nan­cial In­stru­ments, the Ac­count­ing Stan­dards Board (AcSB) undertook this project to clarify the guid­ance per­tain­ing to the fol­low­ing ar­eas: (i) the scope of re­lated party fi­nan­cial in­stru­ments; (ii) the mea­sure­ment of re­lated party com­pound fi­nan­cial in­stru­ments; and (iii) amend­ing the fi­nan­cial in­stru­ment risk dis­clo­sure re­quire­ments.

On completion of the project, the final amendments to Part II were issued to the CPA Canada Handbook in December 2018. Section 3856 has been amended to:

  • require financial instruments in a related party transaction be measured at cost, except for equity or debt quoted in an active market, debt instruments when the inputs significant to the determination of the fair value of the instrument are observable or derivative contracts, that are initially measured at fair value;
  • determine cost based on whether an instrument has repayment terms or not;
  • align the subsequent measurement requirements of a financial instrument with the instrument's initial measurement;
  • require a financial asset transferred in a related party transaction be assessed for impairment before an enterprise recognizes the forgiveness of the asset;
  • provide guidance on how to measure an impairment of a debt and equity instrument in a related party transaction measured at cost;
  • require a private enterprise recognize the forgiveness of a related party financial asset in equity or net income;
  • require a not-for-profit organization to recognize forgiveness of a related party financial asset in the statement of operations; and
  • require enterprises to prepare their financial instrument disclosures using enterprise-specific information.

The amendments are effective for annual financial statements relating to fiscal years beginning on or after January 1, 2020. Earlier application is permitted.


Other developments

December 2018

On December 12, 2018, the AcSB issued the Basis for Conclusions – Accounting for Related Party Financial Instruments and Significant Risk Disclosures.

On December 1, 2018, the final amendments to Section 3856 in respect of this project were issued to the CPA Canada Handbook.

October 2017

On October 31, 2017, the AcSB issued an Exposure Draft proposing amendments to Section 3856, related to the accounting for financial instruments between related parties and significant risk disclosures. Stakeholders are encouraged to submit their comments by January 29, 2018.

February 2017

On February 28, 2017, the staff of the AcSB updated this project to indicate that the AcSB expects to issue an Exposure Draft for comment in Q4/2017.


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