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Standard-setting activities & insights
International Financial Reporting Standards
October 2014 IASB work plan
On October 28, 2014, following its October meeting, the IASB updated its work
plan. The revised plan adds an expected dates for final IFRSs on leases (H2 2015)
and investment entities (Q4 2014); narrows the target range for the discussion
paper on principles of disclosure to the second quarter of 2015; and moves the
target date for an exposure draft on the classification of liabilities to the
first quarter of 2015. Further, the revised plan provides an updated date for
the feedback statement on the post-implementation review of IFRS 3 (now Q1
2015). Lastly, it includes updates to the expected timing of board discussions
for the research project on inflation (Q1 2015) and adds a new research topic on
performance reporting to be discussed during the first quarter of 2015.
October 22-24, 2014 IASB public meeting
On October 28, 2014, the IASB issued its October Update which is a staff summary
of the tentative decisions reached by the IASB at its public meeting held on
22-24 October 2014. The topics discussed at that meeting included: the research
project on Financial Instruments with Characteristics of Equity, the Disclosure
Initiative, an IFRIC update, the Leases project, the project on Investment
Entities: Applying the Consolidation Exception, the project on IFRS for SMEs:
Comprehensive Review 2012–2014, the Conceptual Framework project and the
Insurance Contracts project.
Impact of IFRS in the European Union
On October 27, 2014, the IFRS Foundation issued its formal response to the
European Commission’s consultation on the impact of IFRS in the European Union.
The Foundation believes that it is clear that the adoption of IFRS, as a common financial reporting language,
has brought positive effects in terms of the quality, transparency and comparability of
financial reporting.
Accounting Standards Board Decision Summary - October 15, 2014
On October 24, 2014, a Decision Summary with respect to the AcSB’s meeting on October 15, 2014 was issued.
The topics discussed at that meeting included the IASB Discussion Paper, Accounting for Dynamic Risk
Management: a Portfolio Revaluation Approach to Macro Hedging.
Summary report of the EFRAG, EFFAS, ABAF, and IASB Joint Investor Outreach Event
on macro hedging
On October 23, 2014, the IASB, EFRAG, EFFAS, and ABAF issued a Summary Report of
their third user (investor) event held on July 7, 2014. The joint outreach event
discussed the IASB Discussion Paper, Accounting for Dynamic Risk Management: A
Portfolio Revaluation Approach to Macro Hedging. This event included: presentations
from preparers explaining current practices in the banking and insurance sectors
and from analysts on how the information is understood and used; an explanation of
preliminary IASB and EFRAG positions; and a Question & Answer session.
IFRS learning resources
On October 21, 2014, the IFRS Foundation Education
Initiative issued an updated list of English language
learning resources about IFRS available to accounting
practitioners, educators, students, and others who wish
to study IFRS. The list includes resources available
from accounting firms, professional bodies, government
agencies, commercial publishers, and the IASB itself.
The list also includes IFRS-based textbooks.
Accounting Standards for Private Enterprises
Redeemable preferred shares issued in a tax planning arrangement
On October 29, 2014, the AcSB published a FYI article that discusses the AcSB’s
recently issued Exposure Draft regarding redeemable preferred shares issued in a
tax planning arrangement, specifically for shares issued in transactions
commonly known as an “estate freeze”. The proposal would see these shares
treated in the same manner as any other redeemable preferred shares – i.e., as a
financial liability.
Accounting Standards Board Decision Summary - October 15, 2014
On October 24, 2014, the AcSB issued a summary of its
meeting held on October 15, 2014. The topics addressed
at that meeting included a discussion of the enterprises
permitted to apply the Accounting Standards for Private
Enterprises.
Private Enterprise Advisory Committee Meeting Notes - September 16, 2014
On October 24, 2014, the AcSB issued a summary of the Private Enterprise Advisory Committee meeting held on September 16, 2014. The topics discussed
included:
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the AcSB Strategic Initiative; |
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the Annual Improvements project for 2015; |
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Section 3462, Employee Future Benefits, |
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the impact of IFRS 15 on entities that report revenue in accordance with
Section 3400; and |
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the accounting for a subsidiary when the cost or equity method is used. |
Public Sector Accounting Standards
Post-Implementation Review: Section PS 3410, Government Transfers
On November 3, 2014, PSAB issued a Request for
Information to gather information about stakeholders’
experience in the implementation and ongoing application
of Section PS 3410. Now that stakeholders have had an
opportunity to work through the issues related to
Section PS 3410, PSAB would appreciate learning how you
dealt with those issues and if you see any issues on a
go-forward basis.
Stakeholders are encouraged to submit their responses by
May 15, 2015. PSAB will deliberate on the findings of the review to consider the
appropriate next steps.
Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities
On October 31, 2014, the IPSASB issued its Conceptual
Framework for General Purpose Financial Reporting by
Public Sector Entities (the Conceptual Framework),
following the approval of the final four chapters at its
September 2014 meeting. The publication of the
Conceptual Framework provides the IPSASB with the
concepts that will underpin the development of
International Public Sector Accounting Standards (IPSASs)
and Recommended Practice Guidelines (RPGs) in the coming
years.
US GAAP
Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions
On October 30, 2014, the FASB issued a proposed Update where it specifies that,
for purposes of calculating historical earnings per unit under the two-class
method, the earnings (losses) of a transferred business before the date of a
dropdown transaction would be allocated entirely to the general partner
interest. In that circumstance, the previously reported earnings per unit of the
limited partners (which is typically the earnings per unit measure presented in
the financial statements) would not change as a result of the dropdown
transaction. Qualitative disclosures about how the rights to the earnings
(losses) differ before and after the dropdown transaction occurs for purposes of
computing earnings per unit under the two-class method would also be required.
Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share
On October 30, 2014, the FASB issued a proposed Update where it recommends to
remove the requirement to categorize within the fair value hierarchy investments
for which fair values are measured at net asset value using a practical
expedient.
Financial instruments — impairment
At its October 29, 2014, meeting, the FASB discussed credit impairment
disclosures and the scope of the project. In addition, the Board made tentative
decisions about which types of debt instruments would be included within the
scope of the proposed current expected credit loss model.
Simplifying income statement presentation by eliminating the concept of extraordinary items
At its October 29, 2014, meeting, the FASB affirmed its decision to remove
extraordinary items from U.S. GAAP and voted to issue final guidance in an ASU
for this project. The Board tentatively decided to allow either prospective or
retrospective application of the guidance (prospective application will require
disclosure of “both the nature and amount of an item included in income from
continuing operations after adoption that relates to an adjustment of an item
previously separately classified and presented as an extraordinary item before
adoption, if applicable.”) The ASU will be effective for periods beginning after
December 15, 2015, for both public and private entities. Early adoption is
permitted when the guidance is applied from the beginning of the reporting
period in the year of adoption.
Revenue recognition
At its October 29, 2014 meeting of the FASB/IASB joint transition resource group
for revenue recognition, James Kroeker, the FASB vice chairman, announced that
the FASB and its staff plan to conduct further outreach with both public and
private companies over the next several months to gauge their progress in
preparing to implement the guidance in ASU 2014-09 (equivalent to the IASB's
IFRS 15 revenue standard).
Leases
At their October 22, 2014
joint videoconference board meeting, the FASB and IASB continued redeliberating their revisions to lease
accounting and made certain tentative decisions, including the following:
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When evaluating its right to direct the use of an identified asset, a customer
should focus on its ability to direct “how and for what purpose” the asset is
used. In performing this evaluation, the customer would consider its ability to
control certain key aspects of the identified asset, including the purpose, time
frame, and location associated with the asset’s use or deployment. |
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A supplier’s protective right (e.g., a contract that specifies the maximum use
of an asset or requires prudent operating practices) would not, in itself,
prevent the customer from directing the use of the identified asset. |
In addition, the FASB decided to defer making a decision on the two different approaches for evaluating whether a customer has obtained, or has the ability to obtain,
substantially all of the economic benefits from directing the use of the underlying asset.
Accounting for income taxes
At it October 22, 2014 meeting, the FASB voted to issue a proposed ASU on the tax
effects of intra-entity transfers of assets and the
balance sheet classification of deferred taxes. The
Board’s tentative decisions included the following:
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An entity would no longer be required to defer the income tax consequences of
intra-entity asset transfers until the assets are ultimately sold to an outside
party; tax consequences of such transfers would be recognized in tax expense
when the transfers occur. |
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All deferred taxes would be classified as noncurrent; jurisdictional netting
would still be required. |
Financial instruments — classification and measurement
At its October 22, 2014 meeting, the FASB tentatively decided that (1) investments
accounted for under the equity method would be removed
from the scope of its project (the current requirements
would be retained) and (2) for equity securities for
which an entity has elected the practicability
exception, an entity would use a one-step method to
assess whether the securities are impaired. The
assessment would focus on qualitative impairment
indicators in the FASB’s 2013
proposed Accounting Standards Update but would not
include a threshold for when impairment should be
recognized.
Securities regulatory matters
Topical Guide for Registrants
On October 27, 2014, the OSC issued a Topical Guide for Registrants, a new
web-based tool which allows registrants to search for and access OSC
registration and compliance related guidance by subject matter area. The guide
is organized alphabetically with links to relevant information compiled by OSC
staff. This resource provides a single source destination for OSC and CSA
guidance on current initiatives including the Client Relationship Model.
Extractive Sector Transparency Measures Act
On October 23, the Government of Canada introduced
Under this Act, whereby reporting issuers and certain other entities engaged in the commercial development of oil, gas or minerals in Canada or elsewhere will be required to report payments made to foreign and domestic governments at all levels, including Aboriginal groups. This report will be required to be audited and be posted by affected companies annually on their corporate websites in XBRL.
SEC Investigations
On October 22, 2014, the SEC’s Office of Investor Education and Advocacy issued
this Investor Bulletin to provide investors with a general overview of how the
SEC’s Division of Enforcement conducts investigations. The purpose of an SEC
investigation is to determine whether any persons or entities violated the
federal securities laws. Common violations include misrepresenting important
information about potential investments, manipulating the market prices of
securities, stealing customers’ funds or securities, insider trading, and
selling unregistered securities.
SEC 2014 Enforcement Actions
On October 16, 2014, the SEC announced that in fiscal year 2014, new
investigative approaches and the innovative use of data and analytical tools
contributed to a very strong year for enforcement marked by cases that spanned
the securities industry.
In the fiscal year that ended in September, the SEC filed a record 755
enforcement actions covering a wide range of misconduct, and obtained orders
totaling US$4.16 billion in disgorgement and penalties, according to preliminary
figures.
The agency’s enforcement actions also included a number of first-ever cases,
including actions involving the market access rule, the “pay-to-play” rule for
investment advisers, an emergency action to halt a municipal bond offering, and
an action for whistleblower retaliation.
Assurance
Auditor’s Consent to the Use of the Auditor’s Report Included in a Business Acquisition Report
On October 29, 2014, the AASB issued an Exposure Draft of a proposed new
standard (Section 7170, Auditor’s Consent to the Use of the Auditor’s Report
Included in a Business Acquisition Report) that would replace existing
Section 7500, Auditor’s Consent to the Use of the Auditor’s Report in
Connection with Designated Documents. Section 7170 addresses amongst other
issues, the following:
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management representations relating to intervening period events that would be
obtained; |
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procedures that would be performed on interim financial statements included in a
business acquisition report; and |
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content of the proposed auditor’s consent. |
Stakeholders are encouraged to submit their comments by January 30, 2015.
2014 Conference on Auditing and Capital Markets
On October 27, 2014, the PCAOB's Center for Economic Analysis, in conjunction
with the Journal of Accounting Research, held its first annual economic
conference on Auditing and Capital Markets where the following working papers
were presented by their authors:
Auditing and Assurance Standards Board Decision Summary - October 16, 2014
On October 23, 2014, the AASB issued a Decision Summary in respect of its
meeting on October 16, 2014. Among the items discussed at that meeting were:
issues related to revising and clarifying Section 5020, Association; the
approval of an exposure draft of a proposed revised Joint Policy Statement
Concerning Communications with Law Firms Regarding Claims and Possible Claims in
Connection with the Preparation and Audit of Financial Statements; the AASB’s
Operating Plan 2014-2015.
COSO Enterprise Risk Management-Integrated Framework
On October 21, 2014, the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) announced a project to review and update the 2004 Enterprise
Risk Management–Integrated Framework (Framework). This initiative is intended to
enhance the Framework’s content and relevance in an increasingly complex
business environment so that organizations worldwide can attain better value
from their enterprise risk management programs. The initiative also will develop
tools to assist management in reporting risk information and in reviewing and
assessing the application of enterprise risk management.
Approval of proposed PCAOB AS 18, Related Parties
On October 21, 2014, the SEC approved Auditing Standard No. 18, Related Parties,
amendments to certain PCAOB auditing standards regarding significant unusual
transactions, and other amendments to PCAOB auditing standards, including
required procedures to obtain an understanding of a company’s financial
relationships and transactions with its executive officers.
The new standard and amendments will be effective for audits of financial
statements for fiscal years beginning on or after December 15, 2014, including
reviews of interim financial information within these fiscal years.
PCAOB Investor Advisory Group Meeting - October 20, 2014
The IAG is a forum for the investor community to provide its views and advice on
matters affecting investors and the work of the PCAOB. Members of the IAG
represent a broad spectrum of the investment community, as well as individuals
who have a demonstrated history of commitment to investor protection. At its
October 20, 2014 meeting, the PCAOB discussed the following topics:
A webcast replay is also available.
Changes to the rule on independence referred to in the Code of Ethics of
Chartered Professional Accountants
On November 14, 2013, the following amendments to the standards prescribed by Rule 204 on independence were adopted by Public
Trust Committee:
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new definition of "listed entity" to include listed entities that are not
reporting issuers in Canada but are listed elsewhere has been adopted |
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IESBA Code approach adopted whereby all “key audit partners” are required to
rotate; key audit partners comprise the lead engagement partner, the
engagement quality control reviewer and other partners who make key
decisions or judgments with respect to the audit |
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introduction of specific prohibitions related to the provision of taxation
services to audit or review clients. |
Canadian standard–setting governance activities
Support Groups for Canadian Members
On October 15, 2014, the AcSB authorized the
establishment of two new groups to support Canadian
members of the IFRS Interpretations Committee and the
two Transition Groups by providing input and views on
issues to be addressed, based on Canadian transactions
and circumstances:
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Joint Transition Resource Support Group for Revenue Recognition; and |
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IFRS Transition Resource Support Group for Impairment of Financial Instruments. |
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Chantal Rassart,
CPA, CA