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Standard-setting activities & insights
International Financial Reporting Standards
Recognition of Deferred Tax Assets for Unrealized Losses
On October 3, 2014, the AcSB issued this Exposure Draft that corresponds to
the IASB’s Exposure Draft on the same subject. Canadian stakeholders are
encouraged to submit their comments by December 18, 2014.
The draft amendments propose guidance that clarifies how to account for deferred tax assets related
to debt instruments measured at fair value. The draft amendments are issued in response to diversity
in practice and are relevant in circumstances in which the entity reports tax losses.
Updated IFRS Work Plan
On September 26, 2014, the IASB issued its updated Work Plan for IFRSs as at
September 26, 2014. The revised plan updates the expected redeliberation periods
in the amendments to IAS 1 and recognition of deferred tax assets for unrealized
losses projects, as well as noting the extension for the expected timing of the
exposure draft in the conceptual framework and liabilities projects. The
rate-regulated activities project now appears as a major project, while the
principles of disclosure remained as a research project. Both the rate-regulated
activities and unit of account project have their public consultation periods
noted in the revised work plan. Further, the revised plan provides an expected
date for a final IFRS on amendments to IAS 1 (Q4 2014) as well as a discussion
paper on principles of disclosure (Q1 2015). Lastly, it includes updates to the
expected timing of board discussions for various research projects.
Highlights of the September 2014 IASB meeting
On September 26, 2014, the IASB issued an Update summary
of its meeting on September 22-24, 2014. The topics
discussed included: (i) the Disclosure Initiative; (ii)
Research Project; (iii) Insurance Contracts; (iv) the
Conceptual Framework; (v) an IFRIC Update; (vi) A Paper
on IAS 21, The Effects of Changes in Foreign Exchange
Rates—Foreign exchange restrictions and
hyperinflation; (vii) IAS 1, Presentation of
Financial Statements—Classification of liabilities;
(viii) a Paper on the distinction between a change in
accounting policy and a change in accounting estimate;
(ix) A Paper on the classification of a hybrid financial
instrument by the holder; and (x) the
Post-implementation Review of IFRS 3, Business
Combinations.
Annual Improvements to IFRS 2012-2014 Cycle
On September 25, 2014, the IASB issued its Annual
Improvements to IFRSs 2012-2014 Cycle, which
includes five amendments to four IFRSs under the IASB’s
annual improvements process. The amendments are to IFRS
5, Non-current Assets Held for Sale and Discontinued
Operations, IFRS 7, Financial Instruments:
Disclosure, IAS 19, Employee Benefits, and
IAS 34, Interim Financial Reporting. The
amendments are effective for annual periods beginning on
or after January 1, 2016. Earlier adoption is permitted.
Highlights of the September 2014 IFRIC meeting
On September 24, 2014, the IASB issued an update summary
of its Interpretations Committee meeting on September
16-17, 2014. The meeting included (i) discussion of four
items that are on the current agenda of IFRIC, being
items relating to IFRS 5, IFRS 11, IAS 12 and IFRIC 14/IAS
19; (ii) several Interpretations Committee tentative
agenda decisions; and (iii) other matters.
Accounting Standards for Private Enterprises
Redeemable Preferred Shares Issued in a Tax
Planning Arrangement
On October 1, 2014, the AcSB issued an Exposure Draft that proposes to delete
Financial Instruments,
paragraph 3856.23, and includes a Basis for Conclusions. Stakeholders are encouraged to submit their
comments, on the form provided, by January 15, 2015.
This Exposure Draft proposes that current guidance in 3856 that permits redeemable preferred shares (issued in a tax planning arrangement within specific sections of the ITA) to be presented as equity be removed and consequently these instruments would be accounted for as financial liabilities. This
could have a significant effect on the financial statements of entities, specifically to increase the
total amount of liabilities and decrease the total amount of equity. The AcSB thinks that presenting
redeemable preferred shares in a consistent manner as other liabilities results in benefits to users
in the form of greater transparency and understandability.
Public Sector Accounting Standards
Highlights of the September 2014 PSAB Meeting
On September 25, 2014, the PSAB issued a Decision
Summary of its meeting on September 15-16, 2014. Among
the items discussed at this meeting were the PSAB’s
projects in respect of Financial Instruments, Government
Transfers, PSA Handbook Terminology and Improvements to
the Standards for Not-for-Profit Organizations.
The
results of results of the 2014 Project Priority Survey
were also discussed.
Highlights of the September 2014 IPSASB meeting
On September 18, 2014, the IPSASB issued a podcast of
the highlights of its meeting on September 15 -18, 2014.
Among the items discussed at this meeting were the
approval of the Conceptual Framework, updates on current
projects, the IPSASB’s Strategy and Work Plan
Consultation and the Social Benefits Consultation Paper.
Financial institutions requirements
Guideline D-12, Public Disclosure Requirements
related to Basel III Leverage Ratio
On September 22, 2014, OSFI issued the final version of
its Guideline D-12, Public Disclosure Requirements
related to Basel III Leverage Ratio. Previously on
January 12, 2014, the BCBS issued its final rules on the
Basel III leverage ratio framework and disclosure
requirements (the BCBS LR Framework). The BCBS LR
Framework introduces a simple, transparent, non-risk
based leverage ratio to act as a credible supplementary
measure to the risk-based capital requirements and
includes public disclosure requirements starting January
1, 2015. Guideline D-12 provides clarification on the
implementation of the BCBS LR Framework disclosure
requirements for all Canadian federally regulated
deposit-taking institutions. OSFI requires D-SIBs (i.e.,
the 6 major Canadian banks) to fully implement the
disclosures as described in Guideline D-12 starting with
first quarter 2015 reporting. OSFI requires non-D-SIBs
(i.e. all other federally regulated deposit-taking
institutions) to fully implement the disclosures for
year end 2015 reporting.
Assurance
Updated PCAOB Standard-Setting Agenda
This update outlines milestones on various standard-setting projects:
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Improving Transparency Through Disclosure of Engagement Partner and Certain
Other Participants in Audits: The staff is drafting for the Board's
consideration a supplemental request for comment that takes into account
comments received on the reproposal, including comments related to liability
and an alternative location for the disclosure. |
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Auditor's Reporting Model: The staff is analyzing the comments received on
the proposal and at the public meeting and is drafting a reproposal for the
Board's consideration. |
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Supervision of Other Auditors and Multilocation Audit Engagements:
Observations from the Board's oversight activities indicate, among other
things, a need for improvement in audit procedures performed by the
accounting firm issuing the auditor's report with respect to the work
performed by other auditors. |
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Use of Specialists: Because of the linkage between accounting estimates and
the use of specialists, the staff plans to issue a separate staff
consultation paper to seek additional public comment on certain matters
related to the use of specialists, including key potential audit
requirements. |
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Going Concern: The staff is developing a staff consultation paper seeking
public comment on potential approaches to improving the performance and
reporting requirements in the existing standard. |
Staff Audit Practice Alert, Matters Related to the Auditor's Consideration of
a Company's Ability to Continue as a Going Concern
This practice alert discusses the professional standards applicable to the
auditor's evaluation of a company's ability to continue as a going concern in
light of recent changes to US generally accepted accounting principles ("GAAP").
The alert says that auditors should look to the applicable financial reporting
framework—whether U.S. GAAP or IFRS—to assess management's going concern
evaluation and the related financial statement disclosures. The alert also makes
clear that auditors should continue to look to the existing requirements of
AU sec. 341, The Auditor's Consideration of an Entity's Ability to Continue as a
Going Concern when evaluating whether the auditor's report requires an
explanatory paragraph disclosing the auditor's substantial doubt about a
company's ability to continue as a going concern. It also notes that the
auditor's evaluation is qualitative based on the relevant events and conditions
and other considerations set forth in AU sec. 341. A determination that no
disclosure is required under U.S. GAAP or IFRS, as applicable, is not conclusive
as to whether an explanatory paragraph is required under AU sec. 341. Auditors
should make a separate evaluation of the need for disclosure in the auditor's
report in accordance with the requirements of AU sec. 341.
Highlights of the September 2014 AASB meeting
On September 22, 2014, the AASB issued a Decision Summary of its meeting on
September 8-9, 2014. Among the items discussed at this meeting were the IAASB’s
projects on Auditor Reporting, Financial Statement Disclosures and Auditor’s
Responsibilities Relating to Other Financial Information. In addition the AASB
discussed its own projects on Association, Auditor’s Consent to the Use of the
Auditor’s Report in Connection with Designated Documents, Special Reports —
Assurance on Compliance with Agreements, Statutes and Regulations, and Standards
for Review Engagements. The IAASB’s Strategy and Work Program was also
discussed.
Exposure Draft of a new Section 7170, Auditor’s Consent to the Use of the
Auditor’s Report in Connection with a Business Acquisition Report
The AASB approved an Exposure Draft of a new Section 7170, Auditor’s Consent
to the Use of the Auditor’s Report in Connection with a Business Acquisition
Report. Section 7170 would replace Section 7500, Auditor’s Consent to the
Use of the Auditor’s Report in Connection with Designated Documents. The
Exposure Draft is expected to be issued in October 2014.
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Chantal Rassart, CPA, CA, CPA (IIIinois)