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In this issue, Diana De Acetis, a partner in our National Services Group, provides additional insights that build on her previous editorial published in an earlier edition of Financial Reporting Insights. This article provided a high-level overview of the two new standards dealing with the accounting of interests in other entities by private enterprises. If you missed the part I overview, which focused on joint arrangements, please click here. In this piece, Diana describes the new accounting and presentation requirements for investments in subsidiaries.

From now on, our standard-setting activities and insights, we will only include a selection of the key headlines over the two-week period that this newsletter covers. For a comprehensive listing of all financial reporting news, we would like to invite you to visit our freshly launched Web site: Deloitte’s Centre for Financial Reporting.

Warm regards,



Chantal Rassart
Partner | Audit Knowledge Management Officer

The Canadian Accounting Standards Board issued a new standard, Section 1591, Subsidiaries, for enterprises that apply ASPE. This new section replaces the current guidance for determining control (Section 1590, Subsidiaries) and also results in the withdrawal of AcG‑15, Consolidation of Variable Interest Entities. It is effective for fiscal years beginning on or after January 1, 2016, with early adoption permitted.

It is important to note that these changes will mainly impact private enterprises that apply the consolidation model for subsidiaries.

What are the key changes?

The new requirements do not change the existing guidance for determining whether an enterprise controls another through equity interests (i.e. the voting control model), nor the definition of “control.” However, one of the key changes is the withdrawal of AcG-15, Consolidation of Variable Interest Entities, in response to concerns that it is too difficult to apply in practice. Instead, the standard introduces a simpler approach for determining whether one enterprise controls another through means other than equity interests, such as through contractual arrangements. This revised standard is applicable to all enterprises that prepare consolidated financial statements.

The following are the primary changes to the consolidation model introduced in the new section:

Overall, the determination of control will require a facts and circumstances analysis when there are contractual arrangements that include rights or powers that may provide the counterparty with control.

What are the potential impacts for enterprises that prepare consolidated financial statements?

The withdrawal of AcG-15 and the introduction of this simpler approach to determine when control may exist in contractual arrangements may result in different conclusions than were previously reached about whether an enterprise controls, and thus consolidates, another enterprise.

Key performance indicators and other financial indicators, including debt covenants may be impacted by any changes to the enterprises that were included in the consolidated financial statements under the prior consolidation requirements.

Are there any transition provisions?

The new requirements will have to be applied retrospectively. Some transitional relief is available to ease the initial adoption of these new requirements when the enterprise previously prepared consolidated financial statements or chooses to prepare the consolidation model to subsidiaries for the first time when they adopt the new section.

What are the next steps?

An enterprise preparing consolidated financial statements when considering the impact of this new section should take the following steps:

As always, please don’t hesitate to reach out to your Deloitte Private Business Advisor for more information.

Diana De Acetis, CPA, CA
Partner | National Services

Standard-setting activities & insights

International Financial Reporting Standards

IASB issues “Investor Perspectives” on prudence
On June 11, 2015, the International Accounting Standards Board (IASB) released a new edition in its “Investor Perspectives” series. In this edition, IASB member Steve Cooper discusses the concept of prudence. Read more

Chief Accountant of the SEC believes former SEC chairman's call for burying IFRS was “premature”
On June 5, 2015, at a financial reporting conference in California, Jim Schnurr, Chief Accountant of the Securities and Exchange Commission (SEC), confirmed that the SEC does not intend to bury the objective of a single set of high-quality, globally accepted accounting standards. Mr. Schnurr stated that there is continued support for a single set of high-quality, globally accepted accounting standards. Read more

Accounting Standards for Private Enterprises

AcSB Decision Summary – May 25-26, 2015
On June 4, 2015, the Accounting Standards Board released an executive summary of discussions and decisions with respect to the topics addressed at this meeting. The Accounting Standards Board (AcSB) continued discussions of respondents’ comments, including the results of the roundtable discussions with stakeholders, on the Exposure Draft, “Redeemable Preferred Shares Issued in a Tax Planning Arrangement.” Many respondents noted that the Exposure Draft proposals were based on discussions with creditors and suggested that additional types of users should be consulted. These respondents noted that other users may not understand the results of reporting redeemable preferred shares issued in a tax planning arrangement as liabilities.

The AcSB decided to consider the results of the user outreach on the Invitation to Comment before further deliberating this issue. In light of the above decision, and the time needed to fully consider other issues and comments raised by respondents, the AcSB agreed that any change as a result of this project will not be published prior to January 1, 2016. Accordingly, the AcSB decided that the effective date of any such change will be no earlier than January 1, 2018. Read more

Securities regulatory matters

GRI publishes analysis on sustainability and reporting trends in 2025
On June 1, 2015, the Global Reporting Initiative (GRI) published a first Analysis Paper resulting from its Reporting 2025 Project that is designed to promote an international discussion about the purpose of sustainability reporting and disclosures looking ahead to 2025. Read more

SEC proposes new rules for investment companies and investment advisers
On May 22, 2015, the Securities and Exchange Commission issued two proposed rules that would “modernize and enhance” the reporting and disclosure requirements for investment companies and investment advisers. The purpose of the proposals is to improve the “quality of information available to investors” and facilitate the Commission’s collection and use of data that such companies and advisers provide. Read more

Regulation

Leadersʼ Declaration - G7 Summit
On June 8, 2015, the leaders of the G7 released a declaration where they present some of the concrete steps with regard to health, the empowerment of women and climate protection they agreed on to address the major global challenges and to respond to some of the most pressing issues in the world. Read more

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Standard-setting Activities Digest – May 2015

Publication date: June 2015
This is our last version of the Digest in its current format. However, rest assured you will still be able to access all of the information you previously obtained through the Digest in a new format we believe will be even better equipped to meet your financial reporting needs! With the launch of the Centre for Financial Reporting, you can now access the same information at any time and from anywhere tailored to the specific way you need it. Want to see what standards are effective in 2015 and beyond? Standards released in the last 12 months? Projects updated in the last three months? Exposure-drafts open for comments? It’s all a click away!

We are confident that you will enjoy this new approach to informing you about current standard-setting activities impacting your organization. Make sure to save that page in your Favorites. If something is missing, unclear, could be improved, please reach out to Clair Grindley or myself to share your feedback.

IFRS in Focus — IASB issues Exposure Draft for a revised Conceptual Framework

Publication date: June 2015
This newsletter outlines the proposed revisions to the Conceptual Framework set out in the recent Exposure Draft ED/2015/3, "Conceptual Framework for Financial Reporting," which was issued in May 2015 for public comment.

< IR >: how does it fit into the UK corporate reporting landscape?

Publication date: June 2015
This publication examines the annual reporting requirements and the International < IR > Framework, identifying the missing link between the two. Namely, integrated thinking. It outlines a number of benefits that a company can gain from applying integrated thinking, and highlights key processes that a company will need to have in place to ensure those charged with governance can confidently make the assertions required under the < IR > Framework.

Upping their game: Realigning the finance function

Publication date: June 2015
Based on data obtained through a survey of over 300 respondents who attended Deloitte’s Finance Trends conferences in late 2014, this report identifies the key factors that constrain many CFOs and prevent them from acting as effective strategic partners with their C-suite colleagues. It provides a four-part strategy that CFOs can follow that is practical and cost-effective. In it, you’ll learn how your finance function can be realigned to create greater value for the organization by moving from compiling data and reports to providing thoughtful insights into and analysis of data.

Business news highlights

We continuously review relevant business e-publications and publish a selection of newsworthy items below that we believe you will find interesting and relevant.

Canadian news

U.S. news

International news

Chief Editor

Chantal Rassart, CPA, CA
Partner | Audit Knowledge Management Officer