Français | Archives

It’s been a busy summer…

A big welcome back from Deloitte in our first post-summer edition of Financial Reporting Insights. We hope you had a great summer!

The standard setters did not take a complete break over the summer and, as a result, there are various activities and updates we want to share with you as you catch up with what has been going on in the world of financial reporting. Below is a holiday snapshot by financial reporting framework. For a more comprehensive picture of the summer’s financial reporting activities, don’t forget to review Deloitte’s Centre for Financial Reporting website.

International Financial Reporting Standards

IFRS 10 and IAS 28  - Transactions between investors and associates or joint ventures

Both the Accounting Standards Board (AcSB) and the International Accounting Standards Board (IASB) issued exposure drafts in August to defer the effective date when entities must change some aspects of how they account for transactions between investors and associates or joint ventures. Those changes affect how an entity should determine any gain or loss it recognizes when assets are sold or contributed between the entity and an associate or joint venture in which it invests.

IFRS 15 - New revenue standard

The summer months were busy months as it related to the new revenue standards under both IFRS and US GAAP (IFRS 15/ASU 2014-09 Topic 606). Early in July, the FASB voted and approved a one-year deferral of the effective date of ASU 2014-09 Topic 606. In the subsequent weeks, the IASB approved a one-year deferral of the effective date of IFRS 15, meaning that both Boards have now confirmed a one-year deferral of the effective date of this new standard. This means the mandatory effective date for IFRS 15 is now January 1, 2018.

In addition to the deferral, proposed amendments to respective standards were also issued during these months. The IASB issued an Exposure Draft proposing targeted amendments to the existing Standard, Illustrative Examples and Basis for Conclusions in the areas of: identifying performance obligations, licensing and royalties, principal vs agent considerations and practical expedients on transition.

Accounting Standards for Private Enterprises

Concerning the Post-Implementation Review of Section 3856, Financial Instruments, the AcSB released its feedback statement that summarizes the input received from stakeholders by the AcSB during the course of this Post-implementation Review.

On the strongly-debated project on redeemable preferred shares issued in a tax planning arrangement, the AcSB is still deliberating comments received on its Exposure Draft and in light of 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 would 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.

Accounting Standards for Not-for-Profit Organizations

Deliberations continued around the improvements to the standards for not-for-profit organizations. While the AcSB and Public Sector Accounting Board (PSAB) are deliberating comments received on their joint Statement of Principles, the AcSB launched a new project aimed at clarifying when unique circumstances warrant the continued use of existing Part III standards in which new requirements should be added for private NPOs and when Part II standards can be used.

Public Sector Accounting Standards

In a recent article, When Loans Are Really Grants, published by the PSAB, the author explains how to account for and report certain loans receivable in the financial statements of public sector entities as per Section PS 3050, Loans Receivable. In some cases, public sector entities make loans and provide the borrower with future funding to repay the loan. In other cases, public sector entities provide loans with concessionary terms or forgiveness clauses. Finally, a public sector entity could simply forgive the loan.

Assurance

Recently, there has been a lot of discussion around the standards addressing non-compliance with laws and regulations. Both the Canadian Auditing and Assurance Standards Board (AASB) and the International Auditing and Assurance Standards Board (IAASB) issued an exposure draft proposing to adopt limited changes to international auditing standards necessary to resolve actual or perceived inconsistencies or to clarify key aspects of proposed revisions to the International Ethics Standards Board for Accountants Code of Ethics.

In addition, the AASB issued an Exposure Draft that proposes a new standard to replace existing standards dealing with audits and reviews of compliance with agreements, statutes and regulations (Sections 5800, 5815, and 8600).

Securities

The Canadian Securities Administrators (CSA) published for comment proposed amendments to National Instrument 45-106, Prospectus Exemptions that would introduce a new harmonized report of exempt distribution. This single report would apply across Canada for reporting distributions of securities by both investment fund and non-investment fund issuers, as required when relying on certain prospectus exemptions. Further, the proposed report would provide securities regulators with additional information to facilitate regulatory oversight and policy development for the exempt market, and modernize the CSA’s information collection efforts.

The CSA also published Staff Notice 51-344, Continuous Disclosure Review Program Activities, which summarizes the results of the CSA’s continuous disclosure (CD) review program. The CSA members completed 1,058 CD reviews in fiscal 2015, in which 59 per cent of review outcomes required issuers to take action to improve and/or amend their disclosure or resulted in the issuer being referred to enforcement, ceased traded or placed on the default list.

As for the disclosure requirements around the representation of women on boards and in senior management positions, which was e­ffective December 31, 2014, even though this has prompted more companies to adopt diversity policies, few are setting actual targets to get more women on their boards. As per an article released by Osler, this first year of compliance there is room for significant improvement in several areas, low representation of women on boards and executive officer positions in companies listed on Canada’s senior stock exchange, and virtually no goals or targets for women in senior executive positions.

And concerning the cooperative capital markets regulatory system, the Ministers responsible for capital markets regulation in British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island and Yukon announced the publication for comment of a revised consultation draft of the uniform provincial/territorial Capital Markets Act (CMA).  Additional draft initial regulations will be published for comment in the coming months, including a harmonized set of prospectus exemptions and a fee regulation. The comment period is open until December 23, 2015. As the provinces of Quebec, Alberta and Manitoba remain opposed to replacing the existing securities regulatory framework with the new Cooperative System, it will be interesting to watch how current and new regulations will coexist and apply to listed entities.

Speaking of transparency, the Extractive Sector Transparency Measures Act (“the Act”) was brought into force on June 1, 2015. The Act delivers on Canada’s 2013 G8 commitment to contribute to global efforts against corruption in the extractive sector and requires businesses involved in the exploration or extraction of oil, gas, or minerals to publicly report each year on specific types of payments made to all levels of government, in Canada and abroad. Payment categories are: taxes, royalties, fees, production entitlements, bonuses, dividends, and infrastructure improvement payments. The Natural Resources Canada issued a notice on the implementation tools for the Act, which includes the Guidance and the Technical Reporting Specifications. Comments are requested by September 22, 2015.

In addition to the above developments, other important activities also took place in the last two months which are summarized below.

Warm regards,

Standard-setting activities & insights

International Financial Reporting Standards

July 2015 IASB Update published
On July 29, 2015, the International Accounting Standards Board issued the Update summary of its meeting on July 20, 22 and 23, 2015. Topics addressed at this meeting included: (i) Insurance Contracts; (ii) IFRS Taxonomy; (iii) IFRS Implementation Issues; (iv) Rate-regulated Activities; (v) Dynamic Risk Management; (vi) Revenue from Contracts with Customers; (vii) Provisions, Contingent Liabilities and Contingent Assets; (viii) Fair Value Measurement; (ix) Financial Instruments with Characteristics of Equity; and (x) Agenda Consultation. Read more

FYI Article – Non-authoritative Guidance: To Follow or Not to Follow?
On July 23, 2015, the Accounting Standards Board (AcSB) released an article that highlights some of the commonly asked questions around non-authoritative guidance and provides the IFRS Discussion Group’s perspectives on this topic. Read more

Survey on the impact of the forthcoming new IFRS on leases on financial covenants in loan agreements
On July 22, 2015, the European Financial Reporting Advisory Group (EFRAG), the International Accounting Standards Board and the National Standard Setters of France, Germany, Italy, Lithuania, and the UK invited companies to participate in a public survey on the impact of the forthcoming new IFRS on Leases and on financial covenants in loan agreements. Read more

Accounting Standards for Private Enterprises

AcSB Decision Summary – July 23, 2015 - Post-implementation Review – Section 3856, Financial Instruments
On July 31, 2015, the Accounting Standards Board (AcSB) released an executive summary of discussions and decisions with respect to the topics addressed at this meeting. The AcSB approved its feedback statement to its Request for Information, Post-implementation Review: Section 3856, Financial Instruments, subject to drafting changes and a written ballot. The feedback statement is expected to be issued in September 2015. Read more

AcSB Decision Summary – July 23, 2015 - 2015 Annual Improvements
On July 31, 2015, the AcSB considered responses from stakeholders to its Exposure Draft, 2015 Annual Improvements to Accounting Standards for Private Enterprises, and the recommendations from its Private Enterprise Advisory Committee on how to proceed with the proposals based on that feedback.

The AcSB reaffirmed that amendments to accounting standards for private enterprises resulting from the 2015 annual improvements process will be effective for years beginning on or after January 1, 2016, with earlier application permitted. The amendments are expected to be issued in October 2015. Read more

Public Sector Accounting Standards

CPA Canada Article – Setting the Foundation for Public Sector Entities: PSAB Conceptual Framework
On August 20, 2015, the Public Sector Accounting Board (PSAB) released an article from CPA Canada that explains the work being done on the public sector conceptual framework. The focus has been on getting the foundation of public sector accounting and financial reporting right. Read more

IPSASB issues consultation paper on accounting for social benefits
On July 29, 2015, the International Public Sector Accounting Standards Board (IPSASB) issued a consultation paper that requests feedback on recognition and measurement requirements for social benefits. The paper proposes three approaches to accounting for social benefits: (i) Obligating event approach — Social benefits are considered in the context of the definition of a liability in the IPSASB’s conceptual framework for public-sector entities; (ii) Social contract approach — The benefits are viewed from the standpoint of a social contract between a state and its citizens (e.g., because citizens have agreed to pay taxes); and (iii) Insurance approach — This approach is based on the assumption that “some social benefits are similar in practice to insurance contracts.” Read more

IPSASB Publishes Exposure Draft 56, The Applicability of IPSASs
On July 30, 2015, the International Public Sector Accounting Standards Board (IPSASB) released for comment Exposure Draft (ED) 56, The Applicability of IPSASs. ED 56 proposes to: (i) Revise the Preface to International Public Sector Accounting Standards to provide the characteristics of public sector entities for which IPSASs are intended; (ii) Delete the definition of Government Business Enterprises (GBEs) in IPSAS 1, Presentation of Financial Statements; and (iii) Amend the scope section of each International Public Sector Accounting Standard (IPSAS) and Recommended Practice Guideline (RPG) by removing the paragraph that states that these pronouncements do not apply to GBEs. Read more

Securities regulatory matters

OSC publishes Corporate Finance Branch 2014-2015 Annual Report
On July 14, 2015, the Ontario Securities Commission (OSC) published OSC Staff Notice 51-725 Corporate Finance Branch 2014-2015 Annual Report. This report provides key information to the individuals and entities the OSC regulates, as well as their advisors, to help them comply with regulatory obligations. It contains observations and guidance from compliance work conducted by the Corporate Finance Branch in fiscal 2015 in several areas, including continuous disclosure and prospectus reviews. Read more

TSX provides guidance to applicants and issuers that have a higher risk profile as a result of significant connections to emerging market jurisdictions
On July 13, 2015, the Toronto Stock Exchange (TSX) released guidance to provide a better understanding of the requirements of TSX in relation to listing Emerging Market Issuers, and the rationale underlying such requirements, with a view to facilitating the listing process and supporting successful listings on TSX. Read more

Assurance

AASB Decision Summary – July 7, 2015
On July 16, 2015, the Auditing and Assurance Standards Board (AASB) released an executive summary of discussions and decisions with respect to the topics addressed at this meeting. The following topics were discussed: (i) Responsibilities Relating to Other Information; (ii) Special Reports – Assurance on Compliance with Agreements, Statutes and Regulations; and (iii) AASB Strategic Plan 2016-2021. Read more

AASB Exposure Draft – Engagements to Report on Summary Financial Statements
On August 28, 2015, the Auditing and Assurance Standards Board (AASB) issued an Exposure Draft that proposes to adopt revisions to ISA 810 issued by the International Auditing and Assurance Standards Board (IAASB) dealing with auditor reporting on summary financial statements. Stakeholders are encouraged to submit their comments by October 2, 2015.

The AASB proposes to adopt with appropriate amendments, if any, the proposed revisions to International Standards on Auditing (ISA) 810 (Revised), Engagements to Report on Summary Financial Statements, issued by the IAASB. The result would be a revised Canadian Auditing Standard (CAS) 810 that would replace extant CAS 810. This Exposure Draft consists of: (i) a link to the IAASB’s Exposure Draft, including its Explanatory Memorandum; (ii) a description of the AASB’s process for adopting ISAs; (iii) a discussion of proposed significant Canadian amendments; and (iv) a proposed effective date. Read more

IAASB Finalizes Amendments to Auditing Standards to Promote Greater Focus on Financial Statement Disclosures
On July 15, 2015, the International Auditing and Assurance Standards Board (IAASB) released its revised International Standards on Auditing (ISAs), Addressing Disclosures in the Audit of Financial Statements. The revisions to the standards aim to focus auditors more explicitly on disclosures throughout the audit process and drive consistency in auditor behavior in applying the requirements of the ISAs. Read more

For a complete review of recent news by financial reporting framework, visit our Centre for Financial Reporting: