Beyond compliance — Promoting excellence in financial reporting in Canada

It’s been a busy summer for the standard-setters – Here’s what you need to know!

While summer is often a time for vacations and spending time with family and friends, financial and accounting standard-setters have not stopped progressing with their initiatives and neither have we!

Below you will find a summary of critical updates to financial reporting standards that took place during the summer months–make sure you carve out a little time to go through them all so that you are prepared to meet the changes in requirements.

We have also been working hard to enhance our Centre for Financial Reporting to ensure that it contains the content that will help you succeed in your position, as well as making it easier to find that content. We are certain that you will find our new Toolkit section incredibly valuable.

We are not finished yet either–stay tuned for many more enhancements over the coming months. In the meantime, we would love to hear your feedback on our updates–send us an email and let us know how we are doing.

In case you missed it...

Stay updated on the latest in financial reporting at
Deloitte Canada's Centre for Financial Reporting

IFRS: Article

IFRS 17, Insurance Contracts

The IASB published the article Reducing the gap between insurance and other industries. The article outlines the similarities between IFRS 17 and other IFRS standards as regards the measurement of obligations at current value and the recognition of revenue as a company provides services to its customers. It concludes that the changes introduced by IFRS 17 will enable a wider range of users to understand insurers’ financial statements and compare them with the financial statements of companies within and outside the insurance industry.

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IFRS: Webcast

Financial Instruments with Characteristics of Equity

The IASB published a series of webcasts that cover: an overview of the discussion paper; the IASB’s preferred approach and classification of non-derivative financial instruments; classification of derivatives on own equity; classification of compound instruments and redemption obligation arrangements; presentation of equity instruments; and presentation of financial liabilities.


IFRS: Video

Draft Framework for Reporting Performance Measures

The Accounting Standards Board (AcSB) released a video of AcSB Chair Linda Mezon’s presentation that launched this initiative, which took place at the 2018 FEI Canada Annual Conference.

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ASPE: Standards

New Revenue Project Approved – Narrow Scope Amendments

The project aims to provide additional guidance in Section 3400, Revenue, in Part II on five topics: bill-and-hold arrangements; multiple-element arrangements; percentage of completion method; reporting revenue gross or net; and upfront non-refundable fees/payments.


PSAS: Video

Reviewing International Strategy

The Public Sector Accounting Board (PSAB) released an easy-to-understand video that takes you through the key aspects of this project’s first Consultation Paper, which is out for comment until September 28, 2018.

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U.S. GAAP: Guidance

Disclosures in financial statements

The Financial Accounting Standards Board (FASB) issued two Accounting Standards Updates (ASUs) and two changes to its conceptual framework that are intended to improve the effectiveness of disclosures in notes to financial statements.


U.S. GAAP: Improvements

Leasing guidance

The FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASU makes improvements to several aspects of the guidance in the ASU, including: (1) Residual value guarantees; (2) Rate implicit in the lease; and (3) Lessee’s reassessment of lease classification.

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Securities: Standards

CSA on non-GAAP and other financial measures

The Canadian Securities Administrators (CSA) published for comment Proposed National Instrument 52 112, which establishes disclosure requirements for issuers that disclose non-GAAP and other financial measures. When implemented, the Proposed Instrument will provide authoritative Canadian securities legislative requirements for issuers when they disclose non-GAAP and other financial measures, including ratios, segment measures, capital management measures and supplementary financial measures.


Securities: Standards

CSA highlights common deficiencies in issuers’ continuous disclosure

As per the CSA Staff Notice 51-355, in fiscal 2018, 51 per cent (2017 – 43 per cent) of review outcomes required issuers to take action to improve and/or amend their disclosure. The CSA noted that it continues to see deficiencies in issuers’ use of non-GAAP financial measures. Other areas where issuers can improve disclosures include: fair value measurements and disclosures; forward-looking information; discussions of issuers’ results of operations and significant projects in development; climate change disclosures; and mineral project disclosure.

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AcSB Exposure Draft – ASPE
Section 3051, Investments

This exposure draft clarifies the applicability of the cost-method guidance in Section 3051, Investments.

The key features of the proposals include: 1) Cost method: Guidance on how to apply the cost method in Section 3051 would also apply to interests in jointly controlled enterprises; and 2) Transition: Retrospective application of the amendments to paragraph 3051.07A would be required in accordance with Section 1506, Accounting Changes.

The proposed effective date is for fiscal years beginning on or after January 1, 2020.

Comments are requested by December 5, 2018.

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AcSB Exposure Draft – ASPE
Section 3465, Income Taxes

This exposure draft revises and updates Section 3465, Income Taxes, to remove an outdated example and requires future income tax assets and liabilities to be presented as non-current.

The key features of the proposals include: 1) ECP: The example that provides guidance on accounting for ECP would be removed; 2) Presentation: The requirement to classify future tax assets and liabilities as current and non-current, when the future income taxes method is applied, would be replaced by a non-current classification requirement; 3) Disclosure: A requirement would be added to disclose the amount of future income tax assets and liabilities for each significant type of temporary difference for each period presented; and 4) Transition: Retrospective application of the amendments in Section 3465 would be required in accordance with Section 1506, Accounting Changes.

The proposed effective date is for fiscal years beginning on or after January 1, 2020.

Comments are requested by December 5, 2018.

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AcSB Exposure Draft – ASPE Section 3041, Agriculture
The AcSB proposes to issue Section 3041, Agriculture. This new Section provides agricultural producers with guidance on the accounting for agricultural inventories and productive biological assets. It would also apply to not-for-profit organizations using the standards in Part III of the Handbook, as relevant.

This Section would apply to annual financial statements relating to fiscal years beginning on or after January 1, 2021.

Comments are requested by October 31, 2018.

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AASB Exposure Draft – Identifying and Assessing the Risks of Material Misstatement
This exposure draft proposes the adoption of ISA 315 (Revised), with appropriate Canadian amendments, if any. The exposure draft consists of: an explanation of why change was needed; key public interest considerations; proposed changes; a link to the IAASB’s Exposure Draft, including its Explanatory Memorandum; a description of the AASB’s process for adopting ISAs; a discussion of proposed significant Canadian amendments; and a proposed effective date.

Comments are requested by November 2, 2018.

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AASB Exposure Draft – Compilation Engagements
The main features of the exposure draft include: (1) addressing the public interest issues; (2) the clarity format; and (3) quality control. The AASB is proposing that CSRS 4200 be effective for compiled financial information for periods ending at least 12 months after the issuance of the final standard into the Handbook.

The effective date is anticipated to be in the second half of the year 2020. Earlier application of CSRS 4200 would be permitted.

Comments are requested by November 30, 2018.

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IFRS model financial statements: Appendix 1: Early adoption of IFRS 16, Leases
This appendix has been produced to complement the International GAAP Holdings Limited Model financial statements for the year ended December 31, 2017. It focuses on the changes introduced by the requirements in IFRS 16, Leases, which is effective for annual periods beginning on or after January 1, 2019 (earlier application is permitted if disclosed and if IFRS 15, Revenue from Contracts with Customers is also applied).

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Deloitte readiness survey highlights complexities around implementing the new Leases standards
We released the report Navigating the impact of the new Leases StandardsA Deloitte Global IFRS 16 and ASC 842 readiness survey. As Deloitte accompanies organizations in their new Leases standards implementation projects, we identified a need for organizations to share their many challenges and to understand those faced by others in their jurisdictions, regions and industries around the world.

The key findings of the survey include: (1) 52% of organizations anticipate a "material change" to their financial reporting; (2) 67% of all organizations have not yet started or are on the impact assessment phase; (3) 34% rate the determination of lease terms as highly complex; (4) 86% of organizations are not considering early adoption; (5) 43% have not yet determined their transition budgets; (6) 74% of respondents do not currently have dedicated software systems for contracts; (7) 61% of respondents are considering externally developed leasing systems; and (8) 38% of IFRS 16 respondents are considering the modified retrospective approach.

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AASB In Brief – A plain and simple overview of auditing considerations related to cryptocurrencies
The surge in companies with cryptocurrency holdings or transactions creates new audit risks for auditors as most lack experience in dealing with cryptocurrencies.

The In Brief raises the following questions: (1) Should you accept or continue an engagement for a client with material cryptocurrency holdings or transactions? (2) Do you have the appropriate experience and skillset to identify and assess all the risks of material misstatement and related assertions? And (3) Will you be able to obtain the audit evidence you need through designing and performing the right responses to those risks?

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Financial Reporting Alert 18-1, Frequently Asked Questions About Tax Reform
This Financial Reporting Alert contains responses to frequently asked questions (FAQs) about how an entity should account for the tax effects of the new tax reform legislation in accordance with ASC 740. The following is a high-level summary of the updates to the Financial Reporting Alert since its initial release on January 3, 2018.

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Help to shape future financial reporting standards by commenting on outstanding exposure drafts – find a list here.