Summary Comparison of Part II of the CICA Handbook Accounting

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1 Summary Comparison the CICA Accounting to XFI Version in Part V As December 31, This comparison has been prepared by the staff the Accounting Standards Board (AcSB) and has not been approved by the AcSB. 2. This document provides a high-level comparison accounting for private enterprises () and the XFI version Part V the CICA Accounting (). It covers significant recognition and measurement only and does not necessarily include all the that might arise in a particular entity s circumstances. Presentation and disclosure requirements are not within the scope this comparison. Presentation requirements for are provided in Section 1520, Income Statement, Section 1521, Balance Sheet, and Section 1540, Cash Flow Statement. A compilation disclosure requirements is also provided in the. 3. This document should not be used in preparing financial statements. To understand fully the implications preparing financial statements in accordance with the, users this comparison must refer to the themselves. 4. The in and the XFI Version Part V the are based on common conceptual frameworks. Part V the was used as a starting point in developing the in. Standards in Part V that are largely irrelevant to the private enterprise sector have been excluded from and a limited number issues that have caused significant concern for private enterprises have been reconsidered. However, the majority the recognition and measurement requirements in Part V the do not cause significant concern for private enterprises and have been retained in as is. Emerging Issues Committee (EIC) Abstracts Issues Discussed have been excluded from but in a limited number instances, guidance on significant issues addressed in EIC Abstracts has been incorporated into. 5. This comparison is organized according to Sections and Accounting Guidelines and reflects issued as December 31, The term converged has been used in the comparison when the in are substantially the same as the relevant in the XFI version Part V. Similar requirements compiled in a single standard in that were previously reflected in two or more in Part V, are not considered for the purpose this comparison. Accounting Standards Board 277 Wellington Street West, Toronto, Ontario, Canada M5V 3H2 Tel: (416) Fax: (416) Page 1 18

2 (As December 31, 2009) The following table concordance relates each accounting standard for private enterprises in the CICA Accounting, to the corresponding standard in XFI version Part V. The table does not include in disclosure requirements.,, Comparison accounting treatments 1 Section 1000, Financial Statement Concepts Section 1100, Generally Accepted Accounting Principles Section 1000, Financial Statement Concepts Section 1100, Generally Accepted Accounting Principles Section 1000,, is converged with XFI Section. Section 1100,, is converged with XFI Section. Section 1100,, has been redrafted to be consistent with the content. Not significant. Section 1300, Differential Reporting No corresponding standard in. Section 1400, General Standards Financial Statement Presentation Section 1400, General Standards Financial Statement Presentation Section 1400,, is converged with XFI Section. Section 1500, First-time Adoption No corresponding standard in XFI. Significant on first-time adoption accounting for private enterprises in. 1 The assessment significance is a judgment made by AcSB staff in general terms. A difference may be significant to a particular transaction or entity depending on its materiality or nature. Page 2 18

3 (As December 31, 2009), Comparison accounting treatments Section 1505, Disclosure Accounting Policies Section 1505, Disclosure Accounting Policies All requirements in this Section relate to disclosures, which are outside the scope this summary comparison. Section 1506, Accounting Changes Section 1506, Accounting Changes Section 1506,, is converged with XFI Section, except that Section 1506,, permits certain accounting policy choices to be changed without meeting the criterion in providing more relevant or reliable information (see ). Significant. Section 1508, Measurement Uncertainty Section 1508, Measurement Uncertainty All requirements in this Section relate to disclosures, which are outside the scope this summary comparison. Section 1510, Current Assets and Current Liabilities Section 1510, Current Assets and Current Liabilities Section 1510,, is converged with XFI Section. The following Sections in Part V have been incorporated into Section 1510, : Section 3000 (see ); and Section 3040 (see ). Certain guidance from the following EIC Abstracts has been included in Section 1510, : EIC-59 (see ); and EIC-122 (see ). Section 1520, Income Section 1520, Income Statement This presentation Section reflects income statement presentation requirements from other Sections Page 3 18

4 (As December 31, 2009), Comparison accounting treatments Statement presentation is outside the scope this summary comparison. Section 1521, Balance Sheet This presentation Section reflects balance sheet presentation requirements from other Sections presentation is outside the scope this summary comparison. Section 1535, Capital Disclosures No corresponding standard in. Section 1540, Cash Flow Statement Section 1540, Cash Flow Statement Section 1540,, is converged with XFI Section. However, under, all enterprises must provide a cash flow statement. Significant for enterprises that do not provide a cash flow statement under XFI. Section 1582, Business Combinations Section 1582, Business Combinations Section 1582,, is converged with XFI Section. Section 1582 is effective on adoption as does not include Section Significant for enterprises adopting Part II prior to Section 1590, Subsidiaries Section 1590, Subsidiaries Section 1590,, is converged with XFI Section, except as noted below. Under Section 1590,, an enterprise may account for subsidiaries by consolidating them, or using either the cost or equity method. This is consistent with the differential reporting option in XFI Section. However an investment in a subsidiary whose equity securities are Significant for a subsidiary that would now be accounted for at fair value rather than cost. Page 4 18

5 (As December 31, 2009), Comparison accounting treatments quoted in an active market is not accounted for at cost, but may be accounted for at fair value. Section 1601, Consolidated Financial Statements Section 1601, Consolidated Financial Statements Section 1601,, is converged with XFI Section. Section 1602, Noncontrolling Interests Section 1602, Noncontrolling Interests Section 1602,, is converged with XFI Section. Section1602 is effective on adoption as does not include Section Significant for enterprises adopting Part II prior to Section 1625, Comprehensive Revaluation Assets and Liabilities Section 1625, Comprehensive Revaluation Assets and Liabilities Section 1625,, is converged with XFI Section except for the accounting for income tax benefits (see ). Not significant. Section 1650, Foreign Currency Translation Section 1701, Segment Disclosures Section 1751, Interim Financial Statements Section 1651, Foreign Currency Translation Section 1651,, is converged with XFI Section Hedge accounting (other than a hedge an investment in a self-sustaining foreign operation) is addressed in Section 3856,, rather than in Section 1651,, and differs from XFI Section No corresponding standard in. No corresponding standard in. None, except for hedge accounting addressed in Section 3856,. Page 5 18

6 (As December 31, 2009), Comparison accounting treatments Section 1800, Unincorporated Businesses Section 1800, Unincorporated Businesses Section 1800,, is converged with XFI Section. Section 3000, Cash No corresponding standard in. Guidance from XFI Section incorporated in Section 1510, (see ). Section 3010, Temporary Investments Section 3020, Accounts and Notes Receivable Section 3025, Impaired Loans No corresponding standard in. Measurement and impairment requirements are provided in Section 3856,. Designation as temporary is no longer relevant. Financial instruments are classified as current if they meet the requirements in Section 1510,. No corresponding standard in. Guidance from XFI Section incorporated in Section 3856, (see ). No corresponding standard in. Guidance provided in Section 3856,, differs from that in Section 3025 (see ) in that alternative measurements are possible. When measurement impairment is based on recoverable amounts, these estimates are discounted using market interest rates rather than the original effective interest rate. Significant. Often not significant. Section 3031, Inventories Section 3031, Inventories Section 3031,, is converged with XFI Section. Page 6 18

7 (As December 31, 2009) Section 3040, Prepaid Expenses, Comparison accounting treatments No corresponding standard in. Guidance from XFI Section incorporated in Section 1510, (see ). Section 3050, Long-term Investments Section 3051, Investments Section 3051, differs from XFI Section Significant are noted below. Under Section 3051,, an enterprise may account for significantly influenced investees using either the cost or equity method. This is consistent with the differential reporting option in XFI Section However, an investment in a significantly influenced investee whose equity securities are quoted in an active market is not accounted for at cost but may be accounted for at fair value. Under Section 3856,, an investment in an equity security that is traded in an active market and not subject to significant influence is accounted for at fair value rather than at cost. Significant. Section 3055, Interests in Joint Ventures Section 3055, Interests in Joint Ventures The impairment provisions in Section 3051,, are consistent with those in Section 3856,. Section 3055,, differs from XFI Section. Significant are noted below. Significant. Under Section 3055,, an enterprise may account for interests in joint ventures using proportionate consolidation, the cost method or the equity method. Page 7 18

8 (As December 31, 2009), Comparison accounting treatments This is consistent with the differential reporting options in XFI Section. However an investment in a joint venture whose equity securities are quoted in an active market is not accounted for at cost but may be accounted for at fair value. The impairment provisions in Section 3055,, are consistent with those in Section 3856,. Section 3061, Property Plant and Equipment Section 3061, Property Plant and Equipment Section 3061,, is converged with XFI Section. Section 3063, Impairment Long-lived Assets Section 3063, Impairment Long-lived Assets Section 3063,, is converged with XFI Section. Section 3064, Goodwill and Intangible Assets Section 3064, Goodwill and Intangible Assets Section 3064, differs from XFI Section. Significant are noted below. Significant. Internally developed intangible assets Section 3064,, permits an enterprise to make an accounting policy choice to capitalize or expense development costs. Goodwill and other intangible assets impairment testing Section 3064,, requires enterprises to test goodwill and other intangible assets not subject to Page 8 18

9 (As December 31, 2009), Comparison accounting treatments amortization on an events and circumstances basis, rather than each year. This is consistent with the differential reporting option in XFI Section. Section 3064,, requires goodwill impairment testing to be done at the reporting unit level, removing the requirement in XFI Section to determine fair values individual assets and liabilities. Certain guidance from EIC-133 has been incorporated in Section 3064, (see ). Section 3065, Leases Section 3065, Leases Section 3065,, is converged with XFI Section, except that the requirements for (a) removing a lease liability from a lessee s balance sheet, and (b) the impairment testing lease receivables a lessor in Section 3065,, are consistent with those in Section 3856,. Not significant. Certain guidance from the following EIC Abstracts has been incorporated into Section 3065, : EIC-19 (see (r); EIC-21 (see ); EIC 25 (see and Illustrative Examples 3 and 4); EIC-52 (see and Illustrative Example 5); and Page 9 18

10 (As December 31, 2009), Comparison accounting treatments EIC-97 (see ). Section 3110, Asset Retirement Obligations Section 3110, Asset Retirement Obligations Section 3110,, is converged with XFI Section except that the measurement requirements have been simplified. Significant. Section 3210, Long-term Debt Under Section 3110,, asset retirement obligations are measured at the best estimate the expenditure required to settle the present obligation at the end the reporting period, rather than at fair value. No corresponding standard in. Guidance provided in Section 3856,. Section 3240, Share Capital Section 3240, Share Capital Section 3240,, is converged with XFI Section. Section 3250, Surplus Section 3251, Equity All requirements in this Section relate to presentation, which is outside the scope this summary comparison. The scope Section 3251,, is broader than XFI Section Certain guidance from EIC-132 has been incorporated into Section 3251, (see ). Section 3260, Reserves Section 3260, Reserves Section 3260,, is converged with XFI Section. Page 10 18

11 (As December 31, 2009), Comparison accounting treatments Section 3280, Contractual Obligations Section 3280, Contractual Obligations All requirements in this Section relate to disclosures, which are outside the scope this summary comparison. Section 3290, Contingencies Section 3290, Contingencies Section 3290,, is converged with XFI Section. Section 3400, Revenue Section 3400, Revenue Section 3400,, is converged with XFI Section. Certain guidance from the following EICs has been incorporated into Section 3400, : EIC-78 (see ); EIC-79 (see ); EIC-123 (see ); EIC-141 (see ); EIC-142 (see ); EIC-144 (see ); and EIC-156 (see ). Section 3461, Employee Future Benefits Section 3461, Employee Future Benefits Section 3461, differs from XFI Section. Section 3461,, permits defined benefit plans to be recognized and measured using either: an immediate recognition approach, whereby the accounting is based on a funding valuation, the funded status the plan is recognized on the balance sheet and there is no deferral or amortization actuarial gains and losses or past service costs; or Significant. Page 11 18

12 (As December 31, 2009), Comparison accounting treatments the deferral and amortization approach as in the XFI Section, which requires a separate valuation for accounting purposes and deferral and amortization is required for past service costs and permitted for actuarial gains and losses. The definitions a defined benefit plan and a defined contribution plan have been modified. The difference is not expected to be significant for most private enterprises. Section 3465, Income Taxes Section 3465, Income Taxes Section 3465,, is converged with XFI Section. Under Section 3465,, either the taxes payable method or the future income taxes method may be chosen. This is consistent with the differential reporting option in XFI Section. Certain guidance from the following EIC Abstracts has been incorporated into Section 3465, : EIC-104 (see ); and EIC-146 (see ). Section 3475, Disposal Long-lived Assets and Discontinued Operations Section 3475, Disposal Long-lived Assets and Discontinued Operations Section 3475,, is converged with XFI Section. Section 3480, Extraordinary Items No corresponding standard in. Page 12 18

13 (As December 31, 2009) Section 3500, Earnings per Share, Comparison accounting treatments No corresponding standard in. Section 3610, Capital Transactions Section 3610, Capital Transactions Section 3610,, is converged with XFI Section. Section 3800, Government Assistance Section 3800, Government Assistance Section 3800,, is converged with XFI Section. Section 3805, Investment Tax Credits Section 3805, Investment Tax Credits Section 3805,, is converged with XFI Section. Section 3820, Subsequent Events Section 3820, Subsequent Events Section 3820,, is converged with XFI Section. Section 3831, Nonmonetary Transactions Section 3831, Nonmonetary Transactions Section 3831,, is converged with XFI Section. Section 3840, Related Party Transactions Section 3840, Related Party Transactions Section 3840,, is converged with XFI Section. Certain guidance from the following EIC Abstracts has been incorporated into Section 3840, : EIC-66 (see (a)); EIC-77 (see ); EIC 89 (see (b)); and EIC-103 (see ). Section 3841, Economic Section 3841, Economic Dependence All requirements in this Section relate to disclosures, which are outside the scope this summary Page 13 18

14 (As December 31, 2009) Dependence, Comparison accounting treatments comparison. Section 3850, Interest Capitalized Section 3850, Interest Capitalized All requirements in this Section relate to disclosures, which are outside the scope this summary comparison. Section 3856, Financial Instruments Section 3856,, differs from equivalent requirements under XFI. The requirements in Section 3856,, correspond to or replace guidance in Sections 3020, 3025, 3210, 3860, AcG-4, AcG-12 and AcG-13. The significant between the guidance on financial instruments in XFI and Section 3856,, include the following: Investments in equities that are traded in an active market are measured at fair value, with changes recognized in net income. An entity may also irrevocably elect on initial recognition to measure any other financial instrument at fair value. Derivatives, other than those in qualifying hedges, continue to be measured at fair value. A single model is applied to the recognition and measurement impairment for all financial assets. All financial instruments are recognized on trade date. Transaction costs on financial instruments measured at amortized cost are capitalized. Transaction costs Significant. Page 14 18

15 (As December 31, 2009), Comparison accounting treatments on financial instruments measured at fair value are expensed. The equity component convertible debt and warrants or options issued with, and detachable from, financial liabilities may be measured at zero. Hedge accounting is available by designation for relationships specified in the Section if the critical terms the hedging instrument match those the hedged instrument. Preferred shares issued in a specified tax planning arrangement must be classified as equity. (This is consistent with the differential reporting option in XFI Section 3860.) Certain guidance from the following Sections, Accounting Guidelines and EIC Abstracts and has been included in Section 3856, : Section 3020 (see ); Section 3025 (see ); AcG-4 (see ); AcG-12 (see 3856, Appendix B.); AcG-13 (see ); EIC-88, 96 and 101 (see ); EIC-149 (see ); and EIC-158 (see ). Page 15 18

16 (As December 31, 2009) Section 3860, Financial Instruments Disclosure and Presentation, Comparison accounting treatments No corresponding standard in. Guidance provided in Section 3856,. Section 3870, Stockbased Compensation and Other Stock-based Payments Section 3870, Stock-based Compensation and Other Stock-based Payments Section 3870,, differs from XFI Section. Section 3870,, replaces the minimum value method (i.e., the ability to ignore volatility in measuring stock-based compensation), with the calculated value method. Under the calculated value method an enterprise estimates the volatility that is used as an input to a stock option pricing model based on an appropriate sector index. Significant. Section 4100, Pension Plans No corresponding standard in. The accounting for pension plans can be found in Part IV. Section 4211, Life Insurance Enterprises Specific Items Section 4250, Future- Oriented Financial Information No corresponding standard in. No corresponding standard in. Page 16 18

17 (As December 31, 2009) AcG-2, Franchise Fee Revenue, AcG-2, Franchise Fee Revenue Comparison accounting treatments AcG-2,, is converged with XFI Guideline. AcG-3, Financial Reporting by Property and Casualty Insurance Companies No corresponding Guideline in. AcG-4, Fees and Costs Associated with Lending Activities No corresponding Guideline in. Guidance provided in Section 3856, (see ). AcG-7, The Management Report AcG-8, Actuarial Liabilities Life- Insurance Enterprises Disclosure AcG-9, Financial Reporting by Life Insurance Enterprises AcG-11, Enterprises in the Development Stage No corresponding Guideline in. No corresponding Guideline in. No corresponding Guideline in. No corresponding Guideline in. Page 17 18

18 (As December 31, 2009), Comparison accounting treatments AcG-12, Transfers Receivables No corresponding Guideline in. Guidance provided in Section 3856, (see 3856, Appendix B). AcG-13, Hedging Relationships No corresponding Guideline in. Guidance provided in Section 3856, (see ). AcG-14, Disclosure Guarantees AcG-14, Disclosure Guarantees AcG-14,, is converged with XFI Guideline. AcG-15, Consolidation Variable Interest Entities AcG-15, Consolidation Variable Interest Entities AcG-15,, is converged with XFI Guideline. AcG-15,, does not apply to an enterprise that chooses to prepare non-consolidated financial statements. AcG-16, Oil and Gas Accounting Full Cost AcG-16, Oil and Gas Accounting Full Cost AcG-16,, is converged with XFI Guideline. AcG-17, Equity-linked Deposit Contracts No corresponding Guideline in. AcG-18, Investment Companies AcG-18, Investment Companies AcG-18,, is converged with XFI Guideline. AcG-19, Disclosures by Entities Subject to Rate Regulation AcG-19, Disclosures by Entities Subject to Rate Regulation All requirements in this Guideline relate to disclosures, which are outside the scope this summary comparison. Page 18 18