Update on accounting standards for not-for-profit organizations. Conference of Independent Schools Business Officers May 30, 2013

Transcription

1 Update on accounting standards for not-for-profit organizations Conference of Independent Schools Business Officers May 30, 2013

2 Agenda Are you ready for transition? Exemptions and exceptions Capital Assets Financial Instruments Disclosure Requirements Upcoming Projects and New Standards Employee Future Benefits Joint Not for Profit Review Taxation - Scholarship or bursary awarded to family members of employees 1 Accounting Standards update

3 First time adoption Section 1501 elective exemptions for NPOs fair value of capital assets retirement and postemployment benefits financial instruments business combinations cumulative translation differences asset retirement obligations 2 Accounting Standards update

4 Exceptions to retrospective application - NPO derecognition of financial assets and financial liabilities (paragraphs ) hedge accounting (paragraphs ); estimates (paragraphs ); and non-controlling interests (paragraph ). 3 Accounting Standards update

5 Elective exemption- fair value- NPO Optional election to re-measure any item within capital assets at fair value at the date of transition Use that fair value as the deemed cost going forward paragraphs Accounting Standards update

6 Elective exemption- fair value- example - NPO A not-for-profit organization obtains fair value information for capital asset at date of transition. Cost Accumulated amortization NBV Fair value Deemed cost election Land 25,000-25,000 5,000,000 5,000,000 Building A 2,000,000 (1,000,000) 1,000,000 3,000,000 3,000,000 Building B 5,500,000 (500,000) 5,000,000 6,000,000 Not taken Computer software 1,000,000 (750,000) 250, ,000 Not taken Assume: the fair value election is taken for Land and Building A Required: determine the journal entry to be recorded on transition 5 Accounting Standards update

7 Elective exemption- fair value- NPO The following journal entry would be made at the date of transition Dr. Land- cost $4,975,000 Dr. Building A- cost $1,000,000 Dr. Building A- accumulated amortization $1,000,000 Cr. Net Assets $6,975,000 Consideration points: Increased amortization on Building A for the remaining useful life 6 Accounting Standards update

8 Measuring financial instruments - NPO Initial recognition fair value adjusted or not adjusted for transaction costs depending on subsequent measurement Financial instrument Subsequent Measurement at Fair Value Transactions costs cannot be included in initial recognition Subsequent Measurement at Cost or Amortized Cost Transaction costs must be included in the initial recognition Investments in equity instruments that are not quoted in an active market will subsequently be measured at cost, less any reduction for impairment 7 Accounting Standards update

9 Elective exemption- financial instruments- NPO Any difference between the recognition and measurement of financial instruments at the transition date, in accordance with Section 3856, and the prior year's closing statement of financial position recorded as an adjustment to opening net assets at the date of transition Irrevocable designation of any financial asset or financial liability to be measured at fair value at the date of transition. Previous classifications (i.e., held-for-trading, available for sale, etc.) are no longer applicable. paragraphs Accounting Standards update

10 Disclosure requirements transition- NPO CICA (a) amount and reason of each charge to net assets at the date of transition CICA (b) reconciliation of the excess of revenue over expenses reported in the organization's most recent previously issued financial statements to its excess of revenue over expenses under accounting standards for not-for-profit organizations for the same period CICA Above disclosures should give sufficient detail to enable users to understand the material adjustments to the statement of financial position and statement of operation Exemption s Disclosure of the use of the exemptions from other Part II standards 9 Accounting Standards update

11 Upcoming Projects and Standards 10 Accounting Standards update

12 General overview of active NPO projects under AcSB Standards for not-for-profit organizations Q Q3 Private Sector and Public Sector Joint Not-for-Profit review SOP Private Sector only Employee future benefits ED SOP Statement of Principles ED Exposure Draft 11 Accounting Standards update

13 General overview of active projects under AcSB Standards for private enterprises Q Q Annual improvements HB Major improvements Agriculture Consolidations Joint arrangements Redeemable Preferred Shares Issued in a Tax Planning Arrangement DP ED ED DP HB Handbook Release ITC Invitation to Comment ED Exposure Draft 12 Accounting Standards update

14 Employee future benefits NPOs that transition to Part III are required to follow ASPE, however ASPE issued a new EFB standard in May 2013: ASPE 3461 ASPE 3462 (NEW) Offers an accounting policy choice: Deferral and amortization approach, or Immediate recognition approach Eliminates the accounting policy choice Entities must apply the immediate recognition approach Effective for periods beginning on or after January 1, 2014 NPOs expressed concerned about the volatility in the surplus/deficit that would be created by the immediate recognition approach. 13 Accounting Standards update

15 Employee future benefits NPO Exposure Draft The AcSB has decided that entities applying Part III will follow Part II NEW Section 3462 with the following modifications: Present re-measurements (actuarial gains and losses) and other specified elements of cost of a defined benefit plan as a separate component of changes in net assets, rather than directly through the statement of operations; and Continue to make disclosures substantially similar to the disclosures required by Section 3461, Employee Future Benefits, in Part V of the Handbook 14 Accounting Standards update

16 Joint Not-for-Profit review Private Sector NPO Government NPO Contributions Recognize contributions consistently with the definition of a liability Recognize contributions consistently with the definition of a liability Contributed Materials &Services Provide guidance on recognition and disclosure of contributed materials and services Provide guidance on recognition and disclosure of contributed materials and services Controlled & Related Entities Eliminate accounting policy choices. Controlled NPO's should be consolidated and controlled Profit Oriented Enterprises accounted for using the Equity Method Account for controlled entities consistent with PS 1300 Government Reporting Entity Financial Statement Presentation Align financial statement presentation with Part II Align financial statement presentation with PS 1201 (net debt, etc.) 15 Accounting Standards update

17 Joint Not-for-Profit review (cont d) Private Sector NPO Government NPO Tangible Capital Assets Removal of NPO standard and direct users to Part II standard Require entities to follow PS 3150 Intangible Assets Size Exemption for Tangible Capital & Intangible Assets Impairment of Tangible Capital Assets & Intangible Assets Works of Art & Historical Treasures Continue reporting consistent with existing standards Require all entities to record tangible capital assets and intangible assets, regardless of size Revising impairment model to allow for partial write downs Continue reporting consistent with existing standards If following the PS 4200 series, continue to report intangible assets in a manner consistent with the PS 4200 series. Require all entities to record tangible capital assets and intangible assets, regardless of size TCA- Would follow PS 3150 impairment guidance Intangibles continue to report in a manner consistent with the PS 4200 series (if following PS 4200 series) Continue reporting consistent with PS 4200 series (if following PS 4200 series) 16 Accounting Standards update

18 Scholarship or bursary awarded to family members of employees 17 Accounting Standards update

19 Scholarship and Bursaries awarded to family members of employees. Current Legislation 3.18 Where the family member of an employee is provided with a scholarship, bursary or free tuition by an arm s length employer for attendance at an elementary or secondary school (private or otherwise), the amount will be included in the employee's income as a taxable benefit under paragraph 6(1)(a), regardless of the criteria used to award the particular amount. As such, no amount will be included in the family member s income pursuant to paragraph 56(1)(n).. 18 Accounting Standards update

20 Scholarship and Bursaries awarded to family members of employees. Proposed Changes any benefit received or enjoyed by the family member of a taxpayer under a program offered by the taxpayer's employer that is designed to assist the family member in furthering his or her education, will not be included in the taxpayer's income as an employment benefit, where: the employer and the taxpayer deal with each other at arm s length; and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer If arm length not a substitute for salary, the benefit would be included in the income of the family member. 19 Accounting Standards update

21 Scholarship and Bursaries awarded to family members of employees. Status of Proposed Legislation This change is part of a large technical bill that is at the report stage (consultation period will end on June 28, 2013) through the parliamentary legislative process (passed second reading). The change is already supported by case law, which increases the likelihood of passing. Change would be retroactive to October 31, 2011 Consider the need to start applying the changes now 20 Accounting Standards update

22 Questions Matthew Colley Senior Manager Assurance and Advisory Services Accounting Standards update

23 Canning Spam Working with Canada s Anti-Spam Legislation (CASL) Miyo Yamashita, Partner Conference of Independent Schools Business Officers May 30, 2013

24 Discussion items 1. Understanding CASL requirements 2. Managing CASL requirements 23 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

25 24 Understanding CASL requirements

26 CASL background Industry Canada passed Bill C-28 Fighting Against Internet and Wireless Spam Act into law in December 2010, also known as Canada s Anti-Spam Law (CASL). It is expected to come into force in CASL has rules in three areas: 1. Spam - unsolicited commercial s, including false, misleading or deceptive subject lines and headers 2. Spyware - installation of computer programs on another s computer 3. address harvesting, phishing and pharming CASL is considered to be the toughest anti-spam legislation in the world CASL creates an express, opt-in consent regime involving any electronic communications for commercial purposes, with very limited exceptions CASL applies to all commercial electronic messages (CEMs) including s, text messages and social media messages sent from within or to Canada 25 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

27 Regulatory oversight Three federal agencies will work together to oversee and enforce CASL: The Canadian Radiotelevision and Telecommunications Commission (CRTC) The Competition Bureau Investigate the sending of CEMs and installation of software without consent (e.g. manage basic spam complaints) Address misleading representations (claims) and deceiving marketing practices in the electronic marketplace (e.g. handle fraud and misleading commercial messages) The Office of the Privacy Commissioner of Canada Oversee the collection of personal information through illicit access to people s computer systems and electronic address harvesting (e.g. ensure addresses are not collected without consent) It is within these three agencies powers to exchange information among themselves, as well as with foreign jurisdictions, for the purposes of pursuing violations under CASL 26 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

28 Fines and penalties CASL creates both direct and vicarious liability Examples of potential violations include sending CEMs without express or implied consent, or sending a CEM that does not identify the sender or provide a compliant unsubscribe mechanism Penalty Amount ($) CRTC can levy administrative monetary penalties (AMPs) - Fines may be imposed for up to 10 days The Competition Bureau can seek penalties under the Competition Act Provides a right to both businesses and consumers to sue civilly and seek damages in court where CRTC does not initiate enforcement proceedings $10,000,000 for businesses $1,000,000 for individuals $10,000,000 for businesses $750,000 for individuals up to $1 million CASL provides a due diligence defense 27 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

29 Consumer privacy perceptions are concerning... Will the party stop for digital marketers in 2013? Social Media, and Privacy Perceptions 71% of social networking users ages 18-29, and 65% of social networking users over 40, have recently changed their Facebook privacy settings to limit what they share with others online 56% of all social networking users have recently unfriended contacts in their network 63% of Canadians are concerned with businesses using personal information to send spam Online Behavioral Advertising (OBA) and Privacy Perceptions 40% of consumers say a targeted advertisement has made them feel uncomfortable 50% of people will opt-out of OBA to manage their privacy when possible up from 27% in % believe that personally identifiable information is attached to browsing behavior 85% will not download an app if they do not trust it Only 14% believe that mobile app stores make available apps that safeguard their privacy Source: Pew Research Centre, Reputation Management and Social Media, Management/Summary-of-Findings.aspx 28 Canning spam: Working with Canada s Anti-spam Legislation (CASL) Source: TRUSTe, US Consumer Privacy Attitudes and Business Implications, July

30 Express consent requirements The general rule is that businesses must obtain express or implied consent from recipients before sending a CEM Opt-in consent: Senders must obtain a positive or explicit indication of consent when seeking express consent. This means that the recipient must actively indicate consent through opt-in means. No bundling: Senders must obtain express consent separately for each act regulated by CASL (e.g. sending CEMs, altering transmission data in CEMs, or installing a computer program on another person s computer) and separate from the general terms and conditions of use or sale. Businesses that have the express consent of a recipient may send CEMs to the recipient until he or she withdraws his or her consent. In other words, express consent never expires until a customer revokes his or her consent. 29 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

31 Acceptable means of obtaining express consent Checking a box to indicate consent is permissible but pre-checked boxes in the form of an opt-out are not permitted Typing an address into a field to indicate consent is permissible Requests for consent must be separate ( unbundled ) from the general terms and conditions of use or sale Source: Canada Radio-television and Telecommunications Commission, Bulletin : 30 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

32 Implied consent requirements CASL outlines three specific circumstances under which businesses may rely on implied consent to send a CEM, as follows: Rule Description Example Existing business relationship The business is sending a CEM in the context of an existing business or non-business relationship within the past two years Two year period begins on the day a purchase is made or the relationship ends. Follow up replies may only be sent within six months Purchase/lease of a product/service Inquiry/application Investment opportunity Written contract Donation/gift Publication rule Business card rule The recipient has conspicuously published his or her address (e.g. professional website) and hasn t indicated he/she does not wish to receive communications, and the CEM relates to the recipient s business role or functions The recipient has voluntarily disclosed his or her address and hasn t indicated he/she does not wish to receive communications, and the CEM relates to the recipient s business role or functions Sending CEMs about a financial seminar relevant to a CFO who has published his or her address on LinkedIn Exchanging business cards at a conference or trade show and sending an describing products or services that may be of interest 31 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

33 Exceptions to consent CASL prohibits businesses from sending CEMs without express or implied consent, unless an exemption applies or unless no consent is required Full CASL exemption CEMs exchanged between family and friends Responses to inquiries B2B CEMs within the same industry CEMs sent to employees within an organization No consent required Providing quote in response to a request Facilitating/completing a commercial transaction Providing warranty, product recall or safety alert information about a product Providing factual information about the ongoing use of a product/service or ongoing subscription/account/ membership Delivering a product or service (including upgrades) 32 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

34 33 Managing CASL requirements

35 Step 1: Inventory your electronic communications Determine which CEMs across operations and channels are in scope Inventory of Stakeholder Touchpoints and related CEMs Is message electronic? Sent by any means of telecommunication e.g.: 1. Text 2. Sound 3. Voice 4. Image 5. No Yes Is CEM sent from or received by computer systems in Canada? Message sent from a computer system located in Canada or message accessed by a computer system (e.g. electronic messaging device) located in Canada No Yes Is the sender engaged in commercial activity? Commercial activities include any transaction, act, conduct or regular course of conduct of a commercial character including not-for-profit Yes In-Scope CASL applies. Determine if exemptions apply. No Out-of-Scope: is not subject to CASL OK to send 34 Preparing for Canada s Anti-Spam Legislation (CASL)

36 Step 2: Apply the consent requirements Next, assess which contacts fit into implied, express, no consent category Does the message qualify for implied consent by virtue of: 1. The message is sent in the context of an existing business relationship 2. The recipient has 'conspicuously published' his/her contact information, relevant to the person s business, role, functions or duties in a business or official capacity; or 3. The recipient has disclosed his/her contact information without indicating that they do not wish to receive communications and the message is relevant to the person s business, role, functions or duties in a business or official capacity. Yes No Does the message consist solely of: 1. Providing a quote or estimate for the supply of a product, good or service, if the quote or estimate was requested by the recipient; 2. Facilitating/completing or confirming an existing commercial transaction between the parties; 3. Providing warranty, product recall or safety information about a product or service that the recipient uses, has used or has purchased; 4. Providing notification of factual information about an ongoing subscription, membership, account or loan; 5. Providing information directly related to an employment relationship or benefit plan; or 6. Delivering product, goods or service, including upgrades, further to an existing relationship. Yes Has the recipient No expressly consented to receiving CEM Yes Is the identity and contact information of sender and unsubscribe mechanism provided? No Do not send No Yes OK to send 35 Preparing for Canada s Anti-Spam Legislation (CASL)

37 36 Closing thoughts

38 Closing thoughts: CASL compliance checklist Educate yourself about marketing initiatives, especially electronic marketing initiatives, in your organization Start now to assess the implications Start updating electronic databases to manage soliciting Track and document consent and withdrawal of consent/unsubscribe requests Focus on the positive While CASL violations can result in significant monetary penalties, civil liability and reputational damage, it also represents an opportunity to clean up your CRM system and to inventory your electronic communications practices CASL is also an opportunity to standardize the means and manner by which you obtain consent 37 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

39 For more information If you would like more information on CASL, please contact: Miyo Yamashita Partner Enterprise Risk Caitlin Unterman Consultant Enterprise Risk 38 Canning spam: Working with Canada s Anti-spam Legislation (CASL)

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