Standards digest — December 2016

The AcSB has published a preliminary paper exploring the decision-usefulness of financial information that reflects the economics of rate-regulated activities. Plus, Darrell Jensen, AASB chair, explains the amendments to CSOA 5000.

HOT TOPIC

Evidence-based standard-setting: rate-regulated activities

The Accounting Standards Board (AcSB) is committed to evidence-based standard-setting and recently established a formal research program. To kick off its program, the AcSB directed the staff to develop a preliminary paper exploring the decision-usefulness of financial information that reflects the economics of rate-regulated activities.

The data gathered for the research demonstrates that rate-regulated entities are important to investors and lenders due to the size of their market presence. It highlights that the regulatory framework within which an entity operates is a key factor considered by debt and equity analysts, as well as credit-rating agencies, when assessing the entity’s financial performance and future cash flows. Consistent with what Canadian financial-statement users have told the AcSB, the overall finding is that financial information reflecting the economics of rate-regulated activities is useful and capable of making a difference in their decision-making.

The paper was well received when discussed at the fall 2016 public meetings of the International Accounting Standards Board’s (IASB) Accounting Standards Advisory Forum and the International Forum of Accounting Standard Setters. Readers found such fact-based research helpful in considering data points to further explore in other jurisdictions.

The AcSB is collaborating with other national standard-setters to build out the analysis more globally and assist in advancing the IASB’s Rate-Regulated Activities Project.

Read this pioneering AcSB staff research paper at frascanada.ca/RRAresearchpaper.

DOCUMENTS FOR COMMENT

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● Accounting Standards for Private Enterprises

2017 Annual Improvements to Accounting Standards for Private Enterprises — due December 15

Q&A

Change to applicable standard for consent in connection with business acquisition reports

Canadian Standard on Association (CSOA) 5000, Use of the Practitioner’s Communication or Name, was approved by the Auditing and Assurance Standards Board (AASB) and will be effective on June 1, 2017. As a result of consequential amendments in finalizing CSOA 5000, the effective date of Section 7170, Auditor’s Consent to the Use of the Auditor’s Report in a Business Acquisition Report, was deferred by one year. In addition, Section 7500, Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents, will be reinstated into the CPA Canada Handbook – Assurance, and updated so there is no overlap with Section 7170.

Q: What are the reasons for the consequential amendments and how will they impact auditors who are requested to provide consent in connection with designated documents?

A: Darrell Jensen, Chair, AASB: The effective date of Section 7170 was deferred by one year as we believe that it is important to align the effective dates of Section 7170 and CSOA 5000. We decided to retain Section 7500 as we concluded that the established practice for consents provided on designated documents was better placed outside of CSOA 5000 at this time.

In terms of auditors who are requested to provide consent, Section 7500 will continue to apply for consent in connection with designated documents, including business acquisition reports, before June 1, 2017. Starting June 1, 2017, Section 7500 will apply to consent in connection with designated documents other than business acquisition reports as Section 7170 will be effective by then.

For more information on the effective date of Section 7170, read my message at frascanada.ca/Section7170 and get more information about our decisions at frascanada.ca/AASBdecisionsummaries.
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