Standards digest: accounting and auditing standard-setting in Canada — June/July 2016

The new IFRS 16 will change the way publicly accountable enterprises account for leases. Plus, Accounting Standards Board chair Linda Mezon talks about the 2016-2017 Annual Plan.

HOT TOPIC

Leases

New international financial reporting standard (IFRS) 16, Leases, incorporated into the CPA Canada Handbook — Accounting this summer, represents a major change to the way publicly accountable enterprises account for leases.

IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted for companies that also apply IFRS 15, Revenue from Contracts with Customers.

The new standard updates accounting that made it difficult for investors and other users of financial statements to get an accurate picture of a company’s lease assets and liabilities.

Under the old standard, “operating leases” were disclosed only in the notes to the financial statements, while “finance leases” were reported on the balance sheet. That resulted in many leases being structured as operating leases, and financial statement readers having to estimate a company’s off-balance sheet obligations.

IFRS 16 introduces transparency by requiring lessees to report all (but short-term or low-value) leases on their balance sheet as assets and liabilities. It also improves comparability between companies that lease and those that borrow to buy.

On the lessor side, IFRS 16 requires enhanced disclosures about a lessor’s risk exposure, especially exposure to residual-value risk.

Stay up-to-date on the new leases standard and other Canadian IFRSs news via www.frascanada.ca/ifrss.

Q&A

The Accounting Standards Board’s 2016-2017 Annual Plan

The AcSB’s Annual Plan sets out the objectives and expected activities for publicly accountable enterprises, private enterprises, not-for-profit organizations, and pension plans, along with other initiatives planned for 2016-2017.

Q:
What’s the focus of this year’s plan?

A: Linda Mezon, Chair, AcSB: This annual plan takes direction from the AcSB’s 2016-2021 Strategic Plan, which became effective April 1. For the next five years, we’ll be keeping in place the overall strategies adopted for the various categories of reporting entities for which we set standards. Our stakeholders have told us these strategies are meeting their needs.

We are also looking to improve the way we implement our strategies. Some of our planned improvements are category-specific. Others relate to all categories and enhance our communications, global contributions, research capability and due process.

Our annual plans are tactical. They outline the activities planned to execute the Strategic Plan in the coming year and contain milestones so that we can monitor our progress. Annual plans allow us to fine-tune our steps in response to changing stakeholder needs, while staying true to our long-term objectives.

We hope you’ll read about the specific actions we’ll be undertaking this year in support of our Strategic Plan at www.frascanada.ca/acsbannualplan — and let us know how you think we’re doing along the way.

EFFECTIVE DATES

New standards!

Go to www.frascanada.ca/effectivedates to stay on top of recently issued pronouncements and learn when these standards become effective.

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