Standards digest: accounting and auditing standard-setting in Canada — October 2016

The AcSB is upholding its 2011 decision to implement separate sets of standards for different categories of reporting entities. Plus, AcSOC member Tricia O’Malley talks about what the public interest means to her.

HOT TOPIC

One size still doesn’t fit all

In 2011, Canada’s financial reporting landscape changed. After extensive research and consultation with Canadians, the Accounting Standards Board (AcSB) set in motion a plan based on the premise that “one size does not fit all.” As a result, four separate sets of standards — for publicly accountable enterprises, private enterprises, private sector not-for-profit organizations and pension plans — were put in place to ensure the unique requirements of these entities were met.

Five years later, the AcSB can say for certain that this fundamental shift in direction still makes sense. The AcSB’s 2016-2021 Strategic Plan, which became effective April 1, conclude that the standards it established for the different categories of reporting entities are meeting Canada’s needs. Publicly accountable and private enterprises have adjusted well to their respective standards. Not-for-profits are seeing their standards being brought up to date. And the AcSB is monitoring developments in the pension world to make sure it is ready to act should that be necessary.

The question now becomes: what about differences within each category of reporting entity? For example, the AcSB is in regular communication with its stakeholders through cross-country consultations and is becoming increasingly aware that not-for-profit organizations and private enterprises differ in size and complexity. As a result, Linda Mezon, AcSB chair, is committed to discussing this topic with the AcSB: should a small, private sector not-for-profit or private enterprise follow the same standards as a very large entity that operates worldwide?

Contact the AcSB via www.frascanada.ca or Twitter @FRASCanada and be part of the conversation.

Q&A

What does the public interest mean to an AcSOC member?

Accounting Standards Oversight Council (AcSOC) member and past Accounting Standards Board (AcSB) chair Tricia O’Malley is a prominent member of the Canadian accounting profession. She is also part of a select group of women who broke down professional barriers and achieved the highest levels of success. This includes recently receiving an honorary doctor of laws degree from the University of Waterloo in Ontario in recognition of her work. AcSOC’s role is to serve the public interest by overseeing and providing input to the AcSB and the Public Sector Accounting Board.

Q: What does the public interest mean to you?

A: Tricia O’Malley: In my view, because users rely on financial statements to make important economic decisions, the existence of high-quality standards serves the public interest. Standards focus on the needs of users who require high-quality general purpose financial reports to reduce their information risk. They help protect the interests of investors through transparency, encourage the creation and development of capital markets and facilitate efficient resource allocation in both the private and public sectors.

The boards serve the public interest by setting standards following their due process procedures and consulting with stakeholders. The objective of the boards’ consultations and AcSOC’s oversight is to ensure that, in exercising their independent decision-making, the boards conduct their activities in a transparent manner. This means being neutral and objective in serving legitimate user needs, both in developing proposals and dealing with stakeholders’ comments on them and demonstrating genuine concern for the costs and benefits associated with proposals. In particular, the boards need to avoid being made instruments of other public policy objectives that conflict with their mission of developing standards that provide useful information for informed economic decision-making by users of financial statements. Those other objectives should be pursued by those who have a legitimate mandate to do so.

DOCUMENTS FOR COMMENT

Get your voice heard

Respond to these open documents for comment today.

Standards for Public Sector Entities

PSAB Draft Strategic Plan for 2017-2020 — Due October 28

International Financial Reporting Standards

AcSB Exposure Draft – Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11) — Due October 31