Summary Comparison of New Accounting Standards for Private Enterprises. (Part II of the revised CICA Handbook Accounting) to XFI Version (Part V)

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1 Summary Comparison of New Accounting Standards for Private Enterprises ( of the revised CICA Handbook Accounting) to XFI Version (Part V)

2 16 The CICA s Guide to Accounting Standards About this Comparison As of December 31, 2009 This comparison has been prepared by the staff of the Accounting Standards Board (AcSB) and has not been approved by the AcSB. This document provides a high-level comparison of accounting standards for private enterprises () and the XFI version of Part V of the CICA Handbook Accounting (Handbook). It covers significant recognition and measurement differences only and does not necessarily include all of the differences that might arise in a particular entity s circumstances. Presentation and disclosure requirements are not within the scope of this comparison. Presentation requirements for are provided in Section 1520, Income Statement, Section 1521, Balance Sheet, and Section 1540, Cash Flow Statement. A compilation of disclosure requirements is also provided in of the Handbook. This document should not be used in preparing financial statements. To understand fully the implications of preparing financial statements in accordance with of the Handbook, users of this comparison must refer to the standards themselves.

3 The CICA s Guide to Accounting Standards 17 The standards in and the XFI Version of Part V of the Handbook are based on common conceptual frameworks. Part V of the Handbook was used as a starting point in developing the standards in. Standards in Part V that are largely irrelevant to the private enterprise sector have been excluded from and a limited number of issues that have caused significant concern for private enterprises have been reconsidered. However, the majority of the recognition and measurement requirements in Part V of the Handbook do not cause significant concern for private enterprises and have been retained in as is. Emerging Issues Committee (EIC) Abstracts of Issues Discussed have been excluded from but in a limited number of instances, guidance on significant issues addressed in EIC Abstracts has been incorporated into. This comparison is organized according to Handbook Sections and Accounting Guidelines and reflects standards issued as of December 31, The term converged has been used in the comparison when the standards in are substantially the same as the relevant standards in the XFI version of Part V. Similar requirements compiled in a single standard in that were previously reflected in two or more standards in Part V, are not considered differences for the purpose of this comparison.

4 18 The CICA s Guide to Accounting Standards The following table of concordance relates each accounting standard for private enterprises in of the CICA Handbook Accounting, to the corresponding standard in XFI version of Part V. The table does not include differences in disclosure requirements. Section 1000, Financial Statement Concepts Section 1000, Financial Statement Concepts Section 1000,, is converged with XFI Section. None Section 1100, Generally Accepted Accounting Principles Section 1100, Generally Accepted Accounting Principles Section 1100,, is converged with XFI Section. Section 1100,, has been redrafted to be consistent with the content of. Not significant Section 1300, Differential Reporting No corresponding standard in. Section 1400, General Standards of Financial Statement Presentation Section 1400, General Standards of Financial Statement Presentation Section 1400,, is converged with XFI Section. None Section 1500, First-time Adoption No corresponding standard in XFI standards. Significant on first-time adoption of accounting standards for private enterprises in * The assessment of 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.

5 The CICA s Guide to Accounting Standards 19 Section 1505, Disclosure of Accounting Policies Section 1506, Accounting Changes Section 1508, Measurement Uncertainty Section 1510, Current Assets and Current Liabilities Section 1505, Disclosure of Accounting Policies Section 1506, Accounting Changes Section 1508, Measurement Uncertainty Section 1510, Current Assets and Current Liabilities All requirements in this Section relate to disclosures, which are outside the scope of this summary comparison. Section 1506,, is converged with XFI Section, except that Section 1506,, permits certain accounting policy choices to be changed without meeting the criterion in of providing more relevant or reliable information (see ). All requirements in this Section relate to disclosures, which are outside the scope of this summary comparison. 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 ). Significant None

6 20 The CICA s Guide to Accounting Standards Section 1520, Income Statement Section 1520, Income Statement This presentation Section reflects income statement presentation requirements from other Sections presentation is outside the scope of this summary comparison. Section 1521, Balance Sheet This presentation Section reflects balance sheet presentation requirements from other Sections presentation is outside the scope of 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 standards Section 1582, Business Combinations Section 1582, Business Combinations Section 1582,, is converged with XFI Section. Section 1582 is effective on adoption of as Part II does not include Section Significant for enterprises adopting prior to 2011

7 The CICA s Guide to Accounting Standards 21 Section 1590, Subsidiaries Section 1590, Subsidiaries Section 1601, Consolidated Financial Statements Section 1601, Consolidated Financial Statements Section 1602, Noncontrolling Interests Section 1602, Noncontrolling Interests Section 1625, Comprehensive Revaluation of Assets and Liabilities Section 1625, Comprehensive Revaluation of Assets and Liabilities 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 quoted in an active market is not accounted for at cost, but may be accounted for at fair value. Significant for a subsidiary that would now be accounted for at fair value rather than cost Section 1601,, is converged with XFI Section. None Section 1602,, is converged with XFI Section. Section 1602 is effective on adoption of as Part II does not include Section Significant for enterprises adopting prior to 2011 Section 1625,, is converged with XFI Section except for the accounting for income tax benefits (see ). Not significant

8 22 The CICA s Guide to Accounting Standards Section 1650, Foreign Currency Translation Section 1651, Foreign Currency Translation Section 1651,, is converged with XFI Section Hedge accounting (other than a hedge of an investment in a self-sustaining foreign operation) is addressed in Section 3856,, rather than in Section 1651,, and differs from XFI Section None, except for hedge accounting addressed in Section 3856, Section 1701, Segment Disclosures No corresponding standard in. Section 1751, Interim Financial Statements No corresponding standard in. Section 1800, Unincorporated Businesses Section 1800, Unincorporated Businesses Section 1800,, is converged with XFI Section. None Section 3000, Cash No corresponding standard in. Guidance from XFI Section incorporated in Section 1510, (see ). Section 3010, Temporary Investments 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,. Significant Section 3020, Accounts and Notes Receivable No corresponding standard in. Guidance from XFI Section incorporated in Section 3856, (see ).

9 The CICA s Guide to Accounting Standards 23 Section 3025, Impaired Loans No corresponding standard in. Guidance provided in Section 3856,, differs from that in Section 3025 (see ) in that alternative measurements are possible. When measurement of impairment is based on recoverable amounts, these estimates are discounted using market interest rates rather than the original effective interest rate. Often not significant Section 3031, Inventories Section 3031, Inventories Section 3031,, is converged with XFI Section. None Section 3040, Prepaid Expenses No corresponding standard in. Guidance from XFI Section incorporated in Section 1510, (see ).

10 24 The CICA s Guide to Accounting Standards Section 3050, Long-term Investments Section 3051, Investments Section 3051, differs from XFI Section Significant differences 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. The impairment provisions in Section 3051,, are consistent with those in Section 3856,. Significant

11 The CICA s Guide to Accounting Standards 25 Section 3055, Interests in Joint Ventures Section 3061, Property Plant and Equipment Section 3063, Impairment of Long-lived Assets Section 3055, Interests in Joint Ventures Section 3061, Property Plant and Equipment Section 3063, Impairment of Longlived Assets Section 3055,, differs from XFI Section. Significant differences 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. 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,, is converged with XFI Section. None Section 3063,, is converged with XFI Section. None

12 26 The CICA s Guide to Accounting Standards Section 3064, Goodwill and Intangible Assets Section 3064, Goodwill and Intangible Assets Section 3064, differs from XFI Section. Significant differences are noted below. 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 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 of individual assets and liabilities. Certain guidance from EIC-133 has been incorporated in Section 3064, (see ). Significant

13 The CICA s Guide to Accounting Standards 27 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 of lease receivables of a lessor in Section 3065,, are consistent with those in Section 3856,. 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 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. Under Section 3110,, asset retirement obligations are measured at the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, rather than at fair value. Section 3210, Long-term Debt No corresponding standard in. Guidance provided in Section 3856,. Not significant Significant

14 28 The CICA s Guide to Accounting Standards Section 3240, Share Capital Section 3240, Share Capital Section 3240,, is converged with XFI Section. None Section 3250, Surplus Section 3251, Equity All requirements in this Section relate to presentation, which is outside the scope of this summary comparison. The scope of 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. None Section 3280, Contractual Obligations Section 3280, Contractual Obligations All requirements in this Section relate to disclosures, which are outside the scope of this summary comparison. Section 3290, Contingencies Section 3290, Contingencies Section 3290,, is converged with XFI Section. None Section 3400, Revenue Section 3400, Revenue Section 3400,, is converged with XFI Section. None 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 ).

15 The CICA s Guide to Accounting Standards 29 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 of the plan is recognized on the balance sheet and there is no deferral or amortization of actuarial gains and losses or past service costs; or 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 definition of a defined benefit and defined contribution plan has been modified. The difference is not expected to be significant for most private enterprises. Significant

16 30 The CICA s Guide to Accounting Standards 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. None Certain guidance from the following EIC Abstracts has been incorporated into Section 3465, : EIC-104 (see ); and EIC-146 (see ). Section 3475, Disposal of Long-lived Assets and Discontinued Operations Section 3475, Disposal of Long-lived Assets and Discontinued Operations Section 3475,, is converged with XFI Section. None Section 3480, Extraordinary Items No corresponding standard in. Section 3500, Earnings per Share No corresponding standard in. Section 3610, Capital Transactions Section 3610, Capital Transactions Section 3610,, is converged with XFI Section. None Section 3800, Government Assistance Section 3800, Government Assistance Section 3800,, is converged with XFI Section. None

17 The CICA s Guide to Accounting Standards 31 Section 3805, Investment Tax Credits Section 3820, Subsequent Events Section 3831, Non-monetary Transactions Section 3840, Related Party Transactions Section 3841, Economic Dependence Section 3850, Interest Capitalized Section 3805, Investment Tax Credits Section 3820, Subsequent Events Section 3831, Nonmonetary Transactions Section 3840, Related Party Transactions Section 3841, Economic Dependence Section 3850, Interest Capitalized Section 3805,, is converged with XFI Section. None Section 3820,, is converged with XFI Section. None Section 3831,, is converged with XFI Section. None 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 ). None All requirements in this Section relate to disclosures, which are outside the scope of this summary comparison. All requirements in this Section relate to disclosures, which are outside the scope of this summary comparison.

18 32 The CICA s Guide to Accounting Standards Section 3856, Financial Instruments Section 3856,, differs from equivalent requirements under XFI standards. 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 differences between the guidance on financial instruments in XFI standards 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 of 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 on financial instruments measured at fair value are expensed. The equity component of convertible debt and warrants or options issued with, and detachable from, financial liabilities may be measured at zero. Significant

19 The CICA s Guide to Accounting Standards 33 Section 3860, Financial Instruments Disclosure and Presentation Hedge accounting is available by designation for relationships specified in the Section if the critical terms of the hedging instrument match those of 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 ). No corresponding standard in. Guidance provided in Section 3856,.

20 34 The CICA s Guide to Accounting Standards Section 3870, Stock-based Compensation and Other Stock-based Payments Section 3870, Stockbased 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 standards for pension plans can be found in Part IV. Section 4211, Life Insurance Enterprises Specific Items No corresponding standard in. Section 4250, Futureoriented Financial Information No corresponding standard in. Section 4400, Not-forprofit Organizations No corresponding standard in. I has been reserved for the accounting standards for not-forprofit organizations. AcG-2, Franchise Fee Revenue AcG-2, Franchise Fee Revenue AcG-2,, is converged with XFI Guideline. None AcG-3, Financial Reporting by Property and Casualty Insurance Companies No corresponding Guideline in.

21 The CICA s Guide to Accounting Standards 35 AcG-4, Fees and Costs Associated with Lending Activities AcG-7, The Management Report AcG-8, Actuarial Liabilities of Life Insurance Enterprises Disclosure AcG-9, Financial Reporting by Life Insurance Enterprises AcG-11, Enterprises in the Development Stage AcG-12, Transfers of Receivables AcG-13, Hedging Relationships AcG-14, Disclosure of Guarantees No corresponding Guideline in. Guidance provided in Section 3856, (see ). No corresponding Guideline in. No corresponding Guideline in. No corresponding Guideline in No corresponding Guideline in. No corresponding Guideline in. Guidance provided in Section 3856, (see 3856, Appendix B). No corresponding Guideline in. Guidance provided in Section 3856, (see ). AcG-14, Disclosure of Guarantees AcG-14,, is converged with XFI Guideline. None

22 36 The CICA s Guide to Accounting Standards AcG-15, Consolidation of Variable Interest Entities AcG-16, Oil and Gas Accounting Full Cost AcG-17, Equity-linked Deposit Contracts AcG-18, Investment Companies AcG-19, Disclosures by Entities Subject to Rate Regulation AcG-15, Consolidation of 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. None AcG-16, Oil and Gas Accounting Full Cost AcG-16,, is converged with XFI Guideline. None No corresponding Guideline in. AcG-18, Investment Companies AcG-18,, is converged with XFI Guideline. None AcG-19, Disclosures by Entities Subject to Rate Regulation All requirements in this Guideline relate to disclosures, which are outside the scope of this summary comparison.

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24 Provincial Institutes/Ordre The Institute of Chartered Accountants of Bermuda 31 Queen Street Boyle Building, 3 rd Floor Hamilton, Bermuda HM 11 (441) The Institute of Chartered Accountants of Nova Scotia 1791 Barrington Street, Suite 1410 Halifax, Nova Scotia B3J 3L1 (902) The New Brunswick Institute of Chartered Accountants 55 Union Street, Suite 250 Mercantile Centre Saint John, New Brunswick E2L 5B7 (506) The Institute of Chartered Accountants of Prince Edward Island 56 Water Street, 2 nd Floor Charlottetown, PEI C1A 7K7 (902) The Institute of Chartered Accountants of Newfoundland and Labrador 95 Bonaventure Avenue, Suite 501 St. John s, Newfoundland A1B 2X5 (709) Ordre des comptables agréés du Québec 680, rue Sherbrooke Ouest, 18 e étage Montréal, Québec H3A 2S3 (514) The Institute of Chartered Accountants of Ontario 69 Bloor Street East Toronto, Ontario M4W 1B3 (416) The Institute of Chartered Accountants of Manitoba Portage Avenue East Winnipeg, Manitoba R3B 0Y4 (204) The Institute of Chartered Accountants of Saskatchewan 3621 Pasqua Street Regina, Saskatchewan S4S 6W8 (306) The Institute of Chartered Accountants of Alberta 580 Manulife Place, Street Edmonton, Alberta T5J 4R2 (780) (for Alberta, outside Edmonton) The Institute of Chartered Accountants of British Columbia Suite 500, One Bentall Centre 505 Burrard Street, Box 22 Vancouver, British Columbia V7X 1M4 (604) If you are in the Yukon, please contact the Institute of Chartered Accountants of British Columbia. The Canadian Institute of Chartered Accountants 277 Wellington Street West Toronto, Ontario M5V 3H2 (416) If you are in the Northwest Territories or Nunavut, please contact the Institute of Chartered Accountants of Alberta. The Canadian Institute of Chartered Accountants NIEDU052