RE: Response to Investments in Debt Instruments (Proposed Amendments to IFRS 7) Exposure Draft

Transcription

1 January 15, 2009 CLIFF #: Website: Sir David Tweedie International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Dear Sir David Tweedie: RE: Response to Investments in Debt Instruments (Proposed Amendments to IFRS 7) Exposure Draft Thank you for the opportunity to provide feedback on the exposure draft regarding Investments in Debt Instruments and the proposed amendments to IFRS 7. In our jurisdiction, unless the Canadian Public Sector Accounting Standards Board (PSAB) makes changes to its guidance, government business type organizations (GBTO s) and government business enterprises (GBE s) will be required to follow IFRS commencing January 1, The objectives of financial reporting in the public sector are more diverse than an assessment of profitability. Users of public sector financial statements require information for accountability purposes and to make political, social and resource decisions. As a result, we believe the IASB should consider the impact on public sector entities when it evaluates amendments to International Financial Reporting Standards. Responses to specific questions posed in the exposure draft are attached. Should you have any comments or questions, please contact me at (250) or by Cheryl.Wenezenki-Yolland@gov.bc.ca, or Carl Fischer, Executive Director, Financial Reporting and Advisory Services Branch, at (250) or by Carl.Fischer@gov.bc.ca. Sincerely, (Original signed by) Cheryl Wenezenki-Yolland, CMA, FCMA Comptroller General Province of British Columbia, Canada encl. Office of the Comptroller General Mailing Address: PO Box 9413 Stn Prov Govt Victoria BC V8W 9V1 Location Address: 2 nd Floor 617 Government Street Victoria BC Canada

2 - 2 - cc: Carl Fischer, Executive Director Financial Reporting and Advisory Services Office of the Comptroller General Nick Paul, Deputy Secretary to the Treasury Board Chris Trumpy, Deputy Minister

3 - 3 - Question 1 The exposure draft proposes in paragraph 30A(a) to require entities to disclose the pre-tax profit or loss as though all investments in debt instruments (other than those classified as at fair value through profit or loss) had been (i) classified as at fair value through profit or loss and (ii) accounted for at amortised cost. Do you agree with the proposal? If not, why? What would you propose instead, and why? We do not agree with the additional disclosures proposed by this exposure draft for non GBE public sector entities. For these entities, we believe that the existing requirement to disclose fair value is adequate disclosure. The disclosure of unrealized gains and losses could result in financial statement users believing the disclosed unrealized gains could be used for program spending when in fact, they are unavailable for them. Non GBE public sector entities usually invest in debt instruments to manage short term cash requirements or to contribute to the retirement of outstanding debt. The requirements of this exposure draft may lead to the users of the financial statement believing that the disclosed unrealized pre-tax profits of sinking fund investments are available for program spending when in fact, they are not because the sinking fund will be used to retire the long term debt. The disclosure of investments in debt securities should match the intent in making the investment. The fair value disclosure of investments in debt securities is more appropriate because unrealized gains are unavailable for program spending. Question 2 The exposure draft proposes to require disclosing the pre-tax profit or loss amount that would have resulted under two alternative classification assumptions. Should reconciliations be required between profit or loss and the profit or loss that would have resulted under the two scenarios? If so, why and what level of detail should be required for such reconciliations? Reconciliations should only be required for profit enterprises. Reconciliations should not be required from non GBE public sector entities that prepare their financial statements according to IFRS. This is because the disclosure for non GBE public sector entities should be consistent with their objective when the investments were purchased, which usually does not include the making of profits.

4 - 4 - Question 3 The exposure draft proposes in paragraph 30A(b) to require entities to disclose for all investments in debt instruments (other than those classified as at fair value through profit or loss) a summary of the different measurement bases of these instruments that sets out (i) the measurement as in the statement of financial position, (ii) fair value and (iii) amortised cost. Do you agree with the proposal? If not, why? What would you propose instead, and why? As stated earlier, we do not agree with the additional disclosures proposed by this exposure draft for non GBE public sector entities. British Columbia s non GBE public sector does not invest in debt securities for speculative purposes. Short term cash management and the retirement of long term liabilities (sinking funds) are the primary reasons for holding investments in debt securities. The disclosure of investments in debt securities should match the intent in making the investment. The fair value disclosure of investments in debt securities is more appropriate because unrealized gains are unavailable for program spending. Question 4 The exposure draft proposes a scope that excludes investments in debt instruments classified as at fair value through profit or loss. Do you agree with that proposal? If not, would you propose including investments in debt instruments designated as at fair value through profit or loss or those classified as held for trading or both, and if so, why? We agree with the application of the exclusion. The intent of the proposed amendment is to provide financial statement users with the impact of fair value measurements on profitability. The revaluation of debt instruments classified as at fair value through profit or loss is already reflected in the net income of the entity and is reported in the financial statements. Therefore, the additional note disclosure of the revaluation of investments in debt instruments would not provide an added benefit. Question 5 Do you agree with the proposed effective date? If not, why? What would you propose instead, and why? Yes, we agree with the proposed effective date.

5 - 5 - Question 6 Are the transition requirements appropriate? If not, why? What would you propose instead, and why? Yes, we agree the transition requirements are appropriate.