ISSUED. September ISSUED

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1 New and Proposed Changes to ASPE Sections for the Two Years Ended

2 NEW AND AMENDED STANDARDS 2014 Improvements to Accounting Standards for Private Enterprises (Amendment) 2013 Improvements to Accounting Standards for Private Enterprises (Amendment) ASPE 1591 Subsidiaries (New) ASPE 3051 Investments (Amendment) ASPE 3056 Interests in Joint Arrangements (New) DATE ISSUED October 2014 October 2013 September 2014 September 2014 September 2014 EFFECTIVE DATE January 1, Early application is January 1, Early application is January 1, Early application is January 1, Early application is permitted only if ASPE 3056 is applied at the same time. January 1, Early application is permitted only if the guidance in ASPE is applied at the same time. ASPE 3462 Employee Future Benefits (New) May 2013 January 1, Early application is ASPE 3475 Disposal of Long-lived Assets and Discontinued Operations (Amendment) May 2013 January 1, Early application is EXPOSURE DRAFTS 2015 Annual Improvements to Accounting Standards for Private Enterprises Redeemable Preferred Shares Issued in a Tax Planning Arrangement DATE ISSUED February 2015 October 2014 EFFECTIVE DATE Proposed to be effective for years beginning on or after January 1, Early application is Proposed to be effective for fiscal years beginning on or after January 1, Earlier application is This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 2

3 New and Amended Standards 2014 Improvements to Accounting Standards for Private Enterprises (Amendment) In October 2014, as part of its program of annual improvements to its standards the Accounting Standards Board (AcSB) issued improvements to Accounting Standards for Private Enterprises (ASPE) as set out in Part II of the CPA Canada Handbook Accounting. The following summarizes the proposed amendments: ASPE 3462 Employee Future Benefits Clarify that the option to use a funding valuation for unfunded defined benefit plans can only be applied by entities that have at least one funded defined benefit plan. ASPE 3856 Financial Instruments Clarify how to account for the hedging item if a reporting period ends between the date the hedged transaction occurs and the date the hedging item matures. The hedging item is remeasured at the balance sheet date using the spot rate in effect at that date, with any gain or loss included in net income. Clarify that when impairment has been determined on a group basis, only the amount of allowance for impairment of financial assets is required to be disclosed, not the carrying amount of the impaired assets. For example, allowance for doubtful accounts receivable determined on a group basis. All of the above amendments are effective for periods beginning on or after January 1, Early application is 2013 Improvements to Accounting Standards for Private Enterprises (Amendment) In October 2013, as part of its program of annual improvements to its standards the Accounting Standards Board (AcSB) issued improvements to Accounting Standards for Private Enterprises (ASPE) as set out in Part II of the CPA Canada Handbook Accounting. The following amendments affect multiple Sections and are summarized by the nature of the amendment: Clarification of Accounting for Non-controlling Interest ASPE 1520 Income Statement - Additional guidance has been added to ASPE 1520 in order to clarify that non-controlling interest are not a deduction in calculating net income. ASPE 1540 Cash Flow Statement - Removal of guidance requiring the adjustment of net income or loss for the effects of non-controlling interest. ASPE 1602 Non-controlling Interests - Amended to clarify that non-controlling interests are not a deduction in arriving at net income. Clarification of Remeasurement of Contingent Consideration ASPE 1582 Business Combinations - Amended to clarify that contingent consideration is remeasured at fair value when the contingency is resolved. ASPE 3856 Financial Instruments - Amended to clarify that contingent consideration is remeasured at fair value when the contingency is resolved. This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 3

4 Clarification of Accounting for a Change in Ownership ASPE 1590 Subsidiaries - Amended to clarify that the accounting for a change in ownership interest is based on the accounting policy used to account for the subsidiary. ASPE 3055 Interests in Joint Ventures - Amended to clarify that the accounting for a change in ownership interest is based on the accounting policy used to account for the interests in joint ventures. The following amendments affect a single Section, and are summarized by Handbook Section: ASPE 1582 Business Combinations Amended to remove the requirement for disclosure when subsidiaries are subsequently held at the equity or cost method. Certain disclosures are only applicable if the subsidiary is consolidated. ASPE 1602 Non-controlling Interests Guidance added to clarify the allocation of exchange gains and losses arising from the translation of the financial statements of a self-sustaining foreign operation that are attributable to the non-controlling interests. Such exchange gains and losses should be included in the non-controlling interests component of equity. ASPE 3856 Financial Instruments Additional guidance to clarify that a financial instrument redeemable only by economic compulsion, rather than contractual requirement, is not classified as a financial liability. Additional guidance to clarify the treatment of hedging relationships using foreign exchange forward contracts that mature before the hedged item is recognized. All of the above amendments are effective for periods beginning on or after January 1, Early application is ASPE 1591 Subsidiaries (New) In September 2014, the Accounting Standards Board (AcSB) issued ASPE 1591, which replaces ASPE 1590 Subsidiaries and ASPE AcG-15 Consolidation of Variable Interest Entities. ASPE 1591 includes additional guidance to determine when control is obtained through means other than equity interests. The guidance from ASPE 1590 on accounting for subsidiaries controlled through equity interests has been retained. The following summarizes the additional guidance in ASPE 1591: Explanations of how to apply the existing definitions of a subsidiary and control of an enterprise when the rights of equity interests may not be the dominant factor in determining who controls an enterprise. Descriptions of the types of contractual arrangements that may give one enterprise control over another. Other facts and circumstances to consider when assessing whether an enterprise has control over another enterprise. Guidance to distinguish rights that are designed to protect the interest of the enterprise holding those rights without giving it control from rights that do confer control. This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 4

5 Significant consequential amendments include changes to: ASPE 1500 First-time Adoption, to permit a first-time adopter to apply the transitional provisions in ASPE 1591 if it chooses to consolidate its subsidiaries for the first time. ASPE 1601 Consolidated Financial Statements, to move guidance on how to consolidate from ASPE 1590 to ASPE The new Section is effective for periods beginning on or after January 1, Early application is ASPE 3051 Investments (Amendment) In September 2014, the Accounting Standards Board (AcSB) issued amendments to ASPE 3051 to clarify that the scope includes investments subject to significant influence and certain other non-financial instrument investments (such as works of art and other tangible assets held for investment purposes), but does not include other investments (such as subsidiaries and interests in joint arrangements). The amendments also provide guidance on contributions and other transactions between an investor and an equity-accounted investee. Significant consequential amendments include changes to: ASPE 1500 First-time Adoption, to permit a first-time adopter to apply the transitional provisions in amended ASPE ASPE 3831 Non-monetary Transactions, to refer to ASPE 3051 on accounting for gains or losses from non-monetary transactions. The amendments are effective for periods beginning on or after January 1, 2016 and may be applied prospectively. Early application is permitted only if ASPE 3056 is applied at the same time. ASPE 3056 Interests in Joint Arrangements (New) In September 2014, the Accounting Standards Board (AcSB) issued ASPE 3056 which replaces ASPE 3055 Interests in Joint Ventures. Under ASPE 3056, the accounting by an investor for an interest in a joint arrangement is driven by whether it is an interest in jointly controlled operations or assets, or a jointly controlled enterprise. Investors with interests in jointly controlled operations or assets recognize their share of jointly controlled assets, liabilities, revenues and expenses. Investors with interests in jointly controlled enterprises have a choice to account for the investments using the equity or cost method, or perform additional analysis of its interests in jointly controlled enterprises to determine whether they represent rights to individual assets and liabilities, or net assets. For interests in individual assets and liabilities, the investor recognizes its share of the jointly controlled assets, liabilities, revenues and expenses. For interests in net assets, the investor accounts for its interests using the equity or cost method. The new Section and amendments are effective for periods beginning on or after January 1, Early application is permitted only if the guidance in ASPE is applied at the same time. ASPE 3462 Employee Future Benefits (New) In May 2013, the Accounting Standards Board (AcSB) issued ASPE 3462, which replaces ASPE 3461 Employee Future Benefits. This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 5

6 The main features of this new Section are as follows: Recognition The defined benefit liability (asset) would be recognized in the balance sheet. This amount is the defined benefit obligation less the fair value of plan assets, if any, adjusted for any valuation allowance in the case of a net asset. Deferral of a portion of actuarial gains and losses and past service costs, and their amortization in future periods, would not be Consequently, all changes from remeasuring the defined benefit liability (asset) would be recognized immediately in income. Measurement A defined benefit obligation for which an appropriate funding valuation has been prepared would be measured using either that funding valuation or a separate valuation for accounting purposes. The same accounting policy choice would be applied to all such plans. Plan assets and the defined benefit obligation would be measured as at the balance sheet date, instead of within a three-month measurement date window prior to the balance sheet date as permitted under the current deferral and amortization approach. (Measurement of the obligation may take place at an earlier date and then be updated to reflect the obligation at the balance sheet date.) The expected rate of return on plan assets is not included in the proposals as a result of eliminating the deferral and amortization approach. The actual return on plan assets would be included in the determination of defined benefit cost for the period. Administration costs for the management of plan assets would be deducted from the actual return on plan assets. The present value of economic benefits for purposes of the limit on the carrying amount of a defined benefit asset would be calculated using the discount rate for measuring the obligation, instead of the expected rate of return on plan assets. Disclosure Disclosure of remeasurements and other items would be required, unless these were separately presented on the face of the income statement. Remeasurements are actuarial gains and losses, the difference between the return on plan assets and the return calculated using the discount rate used to determine the plan obligation, and the effect of any valuation allowance for a defined benefit asset. Other items consist of past service costs, gains and losses arising from settlements and curtailments. Disclosure would also be required of the effective date of the most recent actuarial valuation as well as whether a funding or accounting valuation was used, and any change in the actuarial method used in determining the defined benefit obligation. Transitional Provisions Retrospective application would be required in accordance with ASPE 1506 Accounting Changes. However, benefit costs capitalized as part of the cost of assets in prior years would not have to be restated. Simplified transition requirements are provided for a change in the measurement date for plan assets and the defined benefit obligation. This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 6

7 Consequential amendments include changes to: ASPE 1500 First-time Adoption; ASPE 1506 Accounting Changes; ASPE 1520 Income Statement; ASPE 1521 Balance Sheet; and, ASPE 1582 Business Combinations. The new Section is effective for periods beginning on or after January 1, Early application is ASPE 3475 Disposal of Long-lived Assets and Discontinued Operations (Amendment) In May 2013, the Accounting Standards Board (AcSB) issued an amendment in order to revise the definition of a discontinued operation. The proposal creates a higher threshold for a disposal to be classified as a discontinued operation compared to the former definition. As a result, fewer disposals would qualify as discontinued operations in practice. A discontinued operation required to be disclosed separately would be a component of an enterprise that either has been disposed of or is classified as held for sale and meets one of the following criteria: (a) Represents a separate major line of business or geographical area of operations. (b) Is a part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations. (c) Is a subsidiary acquired exclusively with a view to resale. The amendment is effective for periods beginning on or after January 1, Early application is This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 7

8 Exposure Drafts 2015 Annual Improvements to Accounting Standards for Private Enterprises In February 2015, the Accounting Standards Board (AcSB) issued an Exposure Draft (ED) on the 2015 Annual Improvements to Accounting Standards for Private Enterprises. The annual improvements process is intended to propose amendments to clarify guidance or wording and to correct for unintended consequences, conflicts or oversights. The 2015 annual improvement proposes amendments in the following areas: Business Combinations, Section 1582 Clarifying that disclosure of the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed should also be required when business combination is achieved through the acquisition of an asset or group of assets. Investments, Section 3051, and Leases, Section 3065 Clarifies that disclosure of the amount of any impairments loss or reversal of a previously recognized impairment loss is required, consistent with the disclosure requirement for items of income in Financial Instruments, paragraph (e). Employee Future Benefits, Section To provide clarification on the proposal made in the 2014 Improvements to Accounting Standards for Private Enterprises ED that the option to use a funding valuation can only be applied by entities that have at least one funded defined benefit plan. The 2015 proposal also clarifies that an actuarial valuation for funding purposes is one that is required to be prepared in order to comply with pension legislation or regulations. The amendments are effective for years beginning on or after January 1, Earlier application is Redeemable Preferred Shares Issued in a Tax Planning Arrangement In October 2014, the Accounting Standards Board (AcSB) issued an Exposure Draft to amendment ASPE 3856 Financial Instruments to require redeemable preferred shares issued in a tax planning arrangement to be presented as liabilities. The amendments are effective for periods beginning on or after January 1, Early application is This communication contains a general overview of the topic and is current as of. The application of the principles addressed will 8

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