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Staying on top of standard-setting initiatives

Vol. 11-12
March 25, 2011

  Accounting Standards for Private Sector Not-for-Profit Organizations (NFPOs)

Excerpted from the AcSB's Background Information and Basis for Conclusions document

The strategic direction of financial reporting for Canada’s more than 160,000 not-for-profit organizations has been decided. The Accounting Standards Board and the Public Sector Accounting Board finalized new accounting standards for private not-for-profit organizations and the inclusion of the 4400 series of standards from the CICA Handbook – Accounting into the CICA Public Sector Accounting Handbook for use by government organizations applying the standards for not-for-profit  organizations. These standards are effective January 1, 2012.

Given the diversity of not-for-profit organizations, the AcSB agreed that options were required and that the choice between the options should be one that an organization can make freely. The AcSB adopted a free choice of the accounting standards for not-for-profit organizations in Part III of the Handbook, or IFRSs in Part I of the Handbook if that approach meets the needs of the users of its financial statements. In reaching this decision, the AcSB noted that IFRSs do not contain any standards dealing with issues specific to not-for-profit organizations, equivalent to the “4400 series” of Sections in the pre-changeover standards Part V of the Handbook. Furthermore, it is unlikely that the International Accounting Standards Board (IASB) will develop such standards in the foreseeable future.

Consistent with its approach in setting standards for profit-oriented enterprises, the AcSB determined that any not-for-profit organization can use the accounting standards for not-for-profit organizations. There is no size test or other qualifier to use these standards.

To simplify matters for stakeholders, the AcSB decided to consolidate the specific standards applicable to not-for-profit organizations in Part III of the Handbook and to link those standards to the accounting standards for private enterprises in Part II of the Handbook for transactions and circumstances that are not dealt with in Part III.

The accounting standards for not-for-profit organizations will not be static. Any high-quality set of accounting standards must evolve in order to address reporting needs in a changing environment.

In comparison to publicly accountable enterprises and some private enterprises, not-for-profit organizations generally have fewer resources to devote to keeping up to date with standards. Therefore, as accounting standards for private enterprises evolve over time, the AcSB intends to co-ordinate those changes with changes to not-for-profit organization standards, as appropriate. In this regard, the AcSB plans to update the accounting standards for private enterprises on an annual or biennial basis, with each update potentially consisting of changes to several standards that would all be effective at the same time. The AcSB believes that this bundling of changes will be sensitive to the needs of both private enterprises and not-for-profit organizations.

As well, future changes to IFRSs will be considered to determine the extent that they are appropriate for Canadian private enterprises and not-for-profit organizations. Input received from stakeholders supported reviewing IFRSs for potential changes to the accounting standards for private enterprises, as this minimizes confusion in the marketplace and the educational and training burden for those who need to work with both of those sets of standards. Any changes to private enterprise standards have the potential to affect not-for-profit organizations as well.

The AcSB and PSAB will work jointly to reconsider the current requirements of the 4400 series Sections to identify necessary improvements now that both Boards have finalized their respective strategic directions for not-for-profit organizations. The Boards’ objective is to have all not for-profit organizations apply similar accounting treatments to like transactions when the needs of users in the private and public sectors are aligned.

Find the answers to frequently asked questions such as:
  • How do I determine if my organization is a private sector NFPO?
  • What are the main similarities and differences between the pre-changeover accounting standards in Part V and accounting standards for not-for-profit organizations in Part III of the CICA Handbook – Accounting?
  • Is there first-time adoption and transition guidance?
  • What source of GAAP will be referenced on my organization’s financial statements after transition?
  • How can I get involved in the standard-setting process? How do I share my opinions on existing and new accounting standards?

More questions are addressed in the AcSB's FAQ: Accounting Standards for Private Sector Not-for-Profit Organizations (NFPOs).

Additional resources:

This Week in Review

Standard-setting Activities Digest
The Standard-setting Activities Digest (the Digest), published on a monthly basis not only represents an excellent starting point towards the original published text of the standard-setting organization but also present a single source of reference for current standards, future standards, exposure drafts and projects. You may register here to receive automatically a publication alert in your email. The following items have been released this week and will be included in the next edition of the Digest:

  AcSB Activities
  FAQ: Accounting Standards for Private Sector Not-for-Profit Organizations (NFPOs)
Find the answers to frequently asked questions such as why are private NFPOs being asked to follow another set of accounting standards, can I early adopt these standards, and more.
  OSC Activities
  Staff Notice 81-713, Focused Disclosure Review Related to National Instrument 81-107, Independent Review Committee for Investment Funds
NI 81-107 requires that an investment fund that is a reporting issuer have an independent review committee to oversee decisions involving conflicts of interest faced by the fund manager in the operation of the fund. The OSC's review was primarily intended to assess the concerns expressed by the funds industry regarding the implementation of NI 81-107.
  CSA Activities
  CSA Staff Notice 81-320 (Revised) - Update on International Financial Reporting Standards for Investment Funds
The revised version of the notice reflects the recent decision by the AcSB to further defer the transition to IFRS for investment companies to January 1, 2013. In the meantime, investment funds are expected to continue to provide appropriate disclosure about the anticipated impact of the changeover to IFRS in accordance to the guidance provided in Staff Notice 52-320.
  United States
  PCAOB Activities
  PCAOB’s March 2011 Investor Advisory Group Meeting (Prepared by the AICPA's Center for Audit Quality, Restricted to AICPA members)
Some of the Recommendations from the Working Group:
  • The PCAOB should launch an in-depth study into the role auditors played in the financial crisis. The goal of that study should be to identify both the causes of, and remedies for, those pervasive audit failures.
  • The PCAOB should require audit firms to produce an annual report filed with the PCAOB that is made public and certified by the executives of the audit firm. 
  • The PCAOB should undertake a project to establish periodic mandatory audit firm rotation (e.g., every ten years). To prevent “opinion shopping” by the company, any rules adopted by the Board should permit the auditor to be removed only for cause, as defined by the PCAOB.
  • With respect to audit work performed by non-U.S. audit firms, the PCAOB should undertake a study to strengthen the supervision by the lead responsible partner as the working group does not believe that acceptance of the non-U.S. auditors’ “credentials” are sufficient to ensure high quality audits are being performed.
  • The PCAOB should amend the auditor’s report to require audit firms to report the amount or percentages of assets and revenues that have been audited by any auditor that has not been subjected to PCAOB inspection.
  Research Note, Activity Summary and Audit Implications for Reverse Mergers Involving Companies from the China Region
This Research Note highlights concerns regarding domestic registered firms’ use of the work of other firms or using assistants engaged from outside the firm in conducting audits of companies with substantially all of their operations in another country, specifically the China region.
  IASB Activities
  IFRS Taxonomy 2011
The IFRS Taxonomy is a translation of IFRSs into XBRL (eXtensible Business Reporting Language). The 2011 taxonomy is consistent with IFRSs as issued by the IASB at January 1, 2011, and it contains XBRL tags for all IFRS disclosure requirements.

Press review
(EXTERNAL WEB SITE LINKS - Some sites may require free registration)

  Date Publication Article
  2011/04/07 XBRL Canada XBRL Canada Seminar - Introduction to XBRL for Canadian Issuers
  2011/03/25 IASB

IFRS Foundation publishes IFRS Taxonomy 2011

Review the IFRS Taxonomy 2011

  2011/03/24 CPA2Biz Ownership Succession Planning for Family Businesses: A Window of Opportunity Just Opened, But Are You Ready?
  2011/03/23 CFOs Exit Restating Companies, Study Finds
  2011/03/23 Why Are Pension Plan Sponsors Switching to Mark-to-Market Accounting?
  2011/03/23 Google Think Quarterly
  2011/03/23 CGA Canada Investors advised to be cautious as companies transition to IFRS from GAAP, says CGA-Canada study 
  2011/03/22 Missing: Public Companies: Why is the number of publicly traded companies in the U.S. declining?
  2011/03/22 Department of Finance
2011 Federal budget highlights

Visit the official Budget site

  2011/03/22 CICA

The First Interim Report Under IFRSs (PDF)

  2011/03/20 Financial Times US banks face fresh scrutiny on lending
  2011/03/18 Davies Ward Phillips & Vineberg LLP Practical Tools for Business: The Perils and Pitfalls of Emails (PDF)
  2011/03/01 Accounting Today Measures for measurement
  2011/03 Thomson Reuters The New Regulatory World in 2011 (Free Registration Required)
  2011/03 FEI Magazine In this issue:

Table of contents

  2010 United Nations Corporate Governance in the Wake of the Financial Crisis (19-page PDF file)
  2010 Tatum Managing the Risk of a CFO Transition (PDF)

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