2013-09-26 AcSB issues exposure draft - Joint Arrangements and Investments (Part II)
The AcSB proposes to replace Section 3055 Interests in Joint Ventures with Section 3056 Interests in Joint Arrangements and amend Section 3051 Investments in Part II of the CICA Handbook. A Not-for-profit Organization (NPO) would apply amended Section 3051 Investments when it has significant influence over a profit-oriented enterprise. The new standard on joint arrangements would not apply to NPOs.
The main features of the proposals are summarized as follows:
Section 3056 - Joint Arrangements:
- The proposals reduce the accounting policy options for joint arrangements. The proposals are consistent with the key concepts in IFRS 11 Joint Arrangements.
- An investor in an joint arrangement would account for its investment as follows:
- An investor in a jointly controlled operation or a jointly controlled asset that has rights to the individual assets and obligations for the individual liabilities would account for its interest in the joint arrangement by recognizing its share of assets controlled, liabilities incurred, revenues and expenses.
- An investor in a jointly controlled enterprise that has rights to the net assets of the joint arrangement would account for its interest using either the cost or equity method. Alternatively, if the investor has rights to the individual assets or obligations, it would recognize its share of assets controlled, liabilities incurred, revenues and expenses.
- For contributions to a joint arrangement, the requirement to defer and amortize the portion of a gain that does not relate to the amount of cash or the fair value of other assets received would be removed.
- Specific transitional proposals are provided for changes from the proportionate consolidation to the equity or cost method, and for changes from the equity or cost method to accounting for the investor's interests in individual assets and liabilities.
Section 3051 - Investments:
- Amendments to Section 3051 include:
- Clarification of scope
- Requirement to recognize gains and losses on transactions between investors and equity accounted investees in income to the extent of the interests of non-related investors.
- Prospective application would be permitted for Section 3051.
The effective date of the standards will be no earlier than fiscal years beginning on January 1, 2016.
Comments on the exposure draft are requested by November 11, 2013. A copy of the exposure draft can be found at the following link: Joint Arrangements and Investments.