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Accounting Standards

Are accounting standards public enough?

CA Magazine might be freely giving away their content for the benefit of all stakeholders in the CA profession and public accounting in general, but the goodwill doesn’t extend to the CICA when it comes to Canadian accounting and auditing standards.

The CICA, through the Accounting Standards Board (AcSB), develops public accounting standards through a remarkably public process of consultation and comment, but once the standard makes it into the Handbook, it is rarely seen in public again. The Handbook is available online, if you’re a member of the Institute. That is, only if you’re a CA do you get access to the goods.

Additionally, when one Googles “CICA Handbook”, the first result is a link to “Enhanced online access to CICA Handbook”! (This the access available only to CICA members.) A link to the protected Handbook is featured prominently on the CICA homepage. “Great,” a new visitor thinks, “the Handbook is only a mouse click away!” But that click takes you again to the paywall.

I posed the question directly to the Institute, and later in the day received my response: “The CICA Handbook is only granted to members as a part of their annual dues thru their Provincial Institute. You may be able to come across a copy in print in a local Library, assuming the Library has one for public use.” Pay the dues, get access to the public standards.

The profession exists to protect the public interest, so I have to question whether access to the fruits of the profession’s labour, the standards themselves, are holding up this ideal. What do you think?

Categories
Accounting Standards

7 quick facts about the new financial instruments standard

The Canadian Accounting Standards Board (AcSB) has finalized some new sections of the Handbook which include guidance on accounting for financial instruments. Financial instruments include investments, hedges, derivatives, and loans and receivables.

  1. The Canadian standard attempts to harmonize our GAAP in a way with FASB Statement 133, “Accounting for Derivative Instruments and Hedging Activities,” and IAS 39, “Financial Instruments: Recognition and Measurement.”
  2. The standard is balance sheet focused: It is an attempt to get the financial position right and flow the change through the statement of operations (income statement). It is expected to result in new assets and liabilities for most businesses implementing the standard.
  3. The default measurement basis is fair value. There are exceptions: Loans, receivables and investments intended to be held to maturity should be recorded at amortized cost, and equity investments for which no market value is readily available should be recorded at cost.
  4. The Canadian standard has been modeled closely on the IFRS, which is more comparable to Canadian GAAP in general and newer than the US standard.
  5. The new standard will require companies to reassess existing contracts as well as explicit hedges. A previous standard on hedge accounting has been in effect since 2003. The new standards may require changes to the way certain hedges are accounted for.
  6. The new standard is effective for periods beginning on or after October 1, 2006 for public companies and non-profits, and October 1, 2007 for private companies.
  7. The standard will improve, as an example, comparability between companies that are approaching their foreign exchange risk differently. Clearly there is a possibility that a company hedging the risk is in a different position than one not.