New Accounting Standards for
Not-for-Profit Organizations
Change is here—are you ready?
In December 2010, the Canadian
Accounting Standards Board (AcSB)
released the new Accounting Standards for
Not-for-Profit Organizations (ASNPO).
As of fiscal periods beginning on or after
January 1, 2012, Not-for-Profit
Organizations (NFPOs) will be required to
choose between this new set of standards
and those applicable to publicly
accountable enterprises—International
Financial Reporting Standards (IFRS). A
NFPO that applies ASNPO also applies
Accounting Standards for Private
Enterprises (ASPE) to the extent that
those standards address topics not
otherwise addressed in ASNPO.
Organizations that do not receive or expect
to receive contributions internationally or
whose strategy and operations may be
focused locally rather than globally are
most likely to opt for ASNPO versus
IFRS, as the cost savings alone may make
its adoption the most viable option.
Though this change may seem daunting,
we at Grant Thornton LLP are here to
help. This document contains information
on how the transition may impact your
organization, along with some of the areas
where we can assist. If after reading this
publication you have questions or are
unsure about where to go next, please
contact your Grant Thornton
representative at any time—whether you
need help getting started, moving forward
or you’re just in need of some good oldfashioned advice.
Optional exemptions available on
first-time adoption
Organizations are generally required to
apply the new standards retrospectively
(i.e., as though the standards had always
been applied). However, there are a
number of optional exemptions from
certain ASPE standards to ease the cost
and effort of transition. These optional
exemptions should be considered along
with their impacts before selecting those
that will be elected in the year of transition.
Appendix A at the end of this document
provides a brief overview of all the
optional exemptions that are available to
organizations upon first-time adoption.
Appendix A also outlines the mandatory
exceptions that preclude retrospective
application.
Readiness—when should the
preparations begin?
There are changes as a result of the new
ASNPO standards that could be significant
to an organization. It is, therefore,
imperative that your accounting staff,
management, and boards, etc., be aware of
the new standards, and how they will
impact the work of each individual within
the organization in the year of transition
and on an ongoing basis.
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The transition will impact organizations in
varying degrees—depending on their size,
the complexity and nature of operations,
the skills and availability of in-house
accounting personnel, etc. The transition
will require additional work, including
preparing the transition note for the first
financial statements under ASNPO, as well
as amending other notes to ensure
consistency with the new standards.
Carrying out transitional work in addition
to the regular financial year-end can be a
difficult and daunting task. As a result, we
recommend that the transitional work
should be started as soon as possible.
Bringing in professionals who can help
streamline the process can go a long way
towards a smoother transition.
Financial statement impact
Organizations will be required to prepare
and present a statement of financial
position at the date of transition to the new
accounting standards. As there are
exceptions in applying the new framework,
it will be important to understand the
impact those exceptions could have on the
various stakeholders.
Additionally, transition-related information
must be presented in the financial
statements in the year of adoption of the
new accounting framework. Specifically,
there are requirements to indicate the
amount and reason for each adjustment to
net assets at the date of transition, resulting
from adoption of the new standards.
Additionally, a reconciliation of the excess
of revenue over expenses reported in the
organization’s most recent previously
issued financial statements to its excess of
revenue over expenses under ASNPO for
the same period. Disclosure of all optional
exemptions elected upon transition will
also be required.
Moreover, notes to the financial statements
will have to be amended to comply with
the new standards. In this respect, it is
recommended that a template of the
financial statements along with draft notes
under ASNPO be prepared in advance of
the year-end, easing the burden during the
busiest time for both accounting staff and
management.
In respect to stakeholders or creditors
specifically, caution should be used when
adopting new policies permitted under
ASNPO (i.e., although the option to not
consolidate subsidiaries is available under
ASNPO, specific organization by-laws or
loan covenants may indicate that the
statements need to be consolidated). This
helps to highlight the importance of
financial statement preparers knowing the
options and elections available to them.
How does the transition impact the
audit of prior year balances?
Assuming a calendar year-end, the first
annual financial statements prepared under
ASNPO will include statements of
financial position as at
1
December 31, 2012,
2
December 31, 2011, and
3
January 1, 2011 (opening statement of
financial position).
Though auditors will have likely audited
financial statements for the comparative
periods presented in accordance with prechangeover accounting standards, they will
not have previously audited the financial
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statements for those periods presented in
accordance with ASNPO. As a result,
unless auditors are specifically engaged to
report on all financial statement periods
presented, prior year comparatives and
opening statement of financial position
figures will be marked as “unaudited” with
an additional other matters paragraph
included in the audit report that specifically
identifies the comparative information not
covered by the audit opinion.
This may come as quite a surprise to both
creditors and stakeholders alike. Some
lending agreements or organizational bylaws may specify that both current and
prior year statements are required to be
audited. Where this is the case, auditors will
need to be engaged to report on all
periods. Investing the time up front, and
determining expectations of stakeholders
and creditors for the transition financial
statements, may help avoid any surprises
when reporting.
• optimizing the selection of optional
exemptions;
• calculating the impacts of changing
accounting methods and policies at the
date of transition;
• applying the new standards thereafter,
drafting the financial statements,
including the opening statement of
financial position and notes;
• training accounting staff; and
• measuring certain assets such as some
items of capital assets at fair value.
If you would like any additional
information, please contact us—we’ll be
happy to assist with all your ASNPO
needs.
T
E
In addition, organizations may prefer to
report on all financial statement periods
presented, rather than obtaining a report
on the current period only, particularly
when auditors have determined that
additional procedures will not result in
significant additional work from that being
performed on the current period. Thus, the
level of audit work expected as part of the
transition should be discussed with your
auditor as soon as possible.
How can we help?
At Grant Thornton, our experts are trained
in ASNPO and can help with
• decisions related to whether early
adoption may be beneficial;
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About Grant Thornton
in Canada
Grant Thornton LLP
is a leading Canadian
accounting and advisory
firm providing audit, tax
and advisory services
to private and public
organizations. Together
with the Quebec firm
Raymond Chabot Grant
Thornton LLP, Grant
Thornton in Canada has
approximately 4,000
people in offices across
Canada. Grant Thornton
LLP is a Canadian
member of Grant
Thornton International
Ltd, whose member firms
operate across100
countries worldwide.
We have made every
effort to ensure
information in this
publication is accurate
as of its issue date.
Nevertheless, information
or views expressed
herein are neither official
statements of position,
nor should they be
considered technical
advice for you or your
organization without
consulting a professional
business adviser. For
more information about
this topic, please contact
your Grant Thornton
adviser.
For more information
about our services, or to
contact an adviser near
you, please visit
www.GrantThornton.ca.
Appendix A—first-time
adoption of ASNPO
Exemptions and exceptions
Optional exemptions from ASPE
a
recognize all accumulated actuarial
gains and losses and past service costs
in opening net assets, at the date of
transition, even if it uses the corridor
approach for later actuarial gains and
losses; or
b
carry forward unrecognized actuarial
gains and losses and past service costs
that were determined previously under
pre-changeover standards.
Business combinations
The actual exemption around business
combinations for NFPOs was removed,
however there is a requirement still within
the optional exemption section, for
organizations to account for past business
combinations by
• retaining the same classification as
previous financial statements;
• recognizing all assets and liabilities that
were assumed except those previously
derecognized;
• excluding all items previously recognized
that do not qualify for recognition under
ASNPO; and
• goodwill must be recorded at the
carrying amount in accordance with the
previous financial reporting standards
on the date of transition.
Organizations electing one of these
options, must apply it to all defined benefit
plans.
Cumulative translation differences
Also, goodwill MUST be tested for
impairment at the date of transition.
Organizations may elect to set the
cumulative translation differences for all
operations to zero at the date of transition.
The gain or loss on a subsequent disposal
of any operation with cumulative
translation differences will exclude such
translation differences that arose before the
date of transition.
Fair value
Financial instruments
This exemption allows organizations to
measure any item of its capital assets at the
fair value on the date of transition and to
designate this fair value as deemed cost.
This is not an all or none exemption and,
therefore, can be elected for specific items.
At the date of transition, organizations may
elect to designate fair value measurement
for any financial asset or financial liability
in accordance with 3865 Financial
Instruments.
Asset retirement obligations
Employee future benefits
Organizations using the deferral and
amortization approach in Section 3461
Employee Future Benefits may elect to
Organizations may elect for existing asset
retirement obligations (ARO) determined
on a basis inconsistent with Section 3110
Asset Retirement Obligations, or that were
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previously unrecorded, to estimate the
obligation using the methodology of
Section 3110 and to record, or adjust, the
ARO and the carrying amount of the
related asset at the date of transition. The
obligation is measured using management’s
best estimate of the expenditure required
to settle the present obligation at that date.
The amount attributable to the carrying
value of the asset is estimated based on the
original and remaining life of the asset.
Non-controlling interests
Certain requirements of Section 1602 Noncontrolling Interests should be applied
prospectively from the date of transition.
Mandatory exceptions from ASPE
Derecognition of financial assets and
financial liabilities
The derecognition principles of Section
3856 are to be applied prospectively for
transactions occurring on or after the date
of transition. Previously derecognized nonderivative financial assets and liabilities
cannot be re-recognized on adoption of
ASNPO unless they qualify for recognition
as a result of a later transaction or event.
Hedge accounting
Hedges that do not qualify for hedge
accounting under Section 3856 may not
continue to be accounted for as a hedge
under ASNPO. Hedges that do qualify and
where designation as a hedge occurred on
or before the date of transition have their
carrying amounts adjusted to the amounts
that would have been recognized under
Section 3856. Hedging relationships, and
documentation of same, cannot be
retrospectively designated or created.
Estimates
Estimates presented in the opening balance
sheet must be consistent with those made
under previous accounting policies prior to
the date of transition. Adjustments may
only be made when the original estimate
was made in error.
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