Have your say: Redeemable Shares

Have your say: Redeemable Shares

The Accounting Standards Board (AcSB) is proposing changes to the accounting for retractable or mandatorily redeemable shares issued in a tax planning arrangement. These changes will be through amendments to the Financial Instruments, Section 3856 in Part II of the CPA Canada Handbook – Accounting. AcSB is also proposing changes to Subsidiaries, Section 1591, to add guidance on substantive rights; and Equity, Section 3251, to present the effects of the amendments to Financial Instruments, Section 3856, as a separate component of equity.

These changes will have an impact, so AcSB is seeking input through both the release of an Exposure Draft and a roundtable session. The roundtable on the proposed amendments will be held in Calgary on November 15; Alberta CPAs are encourage to attend to ensure their voice is heard.

To attend, complete the registration form. CPAs may attend in person, or by video or teleconference to share their views.

When Where
Wednesday, November 15, 2017
9:00 a.m. – 11:00 a.m. MST
Chartered Professional Accountants of Alberta
800-444 7th Avenue SW Calgary, Alberta, T2P 0X8

Please note that space is limited, and the AcSB may need to limit attendance to one individual per organization, if capacity is reached. For more information, please contact:

Mohamed Hassanali
Principal
Accounting Standards
Phone: +1-416-204-2967
Email: mhassanali@acsbcanada.ca

Interested individuals can also read  the Exposure Draft on the AcSB website. Comments are due by January 15, 2018.

Background on the Exposure Draft

Retractable or mandatorily redeemable shares issued in a tax planning arrangement are a liability in accordance with FINANCIAL STATEMENT CONCEPTS, paragraph 1000.28-.30. FINANCIAL INSTRUMENTS, paragraph 3856.23, provides an exception from liability treatment and requires that these shares be classified as equity when issued under specific sections of the Income Tax Act. Issues relating to scope, measurement, and reclassification of these shares have arisen in practice. As a result, the Board is reexamining this classification exception to address application issues in practice today.

A few of the amendments proposed in this Exposure Draft include:

  • Retractable or mandatorily redeemable shares issued in a tax planning arrangement initially classified as financial liabilities would be prohibited from being subsequently reclassified to equity even if conditions change.
  • Retractable or mandatorily redeemable shares issued in a tax planning arrangement classified as financial liabilities would be measured at the redemption amount.
  • Guidance would be added in EQUITY, Section 3251, to present as a separate component of equity the effect of classifying and measuring the retractable or mandatorily redeemable shares as financial liabilities and to disclose the nature of the separate component of equity.
  • Retrospective application would be required in accordance with ACCOUNTING CHANGES, Section 1506, with an option to not restate comparative financial information.

 

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