In this Update: ASPE Standards, CSRS 4200; SME Accounting; Auditor Considerations
This month flew by for me and I am not quite sure why. Maybe it is because the new routines have become familiar, maybe it is because I am busy with a few special projects or maybe it is just because it has been nice out and I have taken time to enjoy the backyard and my flowers. In the end it doesn’t matter, all I know is I have started focussing on the future once again instead of trying to get by day by day. This month’s updates are also mainly about the future. Read on…
Deferral of Effective Dates for ASPE Standards
At its meeting on April 15, 2020, the Accounting Standards Board (AcSB) made the decision to defer the effective dates of the following amendments effective for years beginning on or after January 1, 2020 by one year to January 1, 2021:
The biggest takeaway from list above is the postponement of the effective date for financial instruments related to the amendments on Redeemable Preferred Shares Issued in a Tax Planning Arrangement. Due to the amendments, it was expected many preferred shares may now have to be classified as liability versus equity. The postponement allows practitioners more time to perform the analysis of classification and clients more time to discuss the impact on covenants with their lenders. Good news all around.
The AcSB is also deferring the effects dates of the new Section 3041, Agriculture and amendments to Section 3400, Revenue, effective for year beginning on or after January 1, 2021 by one year to January 1, 2022. Early adoption of each of the amendments and the new Section continues to be permitted.
CSRS 4200 Guidance
Unlike the accounting standards, there has been no discussion on deferring the effective date for this standard. CPA Canada is hosting a special Practitioner’s Pulse on the new compilation standard. The webinar, to be held in July, will help you learn about the new compilation standard, CSRS 4200 and cover implementation guidance available. Listen to practitioners share practical tips and answer questions on how to implement the new standard. I already have been working with a number of practitioners on implementation as there are many activities you can undertake well in advance of the effective date (periods ending on or after December 14, 2021).
Small Businesses Need Small Accounting Firms
In times like these small businesses turn to their advisors for assistance. It is important to be there for your clients as that is what keeps your firm growing. Business owners are making hard decision about their employees, struggling to maintain ongoing expenses despite losses in revenue and deciphering confusing information about which government programs might be able to help them. With candid and empathetic discussion and a flexible approach, practitioners can enable their clients with the right tools to bridge the gap between crisis mode and action mode. In this article from Accounting Today there are three guiding principles to focus on as you help clients navigate disruption.
Okay, one topic that is back to the current environment but included as it helpful as you complete current engagements. It is hard to keep track of all the guidance, articles and resources to help auditors address the risks in performing their engagements in relation to the impact of COVID-19 operations, financial results, operations and cash flows of organizations. However, CPA Canada’s latest resource does a good job in bringing it all together. This publication covers most of the topics auditors should be thinking about and links to other resources available. Almost a one-stop shop, almost.
This was also a big month in that Revised CAS 315 (Identifying and Assessing the Risk of Material Misstatement) was formally released in the Handbook. The Revised CAS 315 is effective for audits of financial statements for periods beginning on or after December 31, 2021. I will provide you more guidance on this CAS in the coming months but I wanted to bring this to your attention as it is indicative that standards are still changing and it is important to keep up and not fall behind so you do not have to scramble at the last minute to keep up. As they say, slow and steady wins the race. Feel free to reach out any time. I am here to help save you time and provide peace of mind. In the meantime, have a great weekend.
Kirsten S. Albo, FCPA, FCA
In this Update: Dealing with Clients, COVID-19 Support; Standards Update; Reminder
Life continues to change. With the announcements of the province opening, we will slowly move into a “new normal”. I recently read that phrase is in competition for being the highest used phrase of the year – right up there with “flattening the curve”. It will be interesting to watch in the coming months what the new normal entails and how we adapt. Working remotely, social distancing, conducting client meetings, delivering training will all evolve as we settle in. In the meantime, the focus is, and always will be, the client and how we work with them in completing engagements and providing support. This month’s update includes information on things to think about as we move into our new normal. Read on…
5 Steps for Advising Clients
There is so much information to weed through these days, emergency funding options, new working environments, government guidelines, the list goes on. After dealing with the immediacy of your own operations, supporting clients is most likely one of your top priorities. An article from the Journal of Accountancy explores five strategies to navigate advisory, and sometimes difficult, conversations with your clients to help them cope. If there is ever a time when clients needed your guidance, expertise and care, it is now. The strategies are straightforward and may give you useful ideas to help manage through this time.
Areas of Focus Due to COVID-19
Global developments relating to the current situation have impacted the work of auditors. Uncertainty and unpredictability may create risks of material misstatement that are new or heightened. Auditors have to adjust how they obtain sufficient appropriate audit evidence on which to base the audit opinion amid the many challenges they are facing. IFAC has published an Alert that highlights many of the items that auditors need to focus on in a clear and concise manner. The publication refers to ISAs but Canadian auditing standards (CAS) are substantially the same so this is particularly good tool to help you assess risk and document your conclusions.
COVID-19 and Going Concern Impacts
Even though business may now be able to open, COVID-19 related event may cause a deterioration in an entity’s operating results and financial position, affecting its ability to continue as a going concern. An article from CPA Canada provides guidance on learning how to address the challenges that arise from these conditions. Whether the engagement is an audit or a review the issues are the same and must be considered.
Coping with Standards Changes
There have been some delays in the effective date for some US GAAP and IFRS standards. However, for all my research, I have seen no discussion on delays for any Canadian standards. That means throughout all this we still must be cognizant of upcoming new standards. Nothing is imminent but throughout this time we cannot forget about the future. It is a challenge to keep up. The Journal of Accountancy has tips on how to “stay the course” and deliver high quality engagements.
CPA Canada’s COVID-19 information page CPA CANADA COVID RESOURCE PAGE is a good resource for guidance on financial reporting and other issues. FRAS Canada also has an information page FRAS CANADA COVID RESOURCE PAGE although this one is a little more IFRS focussed.
I promise there will come a day when we are not talking about the pandemic and flattening the curve (although in my case, I am eating so much baking I feel like I am “fattening the curve”). In the meantime, whatever challenges you face, remember that I am here as a resource as needed. Feel free to reach out at any time. Take care and stay healthy.
Kirsten S. Albo, FCPA, FCA
In this Update: COVID-19 Support; Financial Reporting; Testing Inventory; Beneficial Ownership
Wow, the world has changed so much in the past month as we now try to figure out the new normal in these uncertain times. As I read through all the email updates, notices and social media posts, I was almost overwhelmed as there is so much information out there. While there are many changes – in how we work, how we interact with clients, extended deadlines – ironically, it is still business “as usual” for many as the work still needs to get done. This month’s topics focus on resources I believe will be helpful in addressing some of the issues you may be facing in getting that work done. Read on…
CPA Canada COVID-19 Resource Support
CPA Canada is committed to adapting and providing timely and relevant information to their members. They are trying to limit emails being sent out and rather are updating their website for relevant topics. They now have a CPA Canada has a COVID-19 resource page listing resources available to help respond to the challenges that now face us. The resources vary in their nature and their source and include publications from accounting firms, lawyers and lenders. Topics covered include crisis response strategies, cash flow management, corporate governance and protecting employees and work remote arrangements. There are many publications in the list that may be of interest to your firm directly or to your clients.
In response to the fact the majority of inquiries from members relate to tax issues, CPA Canada is offering a tax-focused webinar on April 3, 2020 that will address many of the recent announcements by the Federal Government. Topics will include enhanced wage subsidy and GST deferral among other topics. A great resource to more fully understand the current environment so you can in turn advise your clients.
Financial Statement Disclosure Considerations
Over the past week I have had many practitioners phone me to discuss financial statement disclosures for their clients. While I don’t expect to see wide-sweeping generic disclosures, I believe financial statement disclosures may be required for specific circumstances. Companies might scale back operations, have supply chain impacted, lose customers or shut down altogether in reaction to the uncertain times. Such matters as the going concern presumption, valuation of goodwill, impairment of assets, banking covenant requirements, onerous contract provisions and valuation of inventory are significant and require the use of professional judgement on the impact on the financial statements. Many of the larger firms have published articles on financial statement disclosures and after reading most of them, I feel that Deloitte’s is the most comprehensive and informative. While the article is IFRS related, there are many matters that may also be relevant for those companies using ASPE or ASNPO. Use this as the starting point to think about the specific disclosures needed for your clients. And consult where needed.
Testing Inventory Without a Site Visit
The current situation has made inventory testing a huge challenge for auditors, particularly for client entities with a March 31 year end. An article published by the Journal of Accountancy provides guidance on alternative procedures when one can’t attend an inventory count. A cautionary note, the article refers to standards in the US but many of the issues raised consistent with Canadian accounting standards for ASPE and ASNPO. Please feel free to reach out to discuss this issue further as you consider your auditing requirements related to inventory for your clients.
Beneficial Ownership Rules
In the line of business as usual, one change that may slip through the cracks is changes to the Canadian Business Corporations Act mandating the collection of beneficial ownership information, which came into effect in June 2019. The requirement is to track and record individuals who have significant control of the corporation. “Significant” has been deemed to be 25 % or more of the voting rights or 25% or more of the fair market value of shares. While this is a federal requirement, many provinces have taken steps to also make these changes. Manitoba enacted their rules which become effective April 8, 2020 with other provinces following suit. CPA Canada has written a good article on how CPAs can assist clients in meeting this requirement including building awareness, advising and sharing expertise. It is a worthwhile read to help your clients be prepared and meet the requirement which has a stiff penalty if not met. I have not heard of any delays or changes to this requirement.
You will note that I did not include any links on “tips on working from home” as these types of articles are plentiful. Nor did I include any articles on recent announcements from the government on such things as the Canadian Emergency Response Benefit or the enhanced wage subsidy (other than the link to the Webinar) as these articles are also abundant and it is important to go to the source that is most applicable to your clients. I believe that many small owner-managed companies will be relying on their accountants to help them understand or apply for these programs. It is a time when professionals are needed more than ever – I guess that is why the provincial government has stated that accountants are critical service providers and may remain open. Please feel free to reach out any time, I am here to assist you as you assist your clients.
Kirsten S. Albo, FCPA, FCA
In this Update: CSRS 4200; Dealing with Clients; Questioning Techniques; Growing your Practice
Happy leap day!! Another busy month has just passed by. We continue to move forward with the eventual implementation of new approved standards; CSRS 4200, CAS 540 and the recently approved CAS 315 will keep us busy for the mid- to long-term. In the meantime, there are short-term actions that can be taken to help us get ready for the coming changes to come. This month’s topics relate to actions that can be taken to help us be more prepared. Read on…
As previously reported to you, the new standard on CSRS 4200 was recently approved. CPA Canada has released several publications to support in understanding and implementation of the new handbook section. The most recent of these is the Practitioner Alert helps to understand the changes and how those changes will impact your performance of compilation engagements. Along with this, they issued two other publications to help you in your discussions with clients and third parties. I have started discussions with some firms on ideas on implementation plans; while as the standards are not effective until periods ending on or after December 14, 2021, there are several actions you can take now to be prepared.
With the ever-changing standards and the requirement to have in-depth discussions with your clients, it is important that you hold meetings to provide value and gain information and not just hold a meeting for the sake of meeting. Boomer Consulting has five tips for holding better client meetings. They recognize with CPA firms becoming trusted business advisors, it’s important to ensure that client meetings are operating at an optimal level. They state: “You want to make sure that your team and your client understand what the purpose of each meeting is and ensure that everyone is on the same page before and after the meeting takes place”.
Good Questioning Techniques
Technical knowledge is not the only thing to focus on during these busy months. Soft skills can be just as important and questioning techniques top the list as we work with our clients. With the new standards coming, there are many discussions to hold with your clients. Strong questioning skills help you gather more quality information, help you learn about the business, helps other learn, helps build better relationships and helps to manage problems and people effectively. With that in mind, I thought you might find the article Good Questioning Techniques is an interesting read and may be passed onto your staff to help them develop and learn.
10 Steps for Getting Practice Growth Right
I often hear from firms that they want to grow and expand their client base. When a firm is poised for growth, expansion can help attract new business, offer strong career paths, help you remain relevant to client and enhance the firm’s value. Managing growth isn’t always easy, however, as you confront the challenge of scaling your practice effectively. A noteworthy article from the Journal of Accountancy has tips from experienced CPAs on how to navigate a period of growth and is worth the read.
This is going to be an exciting but busy year. I am now a member of the Audit and Assurance Standards Board (AASB) recently formed Audit of Less Complex Entities Advisory Group which provides guidance and advice to the AASB on the direction of Canadian Auditing Standards in the context of the challenges that small- to mid-sized practitioners face when auditing these types of companies. I look forward to hearing your views which in turn I can pass onto the Advisory Group. I will also pass on any updates back to you that I can during the course of this project. In the meantime, if you have any questions on this project, implementation of CSRS 4200 or any other topics, please do not hesitate to reach out. I am here to help save you time and provide peace of mind.
Kirsten S. Albo, FCPA, FCA
The new Handbook Section CSRS 4200 Compilation Engagements was released on the weekend and is now officially in the Handbook. First and foremost, a point of clarity – the section is effective for periods on or after December 14, 2021, that is effective for fiscal years ending December 31, 2021. I had a typo in my January update. My apologies and thanks to the eagle eyes that pointed this out.
CPA Canada summarized some of the key features, designed to respond to stakeholder input and public interest issues as follows:
Even though the standard is not effective for some time, there are a number of activities you can undertake already to be prepared. These include:
Below are links to guidance and information to help you get started.
Please feel free to reach out at any time for support on implementing the new standards.
Kirsten S. Albo, FCPA, FCA
In this Update: Assessing RMM; Mandatorily Redeemable Shares; Audit Estimates; Professional Judgement; Compilation Engagements
Happy New Year!! I know it is a bit late to be saying that but for many, I have not had the chance to wish you all the best in the new year before now. I am very excited about the upcoming year. There are a lot of impending changes that will make it challenging but what is life without a bit of excitement. Read on…
CAS 315 (Revised) Identifying and Assessing RMM Approved in Canada
CAS 315 (Revised) was recently approved at the December 2, 2019 meeting of the AASB. There were no changes from the same International Standard that was approved earlier in the year. CAS 315 will be effective for audits of financial statements for periods beginning on or after December 15, 2021 (that is, effective for fiscal years ending December 31, 2022). The Handbook section itself will be released in the Handbook in May 2020. There will be application material, webinars and other tools released over the next few months to assist with application of the new requirements; I will keep you updated on these sessions as they become available. Of course, I am available to assist in training and implementation.
Section 3856 Retractable or Mandatorily Redeemable Shares (ROMRS) now Effective
The new standard on ROMRS (Section 3856) came into effect on January 1,2020. This standard not only applies to shares issued after January 1, 2020 also to shares issued before then. This means the new standard could be a big deal for your private companies as shares previously classified as equity may now need to be classified as liabilities which may put a company offside on its banking covenants. CPA Canada published an ASPE briefing which provides guidance on the new standard and transition issues. Make sure your clients start talking to banks now if necessary to ensure there are no surprises when the year end statements are issued.
CAS 540 (Revised) Audit Estimates
While you are talking to clients, you may also want to think about the revised auditing standard for estimates. This standard is effective for periods beginning on or after December 15, 2019 (that is, effective for fiscal years ending December 31, 2020) however, depending on the nature of your client’s estimates, it may be helpful to be proactive and think about the impact of the changes in this standard. CPA Canada has published a client briefing document that will help you in your discussions with your clients. This should be an area of focus in training courses for your staff over the upcoming year.
Time to Reinforce Professional Judgment
All of the upcoming changes reminds us that professional judgement is an underlying concept in our daily work. We are often called upon to exercise professional judgment and professional skepticism which may not always be easy. An interesting article from IFAC provides a 6 elements as to how judgment can be evaluated along with an illustration of each action. It is an excellent read and provides food for thought.
CSRS 4200 Canadian Standard on Related Services
As previously communicated the new standard on compilation engagements was approved in October 2019 and is effective for compiled financial information for periods ending on or after December 14, 2021 (that is, effective for fiscal years ending December 31, 2022). The actual standard will be released in the Handbook in February 2020. I will send out a special update upon release along with links to any application guidance. In the meantime, nothing new to report.
All the best in the new year. Don’t forget that today is the CPD Reporting Deadline. A reminder to those I have worked with over the year is that the training time and discussion on standards is all verifiable hours. I look forward to the upcoming year and working with you to implement all upcoming changes, perform efficient and effective engagements and grow your practices. Please feel free to reach out at any time as I am here to assist as needed.
Kirsten S. Albo, FCPA, FCA