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Currently, ASPE 3856 requires tax planning preferred shares (Income Tax Act Sections 51, 85, 85.1, 86, 87, or 88) be measured at par, stated, or assigned value and presented as a separate line item in the equity section of the balance sheet. A suitable description is required which provides the total redemption amount and indicates that the shares are redeemable at the option of the holder.
The main features of the amendments to ASPE 3856 for the accounting of retractable or mandatorily redeemable shares issued in a tax planning arrangement (the “shares”) are:
The amendments are effective for annual financial statements relating to fiscal years beginning on or after January 1, 2020. Earlier application is permitted. An entity may choose to apply the amendments either at the beginning of the earliest period presented or at the beginning of the fiscal year in which the amendments are first applied. When the amendments are applied at the beginning of the earliest period presented, an entity is not required to make retrospective adjustments for shares that were extinguished prior to the beginning of the fiscal year in which the amendments are first applied. The cumulative effect of applying the amendments is recorded in opening retained earnings or in a separate component of equity.
On initial application, an entity may choose to recognize the shares:
The full history of this AcSB project can be accessed
here. The Basis for Conclusions that summarizes the AcSB’s key considerations in reaching its conclusions on this project, and other supporting materials, can be accessed
For more information on the financial reporting library, contact a local
MNP Assurance Professional, or
JodyMacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of December 31, 2018. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2018. All rights reserved.
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