New and Proposed Changes to Accounting Standards for Private Enterprises for the Quarter Ended December 31, 2024

Effective for annual periods beginning on or after January 1, 2024

Customer’s Accounting for Cloud Computing Arrangements (New Accounting Guideline AcG-20)

In November 2022, the Accounting Standards Board (AcSB) issued new Accounting Guideline (AcG) 20 Customer’s Accounting for Cloud Computing Arrangements in response to the growing number of enterprises entering into cloud computing arrangements. 

AcG-20 provides guidance on:

• Accounting for a customer’s expenditures in a cloud computing arrangement; and
• Determining whether a software intangible asset exists in the arrangement.

The main features of AcG-20 are to:

• Clarify that an enterprise may determine a method on a rational and consistent basis for allocating arrangement consideration to significant separable elements in a cloud computing arrangement.
• Specify that an enterprise applies Section 3064 Goodwill and Intangible Assets to account for the significant elements unless the elements are tangible assets or rights to use tangible assets.
• Provide an optional simplification approach to permit an enterprise to expense as incurred the expenditures related to the elements in a cloud computing arrangement within the scope of Section 3064.
• Provide factors to assist an enterprise that does not apply the optional simplification approach to determine whether the cloud computing arrangement includes a software intangible asset or is a software service.
• Allow an accounting policy choice to either:
  • Apply an exception to capitalize directly attributable expenditures on implementation activities when the arrangement is a software service and to present such costs as prepaid expenses; or
  • Continue to expense such expenditures as incurred in accordance with Section 3064.
• Require an enterprise to disclose information on how the arrangement is accounted for in its financial statements.

The new AcG-20 results in significant consequential amendments, including changes to:

• Section 1500 First-time Adoption to permit a first-time adopter to apply the transitional provisions in AcG-20; and
• Section 1521 Balance Sheet to clarify the presentation requirements for expenditures on implementation activities capitalized using the policy choice in AcG-20 as assets for implementation of software services.

AcG-20 is effective for fiscal years beginning on or after January 1, 2024. Earlier application is permitted.

Effective for annual periods beginning on or after January 1, 2025

Revenue (Amendments to Section 3400)

In May 2024, the Accounting Standards Board (AcSB) issued amendments to Section 3400 Revenue that indefinitely defer the effective date for the application guidance pertaining to upfront non-refundable fees and payments. Earlier application is permitted, including in financial statements not yet authorized for issue.

The amendments also introduce a new requirement to disclose the nature and amount of upfront non-refundable fees or payments recognized in revenue when the enterprise recognizes the fee or payment in revenue upon entering into the arrangement. The new disclosure requirement is effective for fiscal years beginning on or after January 1, 2025. Earlier application is permitted.

Related Party Combinations (Amendments to Section 3840)

In September 2023, the Accounting Standards Board (AcSB) issued amendments to Section 3840 Related Party Transactions to:

• Clarify the application of Section 1582 Business Combinations to business combinations under common control accounted for in accordance with Section 3840.44(a); and
• Provide an option in Section 3840.44(b) to retrospectively restate prior periods when carrying amounts are used to account for a combination or to prospectively account for these transactions.

Related amendments were also made to Section 3856 Financial Instruments to clarify the initial measurement of financial instruments acquired or liabilities assumed when a business is transferred between two enterprises under common control.

The amendments are effective for fiscal years beginning on or after January 1, 2025. Earlier application is permitted. The amendments apply prospectively to transactions entered into from the beginning of the fiscal year in which the amendments are first applied.

Related Party Combinations (Amendments to Section 3856)

In September 2023, the Accounting Standards Board (AcSB) issued amendments to Section 3856 Financial Instruments as a result of amendments issued to Section 3840 Related Party Transactions.

The amendments to Section 3856 clarify the initial measurement of financial instruments acquired or liabilities assumed when a business is transferred between two enterprises under common control.

The amendments are effective for fiscal years beginning on or after January 1, 2025. Earlier application is permitted. The amendments apply prospectively to transactions entered into from the beginning of the fiscal year in which the amendments are first applied.

Effective for annual periods beginning on or after January 1, 2026

Accounting for Life Insurance Contracts with Cash Surrender Value (New Accounting Guideline AcG-21)

In September 2024, the Accounting Standards Board (AcSB) issued a new Accounting Guideline (AcG) 21 Accounting for Life Insurance Contracts with Cash Surrender Value. 

AcG-21 provides guidance on recognition and measurement of cash surrender value in a life insurance policy and presentation and disclosure of policy premiums and change in cash surrender value.

The main features of AcG-21 are to:

• Apply to an enterprise that is the owner and beneficiary of a life insurance policy with cash surrender value issued by a regulated insurance provider;
• Require recognition of cash surrender value as an asset when the enterprise becomes the owner and beneficiary of the underlying insurance contract;
• Require measurement at the cash surrender amount, which is the amount that would be immediately realized by the policy holder if the policy were terminated prior to the death of the insured;
• Require presentation of the difference between policy premiums and changes in cash surrender value on a net basis, where a net debit is reported as expense and a net credit is reported as income; and
• Establish disclosure requirements, including disclosure of cash surrender value in aggregate for all life insurance policies with cash surrender value and the caption in the balance sheet and income statement that includes cash surrender value, if not separately presented.

The new AcG-21 results in consequential amendments, including changes to:

• Section 1500 First-time Adoption to permit a first-time adopter to apply the transitional provisions in AcG-21; and
• Section 1582 Business Combinations to provide an exception to the requirement to measure identifiable assets at their acquisition date fair values for cash surrender value.

AcG-21 is effective for annual periods beginning on or after January 1, 2026. Earlier application is permitted. AcG-21 applies retrospectively only to life insurance policies in place at the beginning of the earliest period presented in the financial statements in which AcG-21 is first applied.

Exposure Drafts

Accounting for Common Control Combinations (Proposed Amendments to Section 3840)

In December 2024, the Accounting Standards Board (AcSB) issued an Exposure Draft proposing narrow-scope amendments to Section 3840 Related Party Transactions to address which comparative figures are to be presented, if any, when a transaction at carrying values is accounted for prospectively from the date the transfer occurred for a combination between enterprises under common control.

The proposed amendments would add an accounting policy choice to account for the combined enterprise either as a new entity (no comparatives presented) or as a continuation of one of the combining enterprises.

The amendments are proposed to be effective for fiscal years beginning on or after January 1, 2026. Earlier application would be permitted.

The proposed amendments would be applied prospectively to new combinations entered into from the beginning of the fiscal year in which the amendments are first applied.

The AcSB has requested comments by February 14, 2025.

Further information on the proposal can be found on the AcSB's project page.