ASPE Implementation Guide: ASPE 3856 Related Party Financial Instruments and Significant Risk Disclosures

Category: ASPE

ASPE Implementation Guide: ASPE 3856 Related Party Financial Instruments and Significant Risk Disclosures

In December 2018, the Accounting Standards Board (AcSB) issued amendments to section 3856, Financial Instruments (“ASPE 3856”) with respect to:

  1. The accounting for financial assets originated or acquired, or financial liabilities issued or assumed in a related party transaction (“related party financial instruments”).
  2. Significant risk disclosures.

The amendments were issued in conjunction with amendments to ASPE 3856 relating to the retractable or mandatorily redeemable shares issued in a tax planning arrangement project. The amendments to ASPE 3856 as a result of this project are not the subject of this guide. 

These amendments were issued to address a number of concerns, including the fact that it was challenging to determine whether ASPE 3856 or ASPE 3840, Related Party Transactions (“ASPE 3840”), applied to the various elements of a related party transaction. As the objective was to clarify the accounting for related party financial instruments, the level of impact on previously recognized amounts will depend on how the previous guidance was interpreted in comparison with the new clarified guidance. Therefore, all previously recognized amounts and disclosures should be reviewed for transition to the new requirements.

The main focus of the amendments to ASPE 3856 is to:

  • Have a single standard that provides guidance on the accounting for financial instruments arising from transactions between both arms-length and related parties;
  • Provide clearer guidance on accounting for related party financial instruments; and
  • Require enterprises to disclose enterprise-specific information related to significant risks arising from financial instruments.

The amendments are effective for periods beginning on or after January 1, 2021 with earlier application permitted.

ASPE Implementation Guide: ASPE 3856 Related Party Financial Instruments and Significant Risk Disclosures

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.