ASPE Implementation Guide: ASPE 3856 Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement

Category: ASPE

ASPE Implementation Guide: ASPE 3856 Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement

In December 2018, the Accounting Standards Board (AcSB) issued amendments to ASPE 3856 Financial Instruments revising the requirements for classification and measurement of retractable or mandatorily redeemable shares issued in a tax planning arrangement (throughout this guide we will refer to these types of shares as “retractable shares”). The amendments are effective for annual financial statements relating to fiscal years beginning on or after January 1, 2021 1 , and earlier application is permitted.

Amended ASPE 3856 provides new requirements for the accounting for retractable shares. The amendments, which are covered in more detail throughout this guide, consist of:

  1. Clarification that this guidance is not limited to preferred shares issued in accordance with certain sections of the Income Tax Act.
  2. Elimination of the mandatory exception for tax planning shares from classifying retractable shares as a financial liability.
  3. Introduction of an election for exemption from classification as a financial liability when all three conditions outlined below are met:
    1. Control of the enterprise must be retained by the party receiving the retractable shares;
    2. No consideration other than shares of the enterprise is involved in the transaction; and
    3. The non-existence of a redemption schedule
  4. Guidance on reassessing the classification of the retractable shares.
  5. Revised disclosure guidance pertaining to retractable shares

ASPE Implementation Guide: ASPE 3856 Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement

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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.