2013-09 Related Party Transactions Re-exposed RESPONSES

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September 4, 2013

Related Party Transactions Re-exposure Draft

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Organization: BDO Canada LLP

E-mail: [email protected]

Name: Armand Capisciolto

General comments:

Further to our comments in the original exposure draft, we are still concerned about the interaction between these proposals and Sections PS 3150, Tangible Capital Assets and PS 3410, Government Transfers. For example, we agree with with paragraph .39 in the proposed standard as this results in the transaction being measured at fair value, which is consistent with the results of PS 3150.14 for a contributed tangible capital asset. However, we are concerned that the conclusion in paragraph .39 that fair value is exchange amount is inconsistent with the definition of exchange amount. The definition of exchange amount in paragraph .10(b) of the proposed standard is "the amount of the consideration as established and agreed to by the related parties". However, in the scenario in paragraph .39 the local government would have transferred the parking facility to the parking authority. There would not have been a negotiation between the two parties where they would establish and agree to a specific dollar value as the exchange amount of the transaction. In the absence of this negotiation the exchange amount would be zero, which is not the actual fair value of the transaction. We believe these conflicts can be resolved by excluding contributed tangible capital assets and government transfers from the scope of the measurement requirements of the proposed related party transactions standard.

1. Do you agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of key management personnel of the another entity?

Yes, we agree that entities may be related in this situation.

2. Do you agree that related party transaction should be measured at the carrying amount except when:

(a) they are undertaken in the normal course of operations; or (b) a recipient organization's future economic benefits or service potential is expected to

change significantly as the result of the transaction?

Yes, we agree that related party transactions should be measured at the carrying amount except for the situations described in 2(a) and 2(b).

3. Do you agree that in the case of 2(a) and 2(b) above, related party transactions should be measured at the exchange amount?

Yes, we agree that in the case of 2(a) and 2(b) related party transactions should be measured at the exchange amount.

4. Do you agree with the transitional provisions?

Yes, we agree with the transitional provisions.


Montréal, le 30 août 2013 Tim Beauchamp, directeur Comptabilité du secteur public 277, rue Wellington Ouest Toronto (Ontario) M5V 3H2 Monsieur, Vous trouverez ci-joint les commentaires du Groupe de travail technique Secteur public — Comptabilité dans le secteur public de l’Ordre des comptables professionnels agréés du Québec concernant le deuxième exposé-sondage « Opérations entre apparentés ». Nous vous serions reconnaissants de nous faire parvenir une copie de la traduction anglaise de nos commentaires. Veuillez prendre note que ni l’Ordre des comptables professionnels agréés du Québec, ni quelque personne que ce soit ayant participé à la préparation des commentaires ne peuvent être tenus responsables relativement à leur utilisation et ils ne sont tenus à aucune garantie de quelque nature que ce soit découlant de ces commentaires, comme décrit dans le déni de responsabilité joint à la présente. Veuillez agréer, Monsieur Beauchamp, l’expression de mes sentiments distingués. Représentante du Groupe de travail technique Secteur public - Comptabilité dans le secteur public, Annie Smargiassi CPA, CA p. j. Déni de responsabilité et commentaires

DÉNI DE RESPONSABILITÉ

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le secteur public de l’Ordre des comptables professionnels agréés du Québec (Ordre) ci-après

appelés les « commentaires », sont fournis selon les conditions décrites dans la présente, pour

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COMMENTAIRES DU GROUPE DE TRAVAIL TECHNIQUE SECTEUR PUBLIC — COMPTABILITÉ DANS LE SECTEUR PUBLIC DE L’ORDRE DES COMPTABLES PROFESSIONNELS AGRÉÉS DU QUÉBEC RELATIFS AU DEUXIÈME EXPOSÉ-SONDAGE « OPÉRATIONS ENTRE APPARENTÉS ».

MANDAT DU GROUPE DE TRAVAIL

Le Groupe de travail technique Secteur public — Comptabilité dans le secteur public de l'Ordre des

comptables professionnels agréés du Québec a comme mandat notamment de recueillir et de

canaliser le point de vue des praticiens exerçant en cabinet et de membres œuvrant dans les affaires,

dans les services gouvernementaux, dans l'industrie et dans l'enseignement ainsi que le point de vue

d’autres personnes concernées œuvrant dans des domaines d’expertise connexes.

Pour chaque exposé-sondage ou autre document étudié, les membres du Groupe de travail

technique mettent leurs analyses en commun. Les commentaires ci-dessous reflètent les points de

vue exprimés et, sauf indication contraire, ces commentaires ont fait l'objet d'un consensus parmi les

membres du Groupe de travail ayant participé à cette analyse.

Les commentaires formulés par le Groupe de travail ne font l'objet d'aucune sanction de l'Ordre. Ils

n'engagent pas la responsabilité de celui-ci.

COMMENTAIRES SPÉCIFIQUES

1. Êtes-vous d’accord avec l’idée que deux entités soient apparentées lorsque l’un des

principaux dirigeants de l’entité rapportante ou un proche parent de l’un d’eux est également

l’un des principaux dirigeants de l’autre entité?

Les membres sont d’accord avec l’idée proposée; ils soulignent que ces dispositions sont similaires à

celles contenues dans les IFRS.

Ils sont cependant montrés inquiets au sujet de la mise en application de ces recommandations. En

effet, ils sont d’avis qu’actuellement, les mécanismes ne sont pas en place dans les entités, pour

identifier les proches parents visés. Ils croient que les entités doivent être sensibilisées à ces

nouvelles mesures afin de pouvoir les appliquer.

2. Êtes-vous d’accord pour que les opérations entre apparentés soient évaluées à la valeur

comptable, sauf dans les cas suivants :

a) ces opérations sont conclues dans le cours normal des activités de l’entité;

b) on peut s’attendre à ce que l’opération entraîne une variation importante des avantages

économiques futurs et du potentiel de service de l’entité bénéficiaire?

Les membres se sont montrés d’accord pour que les opérations entre apparentés soient évalués à la

valeur comptable, sauf dans les cas mentionnés en a) c’est-à-dire sauf lorsque les opérations sont

conclues dans le cours normal des activités.

Par contre, les membres ne se sont pas montrés en accord avec l’exception présentée en b) c’est-à-

dire lorsque l’on peut s’attendre à ce que l’opération entraîne une variation importante des avantages

économiques futurs et du potentiel de service de l’entité bénéficiaire, principalement lorsque les

entités visées font partie du même groupe consolidé. Ils croient que cette notion pourrait être

interprétée de plusieurs façons en pratique. De plus, ils n’ont pas été en mesure de comprendre le

fondement de cette proposition, qui n’est d’ailleurs pas expliquée dans les documents joints à

l’exposé-sondage. Ils proposent plutôt de s’appuyer sur le paragraphe .29 du chapitre 3840 des

Normes comptables pour les entreprises à capital fermé (NCECF) pour cette deuxième exception,

c’est-à-dire le critère concernant la modification des droits de propriété.

Les membres ont noté également que l’exemple présenté au paragraphe .34 de l’exposé-sondage est

mal choisi, n’est pas clair et qu’il suscite des questionnements.

3. Êtes-vous d’accord pour que, dans les cas 2 a) et 2 b) ci-dessus, les opérations entre

apparentés doivent être évaluées à la valeur d’échange?

Les membres ont indiqué qu’ils sont d’accord pour que les opérations présentées en 2a) soient

évaluées à la valeur d’échange, mais ne se sont pas montrés en accord avec l’évaluation à la valeur

d’échange présentée en 2b). Ils sont d’avis que le critère de modification des flux de trésorerie n’est

pas suffisant à lui seul pour exiger une évaluation à la valeur d’échange. Ils croient que d’autres

critères devraient être ajoutés dans ce cas, pour pouvoir comptabiliser l’opération à la valeur

d’échange.

De plus, ils ont noté que, dans l’exemple présenté au paragraphe .34, l’entité aurait pu choisir

d’utiliser les tarifs en vigueur sur le marché avant le transfert, selon le paragraphe .35, d’où leur

conclusion qu’un autre exemple aurait pu être choisi ou que la conclusion aurait dû être étayée plus

en profondeur concernant le paragraphe .34.

4. Êtes-vous d’accord avec les dispositions transitoires?

Les membres ont conclu que les dispositions transitoires ne sont pas claires. Pour eux, une

application prospective n’implique pas d’ajustement aux actifs et aux passifs liés aux opérations

précédant la mise en application; ils se sont donc demandé pourquoi il a été jugé nécessaire de

préciser, à la deuxième phrase du paragraphe .52, « qu’il n’est pas obligatoire de retraiter les actifs ou

les passifs… », et si l’exposé-sondage voulait proposer une méthode modifiée d’application

prospective.

Ils proposent de remplacer le paragraphe .52 comme suit : « Le présent chapitre s’applique

uniquement aux opérations postérieures à la date d’application. ».

AUTRES COMMENTAIRES

Objet et champ d’application

o Les membres ont convenu que le paragraphe .03 traite des informations à fournir et

devrait se retrouver dans la section qui débute au paragraphe .42.

o Ils ont noté que la section du champ d’application ne devrait pas inclure des exigences

ou des explications liées à des exigences, ni clarifier des exigences ou aider à les

interpréter. Ainsi ils proposent de ne conserver dans cette première section que

quelques paragraphes, par exemple les paragraphes 1, 7 et 8; les autres paragraphes

pertinents devant être conservés dans les autres sections appropriées s’il y a lieu.

Définitions

o Le paragraphe .10f) définit une opération entre apparentés, entre autres, comme un

transfert de ressources économiques. Les membres ne sont pas à l’aise avec le mot

transfert, car il porte à confusion avec le chapitre 3410 Paiements de transfert; ce

dernier définit les transferts comme correspondant à une opération sans contrepartie,

ce qui n’est pas nécessairement le cas lors d’opérations entre apparentés. Ils

proposent plutôt le terme « cession » pour le remplacer dans tout le chapitre proposé.

Opérations à communiquer

o Les membres apprécieraient qu’un lien soit fait entre la section intitulée « opérations à

communiquer » et celle intitulée « informations à fournir ». Ils auraient préféré que ces

sections soient regroupées. En effet, aucune autre norme du secteur public ne propose

la première en sus de la seconde.

Identification d’un apparenté

o Les membres aimeraient que le paragraphe .14 identifie plus clairement les entités

visées par les alinéas. Par analogie, le chapitre 3840 des NCECF, au paragraphe .04,

utilise un qualificatif chaque fois que le mot « entité » est utilisé, par exemple

« publiante » ou « émettrice ». Ils sont d’avis que le « jargon » usuel devrait être utilisé

pour faciliter la compréhension des notions abordées. De plus, les membres ne se sont

pas montrés favorables à l’expression « entité rapportante » qui est exposée au

paragraphe .19.

o Les membres ont également souligné que le fait de ne pas définir les termes utilisés

pourrait également porter à confusion. Ils ont donné l’exemple de l’« entité publiante »

qui pourrait être définie autant comme les composantes d’une entité qui produisent des

états financiers individuels, que comme l’entité qui publie les états financiers

consolidés pour le groupe de composantes.

Constatation

o Les membres se sont questionnés, en rapport aux paragraphes .22 et .23, à savoir si

les échanges de services étaient inclus ou non dans la portée des recommandations

concernant la constatation. Ils auraient aimé des clarifications à cet égard.

o Les recommandations semblent indiquer qu’il existe un choix pour la comptabilisation

des apports sous forme de biens ou de services; par contre les membres croient que

ces choix devraient être plus clairement exposés au début de la section sur les

apports, c’est-à-dire au paragraphe .27.

Évaluation

o Les membres ont noté qu’en pratique, il existe souvent des écarts entre les valeurs

comptables des éléments échangés, incluant les contreparties en trésorerie. Par

conséquent, la section concernant l’évaluation des opérations devrait inclure des

directives claires pour traiter de l’écart, par exemple un paragraphe similaire à celui

traitant de la question dans les NCECF, c’est-à-dire le paragraphe .09 du chapitre

3840 (ou encore le paragraphe .17).

Informations à fournir

o Les membres ne sont pas d’accord avec l’inclusion de l’alinéa a) du paragraphe .44. Ils

indiquent que la notion d’importance devrait être traitée dans le chapitre SP 1000. Par

analogie, le chapitre 1000 des NCECF traite de la question au paragraphe .12. Ils

suggèrent également de revoir la terminologie applicable et de l’uniformiser à celle

utilisée dans les normes en certification. De plus, l’inclusion de cet élément pourrait

apporter de la confusion lors de l’interprétation du traitement de groupes d’opérations,

par exemple si plusieurs opérations de ventes sont collectivement importantes par

opposition à leur importance individuelle.



September 4, 2013




Organization: Office of the Auditor General - Manitoba


Name: Greg MacBeth

General comments:

I am replying on behalf of the Office of the Auditor General - Manitoba. My comments are from the perspective of the public sector within our jurisdiction. There is a gap in the standards for amalgamations and restructurings between related parties. They are excluded from this re-exposure draft and the Restructuring Statement of Principal. There is also a gap in standards for the measurement of related party transactions between the government and the government business enterprises (GBE). Related party transactions with GBEs are excluded from this re-exposure draft and IAS 24 only covers disclosure standards for related party transactions.


Yes




Yes


Yes for (a) but the standards are confusing for (b). Paragraph .38 states that these transactions should be measured at the exchange amount. However, paragraph .39 states that using fair value may be appropriate. The transaction exchange amount may be different than fair value. How do you measure the transaction - at the exchange amount or fair value? Further, do the transferrer and the recipient have to measure the transaction using the same measurement basis?


Yes.




September 4, 2013




Organization: Office of the Auditor General of Canada


Name: Stuart Barr, Assistant Auditor General

General comments:

The Office of the Auditor General of Canada is pleased to provide comments on the PSAB Re-Exposure Draft on Related Party Transactions. We support PSAB in the development of accounting standards and guidance on public sector related party transactions. In addition to matters noted in the analysis of specific questions posed by PSAB, we offer the following comments: Recognition – contributed goods and services, and cost allocations Neither contributed goods and services, nor cost allocations are required to be given accounting recognition under the proposed standard. In both cases, PSAB provides that a government may direct an entity’s accounting for these transactions. Paragraph .25 states that a provider organization may be subject to a policy requiring that the related costs be allocated to the recipient organization. Paragraph .29 states that an entity may be required by policy to only disclose information about contributed goods and services. Providing a framework that permits a parent government to direct non-recognition of transactions that may be significant to understanding the full cost or consumption of resources for a reporting entity’s activities is contrary to the objectives for financial reporting. We hold the view that the recognition of contributed goods and services and centrally incurred costs should be based on the nature and extent of the transaction. Criteria for application at the entity level should be provided that allow a reporting entity to evaluate and conclude on the need for recognition. We do not support the accounting framework allowing a government’s policy to determine whether an item is an asset, liability, revenue or expense of a reporting entity. Providing criteria for the recognition of contributed goods and services that are linked to government policy may limit consistency of financial reporting across jurisdictions in Canada and threatens to weaken current recognition practices. Legislative authorities should not serve as a basis to not record transactions that are meaningful to achieving the financial statement objectives presented in PS1100. Scope

The newly worded scope out for transactions eliminated on consolidation (paragraph .08(c)) could be further clarified as we believe the intent is that only when preparing consolidated financial statements of a parent are these transactions out of scope of the standard. When preparing entity level financial statements for an entity that belongs to a consolidated group, the related party transactions in the entity level financial statements would not be out of scope simply because the reporting entity belongs to a consolidated group. This concept is presented in IAS 24. Alternate wording that may be considered for use in the proposed standard might be sourced from IAS 24.4. Definitions Adjustments referred to in the definition of carrying amount presented in paragraph .10 are not defined. As result, it may be unclear what nature of adjustment the standard is referring to. The previous exposure draft provided additional text which described the adjustments as writedowns and amortization, similar to how carrying amount is defined in Section 3840 of Part V of the CICA Handbook. The cost of a service provided to be measured at carrying amount is not defined. As a result, it is unclear whether cost should be a full cost (for example, salaries plus benefits, direct costs plus overhead, etc.) or only direct costs incurred by the service provider. In our view, clarifying the expectation would greatly improve comparability of financial reporting. Differentiating contributed services from allocated costs It is difficult to differentiate the concepts of contributed services from allocated costs based on the definitions provided in the proposed standard. Allocated costs include a discussion in paragraph .25 of “…a central agency providing services to other entities under common control”. Contributed services includes a discussion in paragraph .27 of “…certain activities undertaken by a central agency to support the activities of other departments and agencies”. Given what appears to be an interchangeable description of the same situation, it is not clear why the proposed standard has separate discussions and recognition criteria for these situations.


Yes, we agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of key management personnel of another entity.




Yes, we agree with the above measurement provisions. Carrying amount is an appropriate basis to measure the transaction given there has been no substantive change in the consolidated interest in the item. Further, the proposed standard offers clarity via its definition set out in paragraph .10(a) that for services, carrying amount is the cost of the services provided, as recorded in the accounts of the provider organization. Clarity and consistency of application of the proposed standard could be improved - cost is not defined and as a result, differences in measurement during application of the standard will arise. In order to achieve consistency of application, the

important question of how to determine the cost of a service transaction should be addressed.


Yes, we agree that in the case of 2(a) above, use of exchange amount for normal course of operations transaction is appropriate given the criteria to establish the presence of normal course of operations transactions. If the intention of PSAB is to limit the use of the exchange amount to only those cases where the exchange amount is supported with evidence from objective third party transactions, further clarity is required in the proposed standard. Normal course of operations transactions are discussed in the Issues Analysis accompanying the proposed standard as transactions where generally one related party is transacting with both unrelated and related parties in a business relationship. A requirement for actual transactions between both unrelated and related parties to support a normal course of operations conclusion is an objective measure in support of the use of exchange amount. However, this may be a rare occurrence, limiting and narrowing the definition and extent to which exchange amount may be used to measure a transaction. The requirement for transactions to occur between both unrelated and related parties is not explicitly presented as a matter to be taken into account in paragraph .37 of the proposed standard, which may result in inconsistent conclusions on whether or not a transaction meets the definition of normal course of operations and more frequent use of exchange amount measurement. If the presence of actual transactions between both unrelated and related parties is required in order to conclude a transaction meets the definition of normal course of operations and support the use of exchange amount for measurement, then it should be presented as a matter to be taken into account in the list of items provided at the end of paragraph .37 in order to ensure consistency of application. With respect to case 2(b), we accept the premise that certain other transactions outside the normal course of operations may warrant exchange value measurement. Further, with respect to both case 2(b), we would recommend that the proposed standard require objective evidence to support the exchange amount prior to its use in measuring the transaction. Support for the exchange amount, by independent evidence, is necessary to add substance to that amount. It is not clear why case 2(a) requires third party transactions to be present (per the Issues Analysis document) to support the use of exchange amount while no such requirement for independent validation of the exchange amount is required for case 2(b). Contributed assets or services are addressed in paragraph .41 of the proposed standard. A commercial substance type assessment may also be relevant for determining whether a contributed good or service should be measured at fair value if given accounting recognition.


Yes, we agree with the transitional provisions. The proposed standard would be clearer if it used wording identical to that in PS 2120. For example, paragraph .52 would read “… If applied prospectively, restatement of any outstanding related balances existing at the date of the change is not required when the related party transaction occurred prior to the date of adoption.” A cross reference to PS 2120 may be required.


PROVINCIAL AUDITOR of Saskatchewan

September 3, 2013

Mr. Tim Beauchamp, Director Public Sector Accounting Chartered Professional Accountants of Canada 277 Wellington Street West TORONTO, ON M5V 3H2

Dear Mr. Beauchamp:

Re: Related Party Transactions — Re-exposure Draft (June 2013)

We support the development of a standard on related party transactions and, except, as noted below, generally agree with the proposed standard.

Our responses to the specific questions raised:

1. We agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of key management personnel of another entity.

2. We agree that related party transactions should be measured at the carrying amount except when: a) they are undertaken in the normal course of operations; or b) a recipient organization's future economic benefits or service potential is expected to change significantly as the result of the transaction. However, we find paragraph .39 does not provide practitioners with application guidance as to what is meant by "change significantly" and whether this concept differs from "material financial effect" used in paragraphs .04, .05 and .06.

3. We agree that related party transactions should be measured at the exchange amount in situation a) when they are undertaken in the normal course of operations but suggest further clarification in the definition of "exchange amount".

We note that the definition of "exchange amount" in paragraph .10(b) is "the amount of the consideration as established..." as opposed to "the amount of the consideration paid or received as established" (CICA Handbook Accounting Section 3840). We question the deletion of the linkage to "paid or received" in that without this aspect, the definition seems to allow recipient and provider organizations or the government to set the exchange amount without necessarily a tie to the "consideration paid or received".

Paragraph .41 seems to further support the entity / government determining measurement (i.e., "an entity's policy... may determine how the transactions would be measured. In the absence of such ..."). Also, the proposed standard makes reference to government policies in paragraphs .25 and .29. We do not support standards that allow government policy as the basis of decisions on recognition and disclosure. We think recognition and disclosure should be based on the underlying substance of the transaction.

1500 Chateau Tower -1920 Broad Street Regina, Saskatchewan S4 P IV

t 306.7E37.6398 f 306.787.6383 e infogauciitor.sk.ca

www.auditorsk.ca

Mr. Tim Beauchamp September 3, 2013 Page 2

We disagree with exchange amount as the basis of measurement in situation b) when a recipient organization's future economic benefits or service potential is expected to change significantly as the result of the transaction. First, as noted above, the definition in paragraph .10(b) allows the entity/government to arbitrarily set the exchange amount for policy purposes and at amounts that may not reflect the substance of the transaction (consideration received or paid). Secondly, unlike CICA Handbook Accounting Section 3840.29(b), paragraph .38 does not require the "exchange amount to be supported by independent evidence".

Without a more rigorous definition of exchange amount and stronger requirements in acceptable evidence to support the determination of the exchange amount, differences in measurement of situations with similar or the same fact patterns will likely arise. Unless the definition is made more rigorous and stronger is support required to determine the exchange amount, we suggest these types of related party transactions be measured at fair value.

4. We agree with the transitional provisions.

Other comments:

1. We agree with the listed essential characteristics of related parties and recognize that exclusion of entities over which the government/entity has significant influence, or has economic interest in is consistent with prior positions of PSAB. However, we continue to think that PSAB should use this opportunity to define what constitutes an entity with 'significant influence' consistent with other accounting frameworks as, in our view, this concept applies equally to the public sector.

At times, Governments structure their relationships with certain entities so that they do not control them bUt can exert 'significant influence' over them. Similar to the private sector, they use these 'non-controlled' entities to promote public policy or, at times, carry out their activities. Governments often enter into transactions with these entities that would not be considered in the normal course of operations (as described in paragraph .37 of the proposed standard).

We think it is important users of financial statements understand the effect of government's transactions with these types of entities and will be unable to do so if sufficient information about the terms and conditions of transactions with these entities and the relationship with them is not disclosed within the financial statements.

2. Paragraph .30(c) includes "legislative authorities" as one of the factors to consider whether related party transactions involving contributed goods and services would be recognized or disclosed in the financial statements. We view this as an inappropriate factor to consider as it appears to emphasize the legal form of the transaction as opposed to its economic substance. Also, this allows a government to set policy which may create revenues or expenses (or conversely may not recognize revenues or expenses) in an entity's financial statements through the use of related party transactions. This is inappropriate as it poses a significant risk to the reliability and comparability of information presented in financial statements and hinders the ability of the public to place confidence in the financial information presented. As noted above, we do not support standards that allow government policy as the basis of decisions on recognition and disclosure.

3. We think the placement of paragraph .04 may not be appropriate in the purpose and scope section in that it discusses disclosure issues rather than the purpose or scope of the proposed standard. Misinterpretation of disclosure requirements could occur if paragraph .04 is read without the context of the disclosure section (paragraphs .42-.50). For example, paragraph .04 may be read as


suggesting that disclosure is not required for any transactions that occurred at fair market value contrary to guidance in paragraph .47. In its current placement, the risk is that paragraph .04 could be incorrectly interpreted and lead to inconsistent application. We suggest either removing paragraph .04 from the proposed standard or moving it to the disclosure section.

Also, to improve readability paragraph .06 could be moved to before paragraph.05.

4. Paragraph .42 describes required disclosure, however, the current wording is unclear regarding the intent of whether this should only include "reportable transactions" or include all transactions. For example, (f) and (g) refer to contractual obligations and contingent liabilities involving related parties, but these situations were not previously mentioned in the Section. To add clarity, we suggest adding "contractual obligations and contingent liabilities" as an example in the definition of a related party transaction (paragraph .10(f)) for transactions that have not been given accounting recognition).

5. We note the use of varied terminology in the exposure draft to describe the related party — "governments", "entity", "provider organization", "recipient organization", "central agency". In many cases, the exposure draft seems to use "governments" interchangeably with "entities". However, at times, this is unclear and hence impedes the clarity of the proposed standard (e.g., paragraph .12 "Governments can also establish different relationships between entities...").

To avoid reissuance of new standards and consistent with its terminology initiative, we encourage PSAB to carefully consider its use of "government" in this proposed standard vis-a-vis the use of "entities". Furthermore, we encourage standards to include definitions for key terms such as "recipient organization" and "provider organization" to foster consistency in understanding and application.

6. Various paragraphs within the proposed standard refer to "material financial effect" (e.g., paragraphs .04, .05, and .06) or "the materiality of the effect" (paragraph .13(d)). We find the proposed standard unclear if materiality refers to an individual related party transaction or the related party transactions taken as whole. This may lead to inconsistent application of the proposed standard. For greater clarity, we suggest the following addition to in paragraph .13(d) —"the materiality of the effect of the transactions, individually and taken as a whole, ...".

7. We think that the wording "...to the entity that is reporting on its financial position and changes in financial position" in paragraph .14 (and in the transition provisions) could be misinterpreted as the proposed standard applying only to those transactions and events reflected in the statement of financial position as opposed to the financial statements as a whole. We suggest changing this wording to "...to the entity preparing its financial statements" which is consistent with CICA Handbook Accounting Section 3840.

Also, we question the exclusion of post-employment benefit plans from the characteristics of a related party in paragraph .14. While such plans may be a related party to the reporting entity by criterion in paragraph .14 (e.g., shared control), this may not always be the case. We find the rationale for inclusion of post-employment benefit plans as a related party in IAS24 (i.e., "The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity.") equally applicable to the public sector. Such inclusion would provide greater clarity and consistency in application of the proposed standard for these types of relationships. We suggest PSAB consider this addition.


8. We find paragraph .17 (and example) unnecessary given explanations and guidance provided in paragraphs .18-.21. The inclusion of paragraph .17 reduces the clarity of those paragraphs and creates potential for future interpretation issues. We suggest removal of paragraph .17.

9. We do not agree with the exclusion of expenses from paragraph .47. We suggest rewording the paragraph to read (see bold): "On the other hand, if a significant portion of an entity's revenues or expenses are derived-from with related parties, it may...".

10. Paragraph .08 indicates that the Section does not deal with amalgamations and restructurings. However, we note that the related Statement of Principles - Restructurings also scoped out related parties. We suggest PSAB clarify where it intends to provide guidance on related party transactions relating to restructurings.

11. The wording and structure of paragraph .13 seems to be unclear and, based on the structure, the bullets seem to only relate to the specific example provided (i.e., contributed goods). We do not think this is the implied intent. We suggest rewording the paragraph and moving the example into a bullet as follows:

.13 Determining which transactions between an entity and its related parties to disclose should consider what a users' needs include. Factors to consider in assessing users needs include, but are not limited to, the following: (a) information needed to understand the entities' operating environment (for example whether contributed goods and services and other unrecognized transactions exist) (b) ....previous list (a)-(e)

12. The use of "and" in paragraph .14(d) seems incorrect. Is it meant to read "an individual that is a member of key management personnel of an entity end or a close family member of that individual" or conversely "a close family member to an individual that is a member of key management personnel of an entity"?

13. The wording in the following paragraphs is unclear. Do you mean (see bold):

) Paragraph .31 — "for which an entity is responsible and to assist users to assess whether resources"

) Paragraph.39 —"When, as a result of a..."?

Yours truly,

Judy Ferguson, FCA Acting Provincial Auditor

MM/cp

Grant Thornton LLP 12th Floor 50 Bay Street Toronto, Ontario M5J 2Z8

Phone: 1-416-366-4240 Fax: 1-416-360-4944 www.GrantThornton.ca Raymond Chabot Grant Thornton LLP Suite 2000 National Bank Tower 600 De La Gauchetière Street West Montréal, Quebec H3B 4L8

Phone: 1-514-878-2691 Fax: 1-514-878-2127 www.rcgt.com

Chartered Professional Accountants Member of Grant Thornton International Ltd

September 4, 2013

Mr. Tim Beauchamp, CA Director, Public Sector Accounting Standards 277 Wellington Street West Toronto, Ontario M5V 3H2 via: [email protected]

Dear Sir:

Subject: Re-exposure Draft – Related Party Transactions (June 2013)

Grant Thornton LLP and Raymond Chabot Grant Thornton LLP (hereinafter “we”) would like to thank you for the opportunity to provide comments on the Public Sector Accounting Board’s (hereinafter the “PSAB”) Re-exposure Draft, Related Party Transactions (hereinafter the “RED”).

As previously mentioned in our comment letter on the original Exposure Draft published in September 2012, the changes proposed are particularly relevant to us because of the large proportion of our clients who are applying Canadian Public Sector Accounting Standards. We support the PSAB’s decision to issue a standard dealing with recognition, measurement, presentation and disclosure of related party transactions, as the need for it has become even more important due to the transition of many entities to Public Sector Accounting Standards.

While we agree with the intention of the proposed standard, we have the following responses to your questions and additional comments below:

1. Do you agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of key management personnel of another entity?

Yes, we agree with this proposal. We think this recommendation will force many organizations to develop and implement mechanisms in order to identify such related parties, but we also believe the clarifications introduced in paragraph .17 allow this identification to be carried out in a more realistic and manageable way.

2

2. Do you agree that related party transactions should be measured at the carrying amount except when (a) they are undertaken in the normal course of operations or (b) a recipient organization’s future economic benefits or service potential is expected to change significantly as the result of the transaction?

We agree with the proposal in 2(a) and believe the addition of paragraphs .36 and .37 is very useful to entities applying the standard. Nevertheless, we do not agree with the proposal in 2(b) (i.e. paragraph .38). We believe proposals in paragraph .38 of the RED are too broad and could result in diverse application in practice or be used to manipulate the financial statements by inappropriately recognizing transactions at exchange amount and recording gains or losses in the financial statements. We strongly recommend that the PSAB consider the guidance in Section 3840 in Parts II and V of the CICA Handbook – Accounting and measure related party transactions at the carrying amount, except when (a) they are undertaken in the normal course of operations or (b) the change in the consolidated interest of the item is substantive. While the concept of a substantive change in the consolidated interest of the item seems to be taken into account in paragraph .34 of the RED, its placement is quite confusing. It is unclear whether an entity that enters into a related party transaction in the normal course of its operations, where there is no substantive change in ownership, would account for the transaction at carrying amount in accordance with paragraph .34 or at exchange amount in accordance with paragraph .35. We believe our proposed measurement concept is easier for organizations to apply and is less likely to lead to diverse application in practice or a manipulation of the financial statements to record gains or losses. Further guidance should also be provided to convey what would be considered a substantive change in consolidated interest (e.g. control to shared control or control to no control).

As previously stated, we believe paragraph .38 (i.e. 2(b)) should be removed. However, if the PSAB decides to retain paragraph .38, we strongly recommend that significant guidance be added to explain what is meant in this paragraph, especially by “change significantly” in the following wording: “when a recipient’s organization’s future economic benefits or service potential is expected to change significantly”. For example, does it mean that the future cash flows of the asset received differs substantially from the configuration of the future cash flows of the asset given up? If the PSAB is seeking to incorporate the concept of “commercial substance” from Section 3840 of the CICA Handbook – Accounting, additional guidance should be added as this concept has been quite difficult to apply in practice in the private sector and there appears to be even less guidance in paragraph .38 of the proposed standard.

Furthermore, paragraph .39 of the RED is confusing as the proposed standard recommends measurement at carrying amount, except in two situations where exchange amount may be used; then, paragraph .39 introduces the concept of fair value as a third measurement option that was not mentioned in paragraph .33. We strongly believe that this last paragraph should be removed. Instead, the PSAB should convey that exchange amount may, in some occurrences, be equal to fair value, but that it (the amount of consideration that was agreed to by the parties) should be used whether or not it is the fair value.

3

Lastly, it is somewhat unclear if items 2(a) and 2(b) are both required to account for a transaction at exchange amount or if an entity which has met only 2(a) or 2(b) must account for its transaction at exchange amount.


We agree that in the case of 2(a) above, related party transactions should be measured at exchange amount. As stated in our answer to question 2 above, we do not agree with the proposal in 2(b) and believe that this second exception to measurement at carrying amount should be based on the concept of a substantive change in the consolidated interest of the item transferred.


Yes, we agree with the transitional provisions.

Other comments

Below please find our comments on a number of specifics in the standard that did not fall under the scope of the questions above:

We recommend that the section “Reportable transactions”, which includes paragraphs .11 to .13, be included in the section “Purpose and scope”, since it provides further clarity as to which transactions fall within the scope of the proposed standard. We believe that the current presentation may be confusing. Furthermore, there is some repetition between certain paragraphs in the two sections “Reportable transactions” and “Purpose and scope”. For example, paragraph .04 states that only transactions that have or could have a material financial effect on the financial statements are disclosed, whereas paragraph .13 provides additional factors that should be considered when determining the scope of what is disclosed;

In the definition of carrying amount in paragraph .10(a), we suggest the PSAB should provide guidance in the form of examples as to what is meant by “adjustments” (for example, amortization or impairment). Without any guidance, we believe it is unclear that entities should record items like amortizations or impairment up to the date of the transfer;

For greater clarity in paragraphs .14 to .21, we suggest the use of the term “reporting entity”, as it was used in the first Exposure Draft, rather than the word “entity”;

We strongly believe that the words “participate in” in paragraphs .19(b) and .21(b) should be replaced by the words “exercise a degree of influence over”, because paragraph .17 clearly states that to be considered related, key management personnel or close family members must have a degree of influence over the financial and operating policies of the organizations. This change would make the three paragraphs consistent;

4

The section “Contributed goods and services” (paragraphs .27 to .32) does not include any paragraph in italics which would provide the accounting requirements for contributed goods and services which were scoped out of paragraph .22. We believe that paragraph .29, in its current form, could be presented in italics; however, the word “may” appears to imply that there is an accounting policy choice. We recommend that the paragraph be rewritten to clarify if there is an accounting policy choice or if there is a requirement to recognize contributed goods and services when they would otherwise have been purchased;

We recommend that paragraph .41 be clarified to explain if the accounting policy choice between carrying amount and fair value is on an item by item basis or is an overall accounting policy choice;

The proposed standard does not provide any guidance as to the recognition of the difference between the carrying amount of an asset acquired or a liability transferred as part of a related party transaction measured at the carrying amount and the consideration received or transferred. To ensure consistency in practice, we recommend that the PSAB add a paragraph that provides guidance in this area. If the intent is that paragraph .40 should apply, we do not believe that fact is adequately conveyed. We propose the following wording:

“When a related party transaction is measured at carrying amount, any difference between the carrying amounts of items exchanged is reported in …” and

“When a related party transaction is measured at exchange amount, any gain or loss resulting from the transaction is reporting in the statement of operations for the period”.

If you wish to discuss our comments or concerns, please contact Melanie Joseph, CPA, CA ([email protected] or 416-607-2736) or Stéphane Landry, CPA, CA ([email protected] or 418-647-5008).

Yours sincerely,

Grant Thornton LLP Raymond Chabot Grant Thornton LLP Melanie Joseph, CPA, CA Stéphane Landry, CPA, CA

September 4, 2013

Tim Beauchamp

Director, Public Sector Accounting

277 Wellington Street West

Toronto, Ontario M5V 3H2

Dear Mr. Beauchamp,

RE: Related Party Transactions – Re-Exposure Draft

Thank you for the opportunity to provide comments on the Related Party Transactions Re-

Exposure Draft. Our thoughts on the proposed standard are below.

1. Do you agree that entities may be related when individuals that are members of the key

management personnel or close family members of the entity reporting are also members

of key management personnel of another entity?

Yes, we agree that, in certain cases, entities may be related when individuals that are members of

the key management personnel or close family members of the entity reporting are also members

of key management personnel of another entity. We believe paragraph .17 sufficiently

articulates when such entities would or would not be deemed related.

2. Do you agree that related party transactions should be measured at the carrying amount

except when:

(a) they are undertaken in the normal course of operations; or

(b) a recipient organization's future economic benefits or service potential is expected to


Yes, we agree that related party transactions should be measured at the carrying amount except

when:


(b) a recipient organization's future economic benefits or service potential is expected to change

significantly as the result of the transaction.

PO Box 187

1723 Hollis Street

Halifax, NS B3J 2N3

(902) 424-7021

[email protected]

Department of Finance Government Accounting

3. Do you agree that in the case of 2(a) and 2(b) above, related party transactions should be

measured at the exchange amount?

We agree that it is appropriate to use exchange amount when transactions are undertaken in the

normal course of operations because this amount, by its nature, will have to approximate fair

value (i.e., in order for the transaction to happen under terms similar to those applied with non-

arm’s length parties, it would have to include an exchange price that is representative of fair

value).

We do not agree that exchange amount should be used when a recipient organization’s future

economic benefits or service potential is expected to change significantly as a result of the

transaction. This is because, under this scenario, exchange amount does not have to be

representative of normal operations and could therefore turn out to be quite different from fair

value. Exchange amount is determined entirely by the parties to the transaction and is therefore

subject to manipulation, as illustrated in the following example:

Assume a senior government has decided to contribute a tangible capital asset to its controlled

entity. This asset will significantly change the recipient’s future economic benefits / service

potential. It will affect the entity’s future operating performance and would have been purchased

if not donated, so it is decided that this contribution would have to be recognized (rather than just

disclosed). In accordance with proposed paragraph .41 this would have to be recorded at either

carrying amount or fair value. Assume the parties involved prefer not to record it at either of

these two values so they put a $1 price tag on the asset and conclude that it is to be recorded at

this $1 exchange amount. This value is not representative of the economic substance of the

transaction and should not be permitted by the standard.

To prevent these types of situations, we believe paragraph .38 should require the use of fair value

rather than exchange value.


We agree with the transitional provisions.

5. Other comments:

We would like to draw a few final thoughts to your attention.

We feel there is a need to provide more guidance with respect to the measurement of recognized

contributed goods and services. At present, the exposure draft suggests these would be recorded

at carrying value or fair value, but does not define when one measurement basis would be more

appropriate than the other. This could lead to inconsistencies in financial reporting. We believe

contributed goods and services should be subject to the following measurement provisions:

Contributed goods and services should be measured at the carrying amount except when:


(b) a recipient organization's future economic benefits or service potential is expected to change

significantly as the result of the transaction.

In either of the above scenarios, contributed goods and services should be measured at fair value.

This concludes our thoughts on the Related Party Transactions Re-Exposure Draft. We would be

pleased to discuss any questions or comments you may have with respect to this letter. To do so,

please contact Jill Devanney ([email protected]), Rob Bourgeois ([email protected]), or the

undersigned.

Regards,

Suzanne Wile, CA

Executive Director, Government Accounting

Nova Scotia Department of Finance

mailto:[email protected]

mailto:[email protected]

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les commentaires doivent être reçus au plus tard le 4 septembre 2013.

Opérations entre apparentés Deuxième exposé-sondage

Le CCSP invite les intéressés à formuler des commentaires sur tous les aspects des principes proposés dans le deuxième exposé-sondage.

Ce formulaire ne vise pas à restreindre votre réponse. Chaque boîte de texte acceptera l'intégralité de vos commentaires.

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organisation avant de le soumettre.

Nom : Marie-Claude Lamarre

Organisation : Société de Transport de Montréal (STM)

Courriel : [email protected]

Commentaires généraux :

Au paragraphe .24, on semble indiquer que la comptabilisation au brut s'applique seulement dans les cas où "une politique d'attribution des coûts liés à la prestation des biens et des services est en place". Est-ce que la politique à laquelle il est fait référence doit nécessairement être écrite ? Si oui, est-ce que cela signifie que si aucune politique écrite n'est en place, les produits et les charges peuvent être présentés à leur montant net ? Quant au paragraphe .41 (apports de biens et services), nous sommes d'avis qu'il serait nécessaire d'apporter certaines précisions lorsqu'on y mentionne "les politiques, les pratiques budgétaires ou les structures de reddition de comptes de l'entité". Ces termes semblent s'appliquer à la quasi-totalité des situations, impliquant alors que la valeur comptable (point a)) et la juste valeur (point b)) soient rarement utilisées pour évaluer les apports de biens et de services. En effet, si l'entité n'a aucune politique écrite et qu'elle a l'habitude dans des situations similaires d'évaluer les opérations en utilisant une méthode "x" , les points a) et b) du paragraphe .41 ne s'appliqueront pas. Par exemple, prenons le cas d'une entité qui loue des locaux à sa filiale pour une valeur d'échange nulle : l'opération n'est pas comptabilisée aux livres, à la fois pour l'entité et sa filiale, puisque l'évaluation se fait à la valeur d'échange qui est nulle. Même dans les cas où il n'existe encore aucune situation similaire, la méthode d'évaluation choisie pourrait devenir le point de départ d'une pratique budgétaire de l'entité. Les points a) et b) s'appliqueraient alors seulement dans des situations très inhabituelles ? Et dans une situation inhabituelle où l'on déciderait de comptabiliser le transfert à la juste valeur, comment se refléterait cette transaction dans les livres du prestataire ? Il sortirait de ses livres l'actif à sa valeur comptable, enregistrerait un compte à recevoir du montant de contrepartie établi (valeur d'échange), mais comment se refléterait ensuite le choix de la juste valeur comme méthode d'évaluation ? L'impact serait-il sur l'état des résultats ou à l'avoir ? Et du côté du bénéficiaire : l'écart entre la valeur d'échange (contrepartie) et la juste valeur (devenant la valeur aux livres pour le bénéficiaire) serait-il présenté comme gain ou perte à l'état des résultats ou plutôt comme apport dans la section de l'avoir ? Finalement, pourquoi ne pas présenter à la fin du chapitre un arbre de décision ? Ce serait sûrement très utile afin d'avoir une vue d'ensemble et faciliter la détermination de la méthode d'évaluation.

1. Êtes-vous d'accord avec l'idée que deux entités soient apparentées lorsque l'un des principaux dirigeants de l'entité rapportante ou un proche parent de l'un d'eux est également l'un des principaux dirigeants de l'autre entité?

Oui, car un lien est créé entre les deux entités étant donné que le principal dirigeant a l'autorité et la responsabilité de planifier, diriger et contrôler les activités de ces deux entités. Il est dans ce cas nécessaire que les utilisateurs des états financiers en soient informés afin de bien comprendre l'impact que les opérations entre ces deux entités ont ou pourraient avoir sur leur situation financière.

2. Êtes-vous d'accord pour que les opérations entre apparentés soient évaluées à la valeur comptable, sauf dans les cas suivants : a) ces opérations sont conclues dans le cours normal des activités de l'entité; b) on peut s'attendre à ce que l'opération entraîne une variation importante des avantages économiques

futurs et du potentiel de service de l'entité bénéficiaire?

Oui, puisque dans ce cas, comme il est mentionné au paragraphe .34, la substance de la participation consolidée dans l'élément transféré ne change en général pas. La valeur comptable permet alors de conserver la valeur rattachée à l'élément transféré ou au coût du service fourni. Par contre, à la lecture du paragraphe .41 qui traite de l'évaluation des apports de biens et de services, les paragraphes .35 (point a) ci-dessus) et .38 (point b) ci-dessus) semblent exclure le cas des apports de biens et de services, puisque le paragraphe .41 énonce des règles distinctes pour fins d'évaluation de ce type d'opérations. Afin de clarifier ces trois paragraphes, il serait selon nous nécessaire de préciser aux paragraphes .35 et .38 que les apports de biens et de services sont exclus des règles énoncées et de présenter en caractères italiques le paragraphe .41, puisqu'il énonce des règles précises s'appliquant aux apports de biens et de services. De plus, en regard du paragraphes .33, certaines précisions sont selon nous nécessaires quant à l'évaluation à la valeur comptable. Du point de vue du prestataire et dans un cas où la valeur d'échange établie entre les parties est différente de la valeur comptable, en quoi le traitement comptable est-il différent lorsque l'opération doit être comptabilisée à la valeur d'échange ou lorsqu'elle doit l'être à la valeur comptable ? Prenons l'exemple du transfert d'actif suivant : - Valeur comptable = 1 000 000$ - Valeur d'échange = 400 000$ Si c'est l'évaluation à la valeur d'échange qui s'applique, l'entité prestataire sortirait de ses livres un actif de 1 000 000$, enregistrerait un compte à recevoir de 400 000$ et constaterait une perte de 600 000$ dans ses résultats. Si c'est plutôt l'évaluation à la valeur comptable qui s'applique, l'entité sortirait aussi de ses livres un actif de 1 000 000$, enregistrerait un compte à recevoir de 400 000$ (puisque c'est effectivement le montant de la contrepartie) et constaterait une perte de 600 000$ dans ses résultats. Est-ce donc seulement du point de vue du bénéficiaire que le traitement comptable serait différent entre les deux situations ? Quant au paragraphe .40 (présentation d'un gain ou d'une perte lorsque la valeur d'échange est différente de la valeur comptable), il ne précise pas si ce traitement s'applique à la fois au prestataire et au bénéficiaire, ce qui peut porter à confusion. Est-il possible que le traitement s'applique seulement au prestataire et que le bénéficiaire doive constater l'écart à l'avoir plutôt qu'à l'état des résultats ? Aussi, quels libellés devraient être utilisés pour présenter le gain ou la perte ? Par exemple, le terme "gain sur acquisition" pour le bénéficiaire qui acquiert une immobilisation semble inadéquat.

3. Êtes-vous d'accord pour que, dans les cas 2 a) et 2 b) ci-dessus, les opérations entre apparentés doivent être évaluées à la valeur d'échange?

Oui, car les cas a) et b) de la question 2 sont tous deux des cas où il y a un changement de la substance de la participation consolidée dans l'élément transféré. La valeur comptable n'est alors pas un choix approprié pour évaluer l'opération. La valeur d'échange étant généralement située entre zéro et la juste valeur, tel qu'il est mentionné au paragraphe .16 du document "Analyse des questions", les paragraphes .35 et .38 du nouveau chapitre nous permettront une latitude suffisante pour évaluer adéquatement ce type d'opérations.

Toutefois, la fin de la première phrase du paragraphe .39 porte à confusion : lorsque qu'on indique "... il peut convenir d'utiliser la juste valeur", est-ce en référence à la juste valeur comme valeur d'échange (donc comme contrepartie) ? Cette précision éliminerait la confusion à l'effet que cette phrase semble indiquer que la comptabilisation pourrait plutôt s'effectuer à la juste valeur, alors que la valeur d'échange (donc la contrepartie) serait différente de la juste valeur, ce qui serait en contradiction avec le paragraphe .38.

4. Êtes-vous d'accord avec les dispositions transitoires?

Oui. Nous devrons appliquer le nouveau chapitre à compter de notre exercice se terminant le 31 décembre 2017, ce qui nous laissera suffisamment de temps pour être bien préparés en vue de cette adoption. La possibilité de choisir une application prospective plutôt que rétrospective est selon nous une bonne chose. Effectivement, si ce choix est effectué, le passage au nouveau chapitre sera moins onéreux, puisque les opérations entre apparentés conclues antérieurement n'auront pas à être retraitées.


Page 1 of 3

Finance Comptroller’s Division Comptroller’s Office 715 – 401 York Avenue Winnipeg, Manitoba R3C 0P8 Phone: 204-945-4919 Fax: 204-948-3539 E-mail: [email protected]

September 4, 2013 Mr. Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario M5V 3H2 Dear Mr. Beauchamp:

Re: Re-exposure Draft: Related Party Transactions Thank you for the opportunity to comment on the Re-exposure Draft (RED) on related party transactions. The Province of Manitoba (Province) has included responses to the Board’s specific questions in the attachment. The Province agrees with PSAB’s view that the RED will have a minimal effect on the summary financial statements of senior governments. The scope of the RED does not include transactions that are eliminated on consolidation and with entities accounted for under the modified equity method. For government organizations, which previously used Part V of the CICA Handbook, the RED does not represent a significant implementation challenge. The Province’s main concern with the RED is the inclusion of key management personnel and their close family members, and entities controlled by key management personnel and their close family members, as related parties. Transactions with these related parties would generally not be material at the summary financial statement level. However the controls and procedures to produce a listing of these related parties is impractical and has very little cost benefit. Nonetheless legislative auditors will require senior governments to implement the controls and procedures required to ensure the complete disclosure of related party transactions. After reviewing the responses to the Exposure Draft (ED), PSAB indicated in its decision summary of March 2013 that it would address concerns related to key management personnel. The Province does not feel that PSAB has adequately addressed the issue of key management personnel and their close family members.

Page 2 of 3

It is important that governments are transparent and accountable to the general public but the RED does not improve the relevance and usefulness of the Province’s summary financial statements. The issue of key management personnel and their close family members can be better dealt through governance and disclosure practices. The Province of Manitoba has conflict of interest legislation, conflict of interest guidelines, and ethical policies over the procurement of goods and services. The Province also publishes an annual listing of all transactions with vendors totaling over $5,000. The Province agrees that a related party standard would be useful for the transparency and accountability for small public sector entities within the GRE. The disclosure of material related party transactions, terms and conditions helps the user understand the operating results. We appreciate the opportunity to comment on the RED. If you have any questions or concerns related to these comments please contact the undersigned. Yours truly, Betty-Anne Pratt, CA Provincial Comptroller On Behalf of the Province of Manitoba

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Yes, the Province agrees key management personnel of the public reporting entity, and their close family members, who are also key management of another entity, provided they have a considerable degree of influence over both entities or have a significant financial interest. There have been several well documented cases of abuse by key management personnel structuring deals with suppliers that they control and hold a significant financial interest. At a smaller public sector entity a single individual may have significant authority over the entity’s activities and operations. Within the context of senior governments there are likely a great number of potential related party transactions with key management personnel. But there are also conflict of interest policies, delegation of power and authority, and other internal controls which significantly reduces the risk of material related party transactions.

2. Do you agree that related party transactions should be measured at the carrying amount except when:

(a) They are undertaken in the normal course of operations; or (b) A recipient organization’s future economic benefits or service potential is expected

to change significantly as the result of the transaction?

The Province agrees.


The Province agrees.

4. Do you agree with the transitional periods? The Province agrees that the implementation for fiscal years beginning on or after April 1, 2016 is sufficient. If applied prospectively, the restatement of assets or liabilities is not required provided the related party transaction occurred prior to the date of implementation.

Wayne Morgan Office of the Auditor General of Alberta Edmonton, Alberta September 4, 2013 Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario Dear Mr. Beauchamp, Our response to PSAB Re-exposure Draft Related Party Transactions is below. We have provided comments to reduce alternatives within the standard, based on the view that greater objectivity (less choice) is needed in accounting for related party transactions, because by their very nature, they may be less objective. 1. Do you agree that entities may be related when individuals that are members of the key

management personnel or close family members of the entity reporting are also members of key management personnel of the another entity?

We do not agree. The concern with related party transactions seems to arise when control exists on both sides of a transaction. Control arises from an entity’s relationship with another entity, based on concepts in PS1300. Among the concepts in PS1300 is significant input into appointment of the governing body, or appointment or removal of the CEO or other key personnel. But these still involve entity to entity control. The Issue Analysis (paragraph .09) states that key management personnel by definition have authority and responsibility for planning, directing and controlling the activities of the other entity. But that overstates or confuses the concept of one person(s) with one entity controlling another. Control either exists or it does not. Notwithstanding an entity actually exercises control through its own employees and appointees, control is a concept between entities, not between individuals and entities.

More generally, it seems that the concept of key management’s personal interests is more suited to other accountability mechanisms (conflict of interest provisions, recuse provisions, schedules of payments, etc.) rather than a matter of concern for general purpose financial statements.


(a) they are undertaken in the normal course of operations; or (b) a recipient organization's future economic benefits or service potential is expected to change significantly as the result of the transaction?

The criteria in 2(b) is highly subjective as it is not clear (1) how economic benefits or service potential should be measured, or (2) what would constitute a significant change. PSAB may consider removing this concept from the standard. Virtually any transaction involving a transfer of an asset or liability could be considered to change future economic benefits or service potential for the recipient, so the application of the criteria would appear to depend on significance. The use of such a materiality-based threshold for accounting treatment raises additional questions. Should significance be measured only on a single transaction basis, or should the significance of a series of transactions be considered? If the latter, should this evaluation be applied for transactions with all related parties, or separately for each counterparty? And if a series of transactions are later found to be significant, should similar transactions in the comparative financial period be restated? As there is no guidance on how to answer these questions, inconsistent accounting may result.


We are concerned with application of 2(b). The treatment of transactions under 2(b) should be at carrying value. If the standard (paragraph .33) establishes that carrying value is to be used, then 2(b) is not necessary. By definition, these transactions are not at arms-length and therefore the amount of consideration exchanged may be arbitrarily set.

Carrying value is objective; it typically relates to some historical third party transaction. Carrying value also reflects that because a substantive change in ownership has not occurred, a change in measurement of the item may not be justified (as paragraph .34 explains). Similarly, fair value is objective. For transactions in the normal course of operations, exchange amount should approximate fair value, and therefore we agree with 2(a).

We are concerned with paragraph .40. In particular, the difference between exchange amount and carrying amount may be a grant rather than a gain or loss. Use of exchange amount for transactions that are not in the normal course of operations may not reflect the economic reality of the transaction. For example, if a government department transfers a tangible capital asset to a related government agency, the department would expense the asset at its carrying value, while the recipient may record the asset at a nominal or zero value reflecting the amount of consideration it provided in exchange. Alternatively, if the asset was sold to the agency for an amount in excess of its value (in effect, a grant back to the government department) the proposed standard could allow the agency to capitalize the implied transfer by recording the asset at the inflated amount of consideration provided. In each of these examples, the asset should not be revalued because a substantive change in consolidated interest has not occurred, and adjusting the asset to fair value or exchange amount may not be appropriate.

4. Do you agree with the transitional provisions? We agree that prospective application should be an option. It may be impractical to restate tangible capital assets acquired through related party transactions that occurred long ago.

We have some additional comments: • In the definition section, consider adding that related party transactions include related party

arrangements. This would then scope in arrangements such as guarantees or contractual obligations, for which no transaction may have (yet) occurred.

• The standard should differentiate cost allocations and recovery and contributed goods and services more clearly. It seems that “contributed goods and services” would be equivalent to “cost allocation without recovery.” The paragraph .27 example of a central entity seems similar to the example in paragraph .25 of a central agency. Alternatively, contributed goods and services, if this means where there is an actual transfer, should be treated consistently with PS3410. Unfortunately, PS3410 excludes transfers of non-monetary assets other than tangible capital assets. Therefore, PSAB should consider whether a standard on non-monetary transfers is needed rather than dealing with this through the related party standard.

• With respect to cost allocation, the standard should make clearer whether the policy has to include recognition for the standard to apply. For example, if the policy requires only disclosure, not recognition, does paragraph .24 apply? What precisely does “ a policy of allocating costs” mean – does it mean disclosure of allocated costs, or do inter-unit charges have to occur, etc.? Furthermore, an option to disclose, rather than recognize, allocated costs should be preserved in the standard. It may be too complicated to require recognition of allocated costs if the recipient entities are not provided with appropriations to pay for the allocated costs or are not expected to be directly accountable for such allocated costs.

• For the guidance under paragraphs .24-.26, it seems the logic is for the circumstance where a recipient is paying (the cost is allocated and recovered). Paragraphs .27 to .32 are for contributed goods and services, or as explained above, cost allocation without recovery. However, costs may be allocated but only partially recovered (e.g. an agency is required to recover only 25% of its costs). It is unclear how these paragraphs would then apply.

• It is unclear what a “contingent liability involving related parties” in .42(g) is. “Involving” is a very broad term. For example, is it a lawsuit where two related parties are jointly named, or a lawsuit of one party against another, or where one party provides insurance to cover the contingent liabilities of another, or where one entity handles all lawsuits on behalf of related parties in a government reporting entity? Furthermore, guidance on which entity should record the contingency under PS3300 in these circumstances may be useful.

• The disclosure requirements in .42 do not clearly incorporate the general principle in .04. Paragraph .42 requires disclosures of related party transactions, but users may not understand whether they took place at values different from if unrelated parties were involved. Paragraph .43 could be expanded to state “Disclosure is required of transactions between related parties that have occurred at a value different from that which would have been arrived at if the parties were unrelated.” The logical extension of this would then be

disclosure of the impact if the transactions had been recorded at the amount arrived at between unrelated parties. Alternatively, it may be that users interpret all related party disclosures under .42 as transactions that took place at values different from those between unrelated parties, which may not be case.

Thank you for the opportunity to comment. Sincerely, Wayne Morgan, PhD, CA, CISA



September 4, 2013




Organization: Government of Newfoundland and Labrador


Name: Ann Marie Miller, CMA (Comptroller General of Finance)

General comments:


No, the Province does not agree that a related party would include any of the following characteristics that relate to key management personnel and close family members: • an individual that is a member or key management personnel of an entity and a close family member of that individual; • an entity controlled by, or under shared control of, a member of key management personnel of an entity or a close family member of that individual; and • an entity when a member of key management personnel of the entity reporting or a close family member of that individual is a member of key management personnel of that entity. Consistent with the Province’s previous comments to PSAB’s Invitation to Comment, “Related Party Transactions - Definitions and Disclosures,” as well as the previous Exposure Draft our position still remains that disclosures relating to key management personnel and close family members of key management personnel would be an onerous task and would outweigh any perceived benefit of accountability from such disclosures. Obtaining this information in relation to key management personnel and their close family members is not practical for general purpose financial statements for senior governments. Given the definitions of key management personnel and their close family members, the list of possible individuals that would be included is very extensive. While disclosure would only be required for financially material transactions (which would generally be minimal when considering transactions with key management personnel and close family members), the initial effort involved in gathering such information to satisfy completeness of related party transactions from an auditing perspective would create a significant burden upon management. In addition, the Province retains its position that it is not necessary that related party transactions include

these parties as government has various legislation and processes in place to protect the integrity of financial transactions and provide accountability to the public (e.g. conflict of interest and procurement governance).




The Province does not consider it necessary to provide guidance on recognition and measurement of related party transactions beyond the disclosure of the basis used to recognize a transaction. It’s the position of the Province that related party transactions should be recorded at the value determined by government policy or the related parties. The existing PSA Standards adequately define how particular transactions should be measured which can be applied to address the underlying substance and appropriate measurement of related party transactions. In support of the Province’s position, there are other standards that deal with related party disclosure that do not contain measurement guidance beyond the disclosure of the basis used to recognize a transaction (e.g. Section 4460, PS 4260, IFRS 24, IPSAS 20). The only standard within Canadian generally accepted accounting principles that contains measurement guidance is RELATED PARTY TRANSACTIONS, Section 3840 in Part II Accounting Standards for Private Enterprises. Further, PSAB has indicated that the proposed standard is not to be prescriptive in how related party transactions are to be measured; it appears that the revisions in the R-ED have become more prescriptive. As such, measurement guidance should not be included within the proposals for related party transactions; it is more appropriate that such transactions should be measured based on substance of the transaction in relation to existing guidance within the PSA Standards. However, if the PSAB is intending to proceed with recognition and measurement guidance, the Province offers the following comments in relation to the particular proposals. The measurement proposals issued by PSAB are similar to Section 3840. It appears that PSAB proposals (par.38 and par.39) are concerned with referencing that “fair value may be appropriate”. However, Section 3840 indicates that in order for a transaction to be recognized at the exchange value there must be a substantive change in ownership or benefits provided and the exchange amount is to be supported by independent evidence. While PSAB proposals appear to include some of this discussion in par.39, the presentation is more prescriptive, suggesting that an asset should be written up (i.e. fair value) based on expected future use. However, in Section 3840 the discussion around the requirement for a substantive change in ownership interests in the item transferred or the benefit or service provided is in reference to the underlying substance of the transaction. It appears to suggest that in such cases (change in ownership) there would likely be sufficient interests by unrelated parties to provide some support for the reliability of the exchange amount (i.e. possibly at fair value). As such, par.39 should reflect this idea in a similar manner. However, it is to be noted that in relation to senior governments, there may be often cases where there is not sufficient interests by unrelated parties to provide support for the reliability of the exchange amount (i.e. independent evidence).


As mentioned in the response to question 2 above, the Province does not consider it necessary to provide guidance on recognition and measurement of related party transactions beyond the disclosure of the basis used to recognize a transaction. It’s the position of the Province that related party transactions should be recorded at the value determined by government policy or the related parties. The existing PSA Standards adequately define how particular transactions should be measured which can be applied to address the underlying substance and appropriate measurement of related party transactions. See question 2 above in relation to comments offered regarding the measurement proposals.


Yes, the Province agrees with the transitional provisions.


Deloitte LLP 515 Legget Drive Suite 400 Kanata ON K2K 3G4 Canada Tel: 613-254-6899 Fax: 613-599-4369 www.deloitte.ca

September 4, 2013

Mr. Tim Beauchamp, Director Public Sector Accounting The Canadian Institute of Chartered Accountants 277 Wellington Street West Toronto, ON M5V 3H2 Dear Mr. Beauchamp:

Re: Invitation to Comment on Re-Exposure Draft – Related Party Transactions

We appreciate the opportunity to respond to the Invitation to Comment on the re-exposure draft of Related Party Transactions issued in June 2013.

1. Do you agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of key management personnel of another entity?

We agree that entities may be related when individuals that are members of the key management personnel or close family members of the entity reporting are also members of the key management personnel of another entity. We believe that if such relationships exist and there are transactions among those people and the government reporting entity that they should be disclosed.


a) they are undertaken in the normal course of operations; or

We agree that related party transactions should be measured at the carrying mount except when undertaken in the normal course of operations. Related party transactions which occur in the normal course of operations should be recorded at exchange amount, which is defined in the re-exposure draft as the amount of consideration as established and agreed to by related parties. We agree that this is an appropriate approach.

b) a recipient organization's future economic benefits or service potential is expected to change significantly as the result of the transaction?

We believe that this paragraph is trying to draw the same distinction between transactions in the normal course of operations vs. those outside the normal course of operations as existed in Part V of the CICA Handbook. Part V, Section 3840.29 describes when a transaction should be recorded at the exchange amount. Part V, Section 3840.19 provides further guidance on when a non-monetary related party transaction has commercial substance.

Part V required the use of the carrying amount unless very specific circumstances arose, namely the transaction having commercial substance, the change in the ownership interests in the item being substantive and the exchange amount being supported.

Accounting Standards for Private Enterprises ("ASPE”) also contain similar guidance.

The proposed standard excludes certain aspects of the Part V and ASPE guidance, specifically the reference to the cash flows associated with the asset given up versus the asset received. As a result, it establishes different criteria for when the exchange amount should be used in the context of related party transactions. Paragraph 38 of the Exposure Draft (“ED”) states:

“When a recipient organization’s future economic benefits or service potential is expected to change significantly as the result of the related party transaction, it should be measured at the exchange amount.”

This would suggest that it is the future economic benefits or service potential associated with the recipient organization rather than the item transferred drive the accounting consequences. We would suggest that there are likely very few related party transactions that would change the organization’s future economic benefits or service potential. We recommend that the Board consider clarifying that the changes to the future economic benefits or service potential should be in reference to the asset transferred versus received rather than the organization itself.


Subject to our comments above, we believe that in the case of 2(a) and 2(b) above, related party transactions should be measured at the exchange amount.


We agree with the transitional provisions which state that this section may be retroactively or prospectively applied. We believe that in the case of many governmental organization, the cost of retrospective application exceeds its benefits. We would encourage the Board to be clear on allowing either retroactive application with restatement or retroactive application without restatement.

5. Are there any additional matters that need to be considered?

We have identified a number of additional matters which we believe warrant consideration. They are included in the attached Appendix A.

We would be pleased to discuss any questions or comments you many have with respect to this letter. To do so, please contact Cindy Veinot at 416-643-8752 or Lynn Pratt at 613-751-5344 or the undersigned, Tom Kay at 416-874-4424.

Yours truly,

Tom Kay, Partner Deloitte LLP

Appendix A Other matters for consideration

Exposure Draft (ED) paragraph reference

Comment

.04 The Exposure Draft (“ED”) states that: “Only those transactions that have or could have a material financial effect on the financial statements are disclosed”.

We note that related party transactions by their nature should be subject to greater scrutiny and therefore should be subject to a different concept of materiality than normal financial statement materiality. In the context of government reporting entities, there would likely be very few “material” related party transactions. However, we believe that readers expect to see disclosure of all related party transactions except those that are clearly trivial. While professional judgement is necessary to establish what is clearly trivial, we believe that more disclosure is better than less in the context of related party transactions. As it stands based upon the wording of the ED, we do not believe that government financial statements will include the quantum of disclosures we would expect to see in financial statements relative to related party transactions and consequently do not improve or even ensure that relevant information for accountability and decision making is provided .

.08 Amalgamations and restructurings are excluded from the scope of the section. Presumably this is because there is an anticipated project on restructurings.

We believe that restructurings and amalgamations should be within the scope of the related party project since they would constitute some of the most material related party transactions undertaken by governments. The disclosure requirements to be established by the future Restructuring standard may overlap with requirements of this section; cross references could be made. However, the ED on Related Party Transactions should not exclude these types of transactions from its scope. Again, these disclosures will ensure that relevant information for accountability and decision making is provided.

.10 Definition of “Carrying Amount” – the ED states that the “carrying amount is the amount of an item transferred, or cost of service provided, as recorded in the accounts of the provider organization, after adjustments, if any.

We are unclear as to the nature of adjustments being referred to here. Please clarify the nature of adjustment intended. That is, please clarify whether you mean depreciation, impairments, etc.

.14 We note that the scope of the ED focuses primarily on the concept of control. It does not include situations where there is significant influence or economic interest. We believe that where there are transactions amongst entities with these types of relationships, disclosure is required since these should be considered related parties. We recommend that the Board consider including these kinds of relationships in the scope of the ED.

.18 Paragraph 18 describes whether an individual is a member of key



Comment

management personnel. However, it does not address the question of elected officials in the context of a government reporting entity. This is obviously an important consideration in the context of disclosures and we would encourage the Board to consider clarifying the definition with this in mind.

.24 This paragraph addresses the situation of a service provider and the availability of a policy choice in allocating the costs of providing services. We point out that where there is a shared service organization, for example providing payroll services; it is not clear from this paragraph that the service provider is acting as an agent in regards to the payroll itself, and that the payroll expense must be recorded by organization who is the recipient of the employees’ services. In fact, this paragraph could be interpreted as requiring the service provider to record the gross amount of the payroll itself, in addition to the gross amount of the cost of providing the payroll. We do not believe this to be appropriate and would recommend clarification relative to agency relationships. This would improve comparability and transparency.

.29 This paragraph states that “An entity may recognize contributions of goods and services when those goods and services would otherwise have been purchased. The entity may, or be required by policy to, to (a) disclose information about the transaction; or (b) recognize a revenue and expense”.

Our view is that the contribution of goods and services in the context of governments is different from the contribution of goods and services in the context of the not-for-profit segment where there are regular contributions from donors in the form of time, services as well as other asserts. In the context of not-for-profit organizations, the recognition of contributed goods and services is a policy choice due the difficulty in measuring the value of these contributed goods and services.

In the context of government, the recognition of contributed goods and services should not be a policy choice. To do so effectively disguises the cost of delivering services in some contexts and makes comparability very difficult as well as evaluation of annual results.

Also refer to our comment on paragraph .24.

.32 Paragraph .32 seems to assume that contributed goods and services are necessarily an expense. We would point out that they could in some cases be an asset. Paragraph .32 should consider this possibility.

.42 We recommend that the Board clarify that disclosure requirements apply equally to contributed goods and services regardless of whether they are recorded. This would improve understanding of annual results and provide greater transparency.

.44 We recommend that the Board include other determinations beyond size as being a driver of disclosure. For example, the Board could include a



Comment

reference to the nature of the transaction, whether it is outside the normal course of business. In addition, the Board should consider replacing the ‘and’ joining (a) and (b) with “or” so that it is more than just the size of the transaction driving the disclosure requirements.

.50 The ED is proposing that additional information regarding unrecognized transactions be disclosed and that the information would include qualitative or quantitative indication of the extent of the unrecognized related party transactions. We recommend that the Board consider requiring both qualitative and quantitative disclosures unless the transaction cannot be quantified. We would expect that such occasions would be rare.



September 4, 2013




Organization: Office of the Auditor General of B.C.


Name: Brian Jones, Executive Director Professional Standards

General comments:

We continue to support PSAB in the development of standards and guidance on accounting for related party transactions in the public sector. We generally support the proposals set out in the Re-exposure draft with one exception; the proposal to allow government to direct an entity's accounting for contributed goods and services. In general, we do not support the accounting standards allowing a government's policy to determine whether an item is an asset, liability, revenue or expense of a reporting entity. Permitting a parent government to direct non-recognition of transactions that may be significant to understanding the full cost or resources consumed for an entity's activities is inconsistent with the objectives of financial reporting, such as Section PS 1100.39 which states that "Expenses represent the cost of resources consumed in delivering goods and services in the period". Allowing governments the option of not recognizing the value of contributed goods and services may understate an entity's costs for a period. We believe recognition of contributed goods and services should not be a free choice, but, rather, these items should be recognized in circumstances where they are used in the normal course of operations, would otherwise been purchased, and a fair value can be reasonably estimated.


We agree that entities may be related when individuals that are members of the key management personnel, or close family members, of the entity reporting are also members of key management personnel of the other entity. In our view the proposed standard includes sufficient requirements that consideration be given to the degree of influence an individual is able to exert and their ability to control the activities of the other entity. It is likely that only those entities where the relationship could reasonably affect the terms and conditions of transactions between the entities would be considered related parties. We also believe that previous concerns regarding the onerous work effort required as a result of including individuals in the definition will be significantly alleviated with the narrower definition now provided.




We agree that related party transactions should be measured at the carrying amount when they are undertaken outside the normal course of operations and when the continuity of an item transferred, or the beneficial interests of a service provided, has not changed. Using the carrying amount as the basis of measurement for transactions outside the normal course of operations minimizes speculation that arises with the measurement of related party transactions. Re-introducing the concept of "in the normal course of operations" is an improvement over the September 2012 Exposure Draft as the guidance is more definitive and the concept is familiar in Canada, which should result in more consistent application of the standard.


We are in general agreement that in the case of 2(a) and 2(b) related party transactions may be measured at the exchange amount where it will produce financial information that more faithfully reflects the economics of the exchange. However, in our view sufficiently reliable objective evidence is necessary to support the exchange amount if it is to be used for financial reporting purposes. In this regard, the standard requires more definitive guidance for clarification. For example, with respect to 2(a), we did not find guidance in paragraph .37 sufficient to ensure consistent conclusions on whether a transaction meets the definition of normal course of operations for financial reporting purposes. In this respect, we noted that the accompanying Issues Analysis suggests that normal course of operations transactions are where one related party is transacting with both related and unrelated parties within a normal business relationship. But this important premise is not included in the body of the standard (i.e., paragraph .37), so it is unclear as to whether or not the intention is to limit the use of the exchange amount to only those transactions where the exchange amount is supported with evidence from unrelated party transactions. In our view the presence of actual arms-length transactions should be required to support a normal course of operations conclusion. We have similar concerns with the application of 2(b). For example, CICA Section 3840 requires under similar circumstances that the exchange amount be supported by independent evidence before it can be used for financial reporting purposes. There is no such specific requirement under the current proposals for 2(b). Given the speculative nature inherent in measuring related party transactions, we believe that the standard should specifically require the presence of sufficient objective evidence to support the use of an exchange amount where future economic benefits or service potential is expected to change significantly as a result of the transaction.


We agree that the transitional provisions should allow either retroactive or prospective treatment as they are consistent with current provisions under Section PS 2120.










Nom : Michel Samson, vérificateur général par intérim

Organisation : Vérificateur général du Québec

Courriel : [email protected]


En général, nous sommes en accord avec l'adoption de cette norme. Section objet et champ d'application La section sur l'objet et champ d'application est trop détaillée et pourrait créer de la confusion par rapport aux exigences qui sont mentionnées par la suite dans la norme. En effet, le paragraphe .04 nous apparaît plus limitatif que les facteurs du paragraphe .13. Ainsi, pour le paragraphe .04 nous suggérons de conserver uniquement la première phrase. Cela éviterait en pratique toute forme de confusion entre la section objet et champ d'application et les exigences de cette norme. De plus, la question de l'incidence financière importante est déjà traitée pour l'ensemble du Manuel à la préface au paragraphe .14 puisqu'on y précise que ces normes ne visent pas les éléments ou les questions d'importance négligeable ou de nature non significative. Par conséquent, cela est redondant. Advenant, que le CCSP souhaiterait tout de même traiter de la question de l'incidence financière importante dans cette norme contrairement à ce que l'on retrouve dans les autres normes, il serait pertinent d'enlever le mot « seules » au début de la dernière phrase puisqu'une entité pourrait souhaiter être transparente et ajouter de l'information sensible de nature non significative sans avoir l'obligation de l'enlever. Le paragraphe .05 nous apparaît inutile. Par conséquent, il devrait être retiré. Le paragraphe .06 devrait être éliminé puisque la « notion d'effort raisonnable » ne devrait pas apparaître dans une norme de manuel de comptabilité puisqu'elle pourrait être très différente d'un préparateur à l'autre. La notion d'incidence financière importante est davantage reconnue dans le secteur public et elle est valable pour l'ensemble du Manuel. Le paragraphe .09 est hors du champ d'application du Manuel. Par conséquent, il devrait être retiré afin d'éviter la confusion entre des dispositions comptables normatives et des dispositions légales.

Apport de biens et de services Aucune définition n'est présentée dans le chapitre pour ce terme. Ainsi, si le bien est une immobilisation, nous sommes d'avis que le paragraphe 0.32 n'est pas adéquat, car il propose de présenter l'apport en biens à titre de charge dans les résultats. Ainsi, nous suggérons d'exclure les immobilisations à titre d'actif de la définition des apports de biens. Si c'est un apport de biens constitué d'une immobilisation, celle-ci devrait être comptabilisée conformément au SP 3150. En effet, dans le cas d'un don en immobilisation, on doit être à la valeur comptable selon la norme SP 3410.14 sur les transferts. Ainsi, ce nouveau chapitre n'est pas cohérent sur cet aspect puisqu'il permet la comptabilisation à la juste valeur selon le paragraphe .41. Il est donc très important de rendre la norme sur les opérations entre apparentées cohérente avec la norme sur les transferts. Selon le paragraphe .08, cet exposé-sondage ne traite pas des fusions et restructurations. Nous estimons qu'avec le développement d'une norme spécifique sur les restructurations, il serait pertinent d'intégrer une section précise à ce sujet dans la norme sur les opérations entre apparentés étant donné que les restructurations sont généralement entre entités apparentées.


Oui, nous sommes d'accord avec l'idée que deux entités « soient apparentées » lorsque l'un des principaux dirigeants de l'entité rapportante ou un proche parent de l'un d'eux est également l'un des principaux dirigeants de l'autre entité. Cependant, les paragraphes .19 et .21 mentionnent « peut être apparenté ». Par conséquent, nous recommandons de remplacer par l'expression: « est apparentée à l'entité » au lieu de « peut être apparentée à l'entité ». De cette façon, l'exigence sera plus claire pour les préparateurs. De plus, l'expression « entité publiante » est plus courante qu' « entité rapportante » et devrait être privilégiée.



Nous sommes d'accord sur le principe général que les opérations entre apparentés soient évaluées à la valeur comptable. Cependant dans le cadre d'une transaction sans contrepartie entre des apparentés, à notre avis, le SP 3410 Paiements de transfert devrait être priorisé (primer). Une mention devrait être faite en référence avec la norme SP 3410 pour préciser que ce dernier chapitre devrait être appliqué au préalable, soit avant ce nouveau chapitre sur les opérations entre apparentés, notamment pour le moment de constatation. La mention devrait aussi être ajoutée au chapitre sur les paiements de transferts. Ainsi, la valeur comptable devient un revenu pour l'entité bénéficiaire et une charge pour l'entité cédante impliquées dans la transaction, sans impact pour les états financiers consolidés de l'entité mère. Ainsi, aucune notion de juste valeur ne devrait être permise dans ces situations. Il faudrait apporter des précisions au paragraphe .33 puisque dans le cas d'opérations entre apparentés évaluée à la valeur comptable, il pourrait y avoir un écart entre les éléments échangés. La proposition actuelle ne traite pas à quel endroit le débit ou le crédit devrait être porté. Il serait nécessaire de clarifier la situation en mentionnant que l'écart devrait être traité à l'état des résultats, soit selon la même logique que dans le chapitre sur les transferts. À titre informatif, le chapitre 3840.09 du Manuel de l'ICCA (Partie II, Normes comptables pour les entreprises à capital fermé) inscrit l'écart au débit ou au crédit des capitaux propres. Ce qui ne serait pas adéquat pour une entité du secteur public compte tenu du chapitre SP 1201 présentation des états financiers.


Nous sommes d'accord avec 2a). Cependant quant au 2b) (paragraphes .38 et .39 de cet exposé-sondage), nous avons quelques commentaires: - afin d'éviter des interprétations quant à la valeur d'échange, lorsqu'on peut s'attendre à ce que l'opération entraîne une variation importante des avantages économiques futurs et du potentiel de service de l'entité bénéficiaire, celle-ci devrait être étayée par des valeurs de marchés ou d'expertise tel qu'exigé dans la paragraphe .14 de SP 3150 pour les immobilisations reçues sous forme d'apport. - une entité pourrait vouloir changer l'usage d'un bien sans faire de transaction entre apparentés. Dans ce cas, le traitement comptable serait différent puisque cela n'est pas prévu dans le chapitre SP 3150 Immobilisations corporelles de pouvoir procéder à une réévaluation. Puisque la notion de réévaluation n'est pas présente actuellement dans le Manuel du secteur public, on ne voit pas la nécessité d'introduire cette possibilité dans le chapitre sur les opérations entre apparentés. Cette nouvelle possibilité pourrait avoir pour effet d'augmenter le nombre de transactions entre apparentés afin de pouvoir comptabiliser un gain à l'état des résultats de l'entité. Compte tenu de ces aspects, nous recommandons d'éliminer les paragraphes .38 et .39.


oui, nous sommes d'accord.










Nom : Simon-Pierre Falardeau, CPA, CA, Contrôleur des finances et André Miville, CPA, CA, directeur général de la pratique professionnelle

Organisation : Contrôleur des finances

Courriel : [email protected] et [email protected]


Tout d’abord, nous remercions le CCSP pour les améliorations apportées à ce 2e exposé-sondage sur les opérations entre apparentés. Par ailleurs, nous sommes d’avis que le paragraphe .08 a) du présent exposé- sondage devrait être reformulé comme suit : « les restructurations entre apparentés, incluant les fusions ». En effet, le paragraphe .17 de l’exposé- sondage sur les restructurations mentionne que les restructurations incluent les fusions. Ainsi, nous sommes d’avis que toutes les restructurations entre apparentés devraient être mesurées à la valeur comptable selon la méthode de la continuité des intérêts communs, conformément à la pratique dans le secteur public canadien, comme déjà mentionné par le CCSP. Aussi, certains éléments terminologiques ont été modifiés entre le premier et le second exposé-sondage. Par exemple, il est maintenant spécifié au paragraphe .33 le libellé « enregistrées » au lieu de « comptabilisées ». La concordance n’a pas été faite avec le paragraphe .48. Toutefois, nous sommes d’avis que « comptabilisées » est plus compréhensible pour la version française. Également, bien que cela soit spécifié dans l'analyse des questions, nous nous questionnons sur le fait d’avoir utilisé le libellé « entité rapportante » au lieu d’« entité publiante ». Ce dernier est bien connu et compris par les différents utilisateurs du Manuel de comptabilité de l’ICCA pour le secteur public et c’est également le terme usuel de ce manuel. Enfin, certains pourraient croire qu’il faut utiliser la valeur nette comptable (VNC) lors de transactions entre apparentés. Afin d’assurer une compréhension et une application uniforme par les utilisateurs du libellé « valeur comptable », sa définition devrait clairement mentionner qu’il ne s’agit pas de la VNC car cette dernière ne permet pas de bien refléter la substance des transactions entre apparentés. Par exemple, si la VNC était utilisée lors de l’acquisition d’une immobilisation par une entité sous le même contrôle commun que l’entité cédante, le coût et l’amortissement initiaux ne seraient pas transférés dans les livres de l’entité qui acquiert. En conséquence, des ajustements devront être effectués lors de la consolidation afin que le coût et l’amortissement cumulé inscrits aux états financiers consolidés soient reflétés adéquatement.


Nous sommes d’accord avec le concept, à l’exception des proches parents pour lesquels nous sommes en désaccord. Nous avons mentionné dans notre réponse à l’exposé-sondage de septembre 2012 que « déjà qu’il serait difficile de répertorier l’ensemble des proches parents des principaux dirigeants, l’identification des transactions effectuées par le gouvernement avec ceux-ci le serait encore plus, et entraînerait ainsi une importante lourdeur administrative ». Dans ces circonstances, nous ne pouvons être en accord à l’effet que deux entités soient considérées comme apparentés si des proches parents sont dirigeants de l’autre entité. De plus, nous sommes d’avis qu’il est primordial que l’importance relative de l’incidence des opérations sur les états financiers pour la divulgation des opérations entre apparentés soit prise en considération. À cet effet, le paragraphe .13 de l’exposé-sondage devrait être clarifié et mentionner clairement que seules les opérations importantes devraient être présentées. Puisqu’il y est précisé que c’est selon le jugement professionnel, il pourrait être interprété que toutes les transactions avec les principaux dirigeants devraient être divulguées. Enfin, il est certain que des travaux importants pour recenser l’information auprès des différentes entités du périmètre comptable seront nécessaires afin de bien identifier ces apparentés.



À la suite de plusieurs réflexions, notre conclusion est à l’effet que les transactions entre apparentés qui sont sous contrôle commun doivent être constatées à la valeur comptable lorsque la transaction a été réalisée à la suite d’une décision de l’entité contrôlante, à savoir le gouvernement par exemple. Dans la situation où les transactions réalisées relèvent des entités concernées elles-mêmes, nous sommes d’avis que la meilleure évaluation est la valeur d’échange, et ce, sans prendre en considération les points a) et b) de la question 2. La valeur d’échange permettra une meilleure reddition de comptes aux utilisateurs des états financiers puisqu’elle reflétera la réalité de la transaction survenue sous la gouverne de la direction de ces entités. Si toutefois, le CCSP en venait à la conclusion de conserver la recommandation proposée, le point 2b) n’est pas adéquat. En effet, la « variation importante des avantages économiques futurs et du potentiel de service de l’entité bénéficiaire » ne devrait pas être utilisée car elle n’est pas objective et est sujette à interprétation par les différents utilisateurs. Nous suggérons plutôt d’utiliser le critère de la réalité de la modification des droits de propriété liés à l’élément transféré énoncé dans le paragraphe.29a) du chapitre 3840 OPÉRATIONS ENTRE APPARENTÉS de la partie II de Manuel de l’ICCA - Comptabilité. Les critères pour cette situation sont objectifs et ainsi assureront la comparabilité de la mesure des transactions dans cette situation. Par ailleurs, selon le paragraphe .40 de l’exposé-sondage, un vendeur apparenté doit toujours constater un gain ou une perte lorsque la valeur d’échange n’est pas équivalente à la valeur comptable. Quant à l’acquéreur apparenté, il comptabilisera un gain ou une perte seulement dans la situation où la transaction est évaluée à la valeur comptable. Bien que la symétrie ne soit pas un principe incontournable en comptabilité, un traitement différent pour le vendeur et l’acquéreur apparentés nous apparaît incohérent dans ces circonstances. Cette recommandation est d’ailleurs différente du paragraphe 3840.09 de la partie II lequel précise qu’un écart résultant d’une transaction entre apparentés évaluée à la valeur comptable doit être portée au débit ou au crédit des capitaux propres.


Voir notre réponse à la question 2.


Nous sommes en accord avec les dispositions transitoires. Toutefois, nous sommes d’avis que la dernière phrase du paragraphe 0.52 devrait être reformulée comme suit : « S’il est appliqué prospectivement, le présent chapitre s’applique seulement aux nouvelles opérations survenues après la date de son adoption. »




September 4, 2013




Organization: Alberta Treasury Board and Finance


Name: Darwin Bozek

General comments:

Thank you for the opportunity to comment. We are pleased with the changes made in response to the respondents' comments particularly concerning the proposed amendments to other standards to address inconsistencies, clarification of some of the definitions and facilitating the initial adoption of the standard. We have, however, the following comments: 1. In our view, the concept of "shared control" should be excluded from the scope of the standard. The concept of "shared control" and the related disclosure requirements are already addressed in PS 3060. The characteristic of shared control representing a government's interest in a government partnership is different from investments in other activities in which the government may exercise control. In a shared control arrangement none of the partners is in a position to exercise unilateral control over the government partnership. However, the definition of control in PS 1300 implies that control can be exercised unilaterally and without the involvement and cooperation of other parties. Therefore, the notion of "shared control" is not the same as "control" as defined in PS 1300. Our review of other standard setters' pronouncements indicates that they have not considered entities subject to "shared control" as related parties. 2. In our view, related party relationships where control exists should be disclosed, irrespective of whether there have been transactions between the related parties. The provision of such information provides context and a better understanding of the financial statements of the entity. Other standard setters have similar recommendations.


Yes. We support the additional clarity provided in the re-exposure draft. It should, however, be stressed that classification of persons into the key management personnel group requires the exercise of professional judgement.




Yes, however, with respect to 2(a), it should be clarified that it would be "in the normal course of operations on similar terms and conditions to those adopted if the parties were dealing at arm's length". In other words, when a public sector entity deals only with other public sector entities, transactions in the normal course of operations should be measured at carrying amount. 2(b), it appears that the proposal would create an inconsistency with PS 3150.14 which states that the cost of contributed asset is considered equal to its fair value at the date of contribution and the proposed consequential amendments thereto as suggested by paragraph .32 of the Issue Analysis - Related Party Transactions.


Yes. However, as the exchange amount has been defined as the amount of consideration established and agreed to by the related parties, the proposal under 2(b) may need a consequential amendment to PS 3410.14 in situations that the contributed assets are granted at no consideration by one related party to another.


Yes. The proposal that, on prospective application the restatement of assets and liabilities is not required, would facilitate the implementation of the standard.


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2013-09 Related Party Transactions Re-exposed RESPONSES

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