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Canada News
Emerging Issues Committee - "Future Income Tax Liabilities"
On July 9, 2007, the Emerging Issues Committee (EIC) of the Accounting Standards Board (AcSB) issued a request for comment on their draft abstract of issues discussed relating to " Future Income Tax Liabilities – Income Trusts and other Specified Investment Flow-Throughs. The issues discussed are:
- When should a future income tax asset or liability be recognized as a result of the changes to the Income Tax Act?
- Is the recognition of a future income tax asset or liability a charge to income or charge to equity.
- How should the future income tax asset or liability be measured?
- What disclosures should be made?
A copy of the abstract can be found on:
http://www.acsbcanada.org/client_asset/document/3/8/5/6/8/document_
AB92C267-9401-B00A-550F08374D44E763.pdf
Comments are requested by August 10 and are to be made to:
Kamalesh Gosalia, CPA, CGA
Secretary, Emerging Issues Committee
The Canadian Institute of Chartered Accountants
277 Wellington Street West,
Toronto, ON. M5V 3H2
Kamalesh.gosalia@cica.ca
Emerging Issues Committee – "Accounting by Pension Plans for Transactions Costs"
On July 23rd, the Emerging Issues Committee (EIC) of the Accounting Standards Board (AcSB) issues a Draft Abstract of Issue Discussed" Accounting by Pension Plans for Transactions Costs. Interested parties are invited to provide comment by August 20.
PENSION PLANS, paragraph 4100.10, requires that pension plans measure investment assets at fair value at the date of the statement of net assets available for benefits. Fair value is defined by paragraph 4100.05 (j) as follows: "Fair value is the amount of the consideration that would be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act."
The issue is whether transaction costs should be included in the fair value measurement with investments.
A copy of the abstract can be found on:
http://www.acsbcanada.org/client_asset/document/3/8/8/2/8/document_
E3FB0E68-00FD-B05E-D7E8BB64720C3931.pdf
Comments are to be made to:
Kamalesh Gosalia, CPA, CGA
Secretary, Emerging Issues Committee
The Canadian Institute of Chartered Accountants
277 Wellington Street West,
Toronto, ON. M5V 3H2
kamalesh.gosalia@cica.ca
Accounting Standards Board – "Intangible Assets"
The Accounting Standards Board (AcSB issued a Re- Exposure Draft – "Intangible Assets'' proposing to:
- amend FINANCIAL STATEMENT CONCEPTS, Section 1000, to clarify the criteria for the recognition of assets.
- Issue a new Handbook Section, GOODWILL AND INTANGIBLE ASSETS section 3064, to replace GOODWILL AND OTHER INTANGIBLE ASSETS, Section 3062. Section 3064 incorporates guidance to clarify the recognition of intangible assets and address the recognition and measurement of internally developed intangible assets.
- Withdraw RESEARCH AND DEVELOPMENT COSTS, section 3450.
As a result of these changes, the AcSB also proposed to amend ACCOUNTING GUIDELINE AcG-11, Enterprises in the Development Stage. Interested parties are invited to submit comments by September 30 and should them to:
Peter Martin, CA
Director, Accounting Standards Board
277 Wellington Street West,
Toronto, Ontario. M5V 3H2
A copy of the complete re-exposure draft can be found on:
http://www.acsbcanada.org/client_asset/document/3/8/4/4/2/document_
ABD9EFF6-DE58-CCCA-3BBC911F783DF4F5.pdf
Public Sector Accounting Board – "Amendment to Introduction"
The Public Sector Accounting Board (PSAB) has issued an Exposure Draft "Amendment to Introduction" . Subject to comments received, the Board will revise the Introduction to Public Sector Accounting Standards. These revisions will apply to government business enterprises and government business-type organizations. The proposals state that when preparing financial statements for their own purposes, government business enterprises and government business-type organizations should follow the CICA Handbook - Accounting for publicly accountable enterprises.
PSAB welcomes comments on the following:
- Do you agree with the proposed amendments? If not, please explain why.
- Should government business enterprises and government business-type organizations adhere to the same transitional provisions as determined by the AcSB for private sector publicly accountable enterprises? If not, please explain why.
A copy of the abstract can be found on:
http://www.psab-ccsp.ca/client_asset/document/3/8/5/7/2/document_
B60B9173-BDDF-5113-13836339867DBF80.pdf
Comments are requested by September 28 and are to be made to:
Tim Beauchamp, Director
Public Sector Accounting,
277 Wellington Street West,
Toronto, ON. M5V 3H2
Ed.psector@cica.ca
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Mark your calendar for our next National Breakfast Seminar series in September, Getting Ready for IFRS – Top Ten Actions to Take Now. Is your organization a Canadian publicly traded company or a publicly accountable enterprise that will report under IFRS? If it is, you'll be interested in knowing what you should be doing now to set yourself up for a timely, well-organized and effective transition process.
Converting to IFRS is far more than just an accounting change – it has implications not only for financial reporting, but also for management reporting, budgeting and forecasting throughout the organization. The finance function will certainly be at the centre of the action, but you will also want to access resources from other parts of the business in developing and then implementing your transition plan.
In this series, we'll help you to examine some of the IFRS standards themselves, so you'll learn how to identify the ones most likely to create challenges for your organization. We'll also focus on the process of change. Many of the "top ten actions" that we'll discuss actually come from the lessons learned by international companies that made the change in 2005, and by AIM listed companies who are currently making this conversion. In certain locations, Canadian CFOs who are moving along in their transition will also share their experiences with us.
Please note that these breakfast seminars will run until 10:00 am as opposed to our usual 9:30 finish. Registrations for the Seminar will be updated soon. For further information please contact Marita Dias at mdias@feicanada.org.
- Calgary – September 14
- Montreal – September 19
- Edmonton – September 21
- Toronto – September 26
- Winnipeg – September 26
- Halifax – September 27
- Vancouver – September 27
From the News Desk of |
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Ontario Retail Sales Tax and Disability Plan Premiums
The Ontario Retail Sales Tax Act has taxed insurance premiums since 1993, and included in the tax base are premiums paid into a funded benefit plan, or payments out of an unfunded benefit plan. A funded plan is one where it is anticipated that premiums paid into the plan will be sufficient to fund at least 30 days of benefit payments. The timing of the taxation of the premium or payment therefore varies depending on the level of funding.
The Act has, since the start of the tax on insurance premiums, exempted benefit payments paid with respect to unfunded employee benefit plans, where the payments made from such a plan would, without such an exemption, be subject to both employer health tax at rates up to 1.95% and retail sales tax at 8%.
This double taxation could arise where the payment out of the benefit plan is subject to income tax in the employee's hands, and therefore is usually restricted to the situation where the employee is receiving benefit payments from a disability plan which are borne in whole or in part by the employer. In this case, the employer-borne portion of the payment would be taxable to the employee for income tax purposes, and, provided the payments are not made under an insurance contract with an insurer or out of a plan funded through an independent third-party trust, would also form part of the Ontario remuneration paid by the employer for employer health tax purposes.
For years, however, Ontario has stockpiled any claims for refund of retail sales tax, because it had concerns over the funding levels of benefit plans that could oscillate between being funded or unfunded. In December 2006, the province moved to eliminate the uncertainty by enacting amendments to the retail sales tax provisions that, effective from December 20, 2006, treat both unfunded and funded benefit plans the same for these purposes. In June 2007, the Ministry of Revenue published an Information Notice intended to clarify how the system now works. Plan holders are required to designate new plans as either funded or unfunded for these purposes (the designation is required to be filed with the administrator of the plan) at the time the plan is set up. Existing plans require designations to be filed with the Minister and maintained by the administrator of the plan. Those plan holders of unfunded plans that have filed claims may expect to be contacted by a Ministry official within the next few weeks for the applicable designation.
The more perceptive of taxpayers will note that the mere fact of a designation does not prevent a plan from moving between funded and unfunded status from time to time. However, the word from the Ministry is that, provided there is no substantial deviation from the designated funding pattern, administrators will be entitled to rely on such a designation for purposes of administering the tax, and the Ministry will not challenge the status of plans that experience immaterial or insignificant deviations. The Ministry anticipates being able to commence processing the old refund claims within the next few months.
From the News Desk of |
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STAYING PUT - Executive Survey Finds Most CFOs Have Not Identified a Successor
Few financial executives know who will fill their shoes one day, but most have no plans for leaving, a new survey shows. The majority (72 per cent) of chief financial officers (CFOs) polled said they have not identified a successor for their positions. Sixty-three per cent of respondents cited no plans to leave their present companies in the near future as the primary reason.
The survey was developed by Robert Half Management Resources. It was conducted by an independent research firm and includes responses from 270 CFOs from a stratified random sample of Canadian companies with 20 or more employees.
CFOs were asked, "Have you identified a successor for your position?" Their responses:
| Yes.......................................................... | 22% |
| No.......................................................... | 72% |
| Don't know/no answer.................................. | 6% |
| 100% |
CFOs who have not identified their successor were also asked, "Which one of the following most accurately describes your reason for not identifying your successor?" Their responses:
| Not planning on leaving in the near future....... | 63% |
| Not a priority as you would no longer be with the company............................................... | 24% |
| No qualified candidates currently working at your organization.................................... | 7% |
| Too busy focusing on other concerns................ | 4% |
| Other...................................................... | 1% |
| Don't know/no answer................................. | 1% |
| 100% |
International News
From the News Desk of |
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Act Before 2008 to Avoid Adverse Impact of New U.S. Deferred Compensation Rules
The U.S. government has implemented deferred compensation tax provisions that affect Canadian companies' employees and executives working in the U.S. An individual working in the U.S. who participates in a deferred compensation plan and who does not meet specific guidelines set out in these new provisions may be subject to a 20% tax on top of regular income taxes plus an interest charge on the non-qualified deferred compensation. Although the rules are generally effective for deferred compensation vesting after 2004, limited transitional relief is available if plans are amended before January 1, 2008. While these new provisions are meant to curb abusive tax-deferred arrangements, they may adversely affect several non-abusive Canadian compensation plans.
Background
As of January 1, 2005, the U.S. Internal Revenue Code provides new requirements for non-qualified deferred compensation arrangements and imposes penalties on arrangements that do not comply with them. Generally, an additional 20% withholding tax will be imposed on the person receiving the option if certain requirements are not met.
The following are the major restrictions imposed by the new regime:
- The payments are paid on the occurrence of an event specified when the deferred compensation is created
- Deferred compensation payments may not be accelerated
- Elections to defer the compensation must be made irrevocably in the year before the relevant services are performed.
Non-abusive arrangements may be affected
The new deferred compensation provisions can affect deferred compensation plans that are not abusive. Canadian compensation plans that may be affected by these rules include:
- Deferred bonus plans
- Deferred share unit plans
- Supplemental employee retirement plans
- Back-dated and under-priced employee stock options or share appreciation rights (especially Canadian-controlled private corporation options)
- Severance plans.
Under transitional relief, a plan adopted before January 1, 2008 will not be treated as violating the new U.S. provisions if it meets the following two criteria:
- The plan is operated through December 31, 2007 in reasonable "good faith compliance" with section 409A of the Internal Revenue Code and other issued guidance
- The plan is amended before January 1, 2008 to conform to the U.S. provisions.
For more information on this matter, please contact your KPMG adviser or Jim Yager at (416) 777-8214.