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GENERAL ACCOUNTING

SECTION 1100
generally accepted accounting principles

PURPOSE AND SCOPE

.01 This Section establishes standards for financial reporting in accordance with generally accepted
accounting principles. It describes what constitutes Canadian generally accepted accounting principles and
its sources. This Section also provides guidance on sources to consult when selecting accounting policies
and determining appropriate disclosures, when a matter is not dealt with explicitly in the primary sources of
generally accepted accounting principles.

Definitions

DEFINITIONS

.02 The following definitions have been adopted for the purposes of this Section:

(a) Accounting policies encompass the specific principles and the methods used in their application that
are selected by an entity in preparing financial statements.

(b) Generally accepted accounting principles (GAAP) encompass broad principles and conventions of
general application as well as rules and procedures that determine accepted accounting practices at a
particular time.

(c) Primary sources of generally accepted accounting principles (primary sources of GAAP) are, in
descending order of authority:

(i) Accounting Handbook Sections 1300-4460, including Appendices and Board Notices;

(ii) Accounting Guidelines, including Appendices and Board Notices;

(iii) Abstracts of Issues Discussed by the Emerging Issues Committee (EIC Abstracts), including
Appendices;

(iv) Background Information and Basis for Conclusions documents accompanying pronouncements
described in (i)-(ii), including Appendices;

(v) Illustrative material 1 of those pronouncements described in (i)-(iv); and

(vi) Implementation Guides authorized by the Board.

Sources of GAAP

SOURCES OF GAAP

07 An entity consults sources other than primary sources of GAAP to assist in selecting accounting policies and disclosures only when these sources comply with paragraph 1100. Management is required to be knowledgeable about the primary sources of GAAP. (c) The continued relevance of the source..03 ¨ An entity should apply every primary source of GAAP that deals with the accounting and reporting in financial statements of transactions or events encountered by the entity. . an entity should adopt accounting policies and disclosures that are: (a) consistent with the primary sources of GAAP. Section 1000. an entity takes into account the primary sources of GAAP as well as the concepts described in FINANCIAL STATEMENT CONCEPTS. (d) The development process for the source.05 The primary sources of GAAP provide the financial statement accounting and reporting requirements as well as explanations and guidance for most transactions and events encountered by an entity. . In exercising professional judgment. Section 1000. It is necessary to refer to other sources when the primary sources do not deal with the accounting and reporting in financial statements of transactions or events encountered by the entity or when additional guidance is needed to apply a primary source to specific circumstances. . A source that deals with the specific circumstances is likely to be more relevant than one from which the entity must analogize. 2003] .06 No rule of general application can be phrased to suit all circumstances or combinations of circumstances that may arise. An entity evaluates sources in selecting the appropriate accounting policies and disclosures based on all of the following criteria: (a) The specificity of the source. and (b) developed through the exercise of professional judgment and the application of the concepts described in FINANCIAL STATEMENT CONCEPTS.04 ¨ When the primary sources of GAAP do not deal with the accounting and reporting in financial statements of transactions or events encountered by the entity.04. (b) The authority of the issuer or author. A source issued by an accounting standard setter in its own jurisdiction is likely to be more relevant than a source issued by others in the same jurisdiction. matters may arise that are not specifically addressed in the primary sources of GAAP. 2003] . because what constitutes GAAP at a particular time changes and adapts to reflect economic or social conditions. The passage of time may diminish the relevance of certain sources. [OCT. As well. management is required to be aware of changes to the primary sources.08 The selection of appropriate accounting policies and disclosures requires the exercise of professional judgment. or additional guidance is needed to apply a primary source to specific circumstances. . As a result. [OCT. A source developed after extensive consultation and debate is likely to be more relevant than a source developed without such discipline.

.13 Recommendations and non-italicized paragraphs in Accounting Handbook Sections have equal authority. non-italicized paragraphs may include guidance for practices that are encouraged or desirable. an entity selects the treatment that is most consistent with the Recommendations. An entity adopts accounting policies that are consistent with the concepts described in Section 1000. . an entity complies with the non-italicized paragraphs as well as the italicized paragraphs..15 Accounting Guidelines set out the Board's views on how existing Accounting Handbook Sections should be applied in specific cases or its conclusions on other particular issues of concern with respect to financial reporting. Primary sources of GAAP Primary sources of GAAP . The Board is guided by the concepts in Section 1000 in the development of future pronouncements and in its review of existing pronouncements. The Board seeks to minimize instances when GAAP and regulatory or legislative requirements conflict. the basis of accounting can be described as being in accordance with GAAP. Section 1000. users of financial statements need to know that the statements are not prepared in accordance with GAAP.10 An entity considers all sources of GAAP that it consults in the context of FINANCIAL STATEMENT CONCEPTS. generally indicate the main principles.11 When the concepts in FINANCIAL STATEMENT CONCEPTS. When there appear to be different ways of interpreting the non-italicized paragraphs. Recommendations. However. conflict with a primary source of GAAP. the requirements of the primary source of GAAP prevail. The Board considers a source to be consistent with the concepts in Section 1000 when the guidance in that source is compatible with the qualitative characteristics of financial information. in those circumstances in which conflict does exist. Therefore. legislative or contractual requirements. . To be in accordance with GAAP. When these requirements are within the range of acceptable choices allowed by this Section. and the recognition and measurement criteria in Section 1000.14 Board Notices clarify certain aspects of an Accounting Handbook Section or Accounting Guideline when it becomes apparent that the text does not adequately convey the Board's intent. In addition. the number of cases of conflict between the concepts in Section 1000 and primary sources of GAAP will diminish over time. that basis cannot be described as being in accordance with GAAP. .12 An entity may be required to prepare financial statements in accordance with regulatory. but not required. Section 1000. in italic type. Section 1000 describes the concepts underlying the development and use of accounting principles in general purpose financial statements (financial statements). . while non-italicized paragraphs generally explain the Recommendations or their application to a particular situation. .09 An entity would not analogize to a primary source of GAAP if the source used states that it applies only to the particular circumstances described therein. Therefore. if the basis of accounting used to prepare such financial statements conflicts with the requirements of this Section. the elements of financial statements.

.19. described in paragraph 1100. This material is also approved by the Board.18 Appendices are an integral part of primary sources of GAAP and include an introductory statement to that effect. are often important sources to consult on matters not covered by primary sources of GAAP or to assist in applying a primary source of GAAP to specific circumstances. These illustrations of the application of a consensus have the same level of authority as illustrative material. . These documents do not include explanations of requirements or application guidance that properly belong in the related pronouncement..16 The Emerging Issues Committee (EIC) provides a forum for timely review of emerging accounting issues that are likely to receive divergent or unsatisfactory treatment in practice in the absence of some guidance. . Other sources Other sources . .23 Paragraphs 1100. The EIC makes information about its deliberations available by publishing Abstracts of Issues Discussed. and includes illustrative examples.22 The primary sources of GAAP may address matters relating to financial information that is not part of the financial statements. Such guidance is identified as having been authorized by the Board.19 Illustrative material indicates how the accounting treatment specified in a document might be applied in particular situations or summarizes aspects of the underlying document. decision trees and other material. In particular.04. or the International Accounting Standards Board (IASB). .17 Background Information and Basis for Conclusions documents issued by the Board set out the rationale for certain Accounting Handbook Sections and Accounting Guidelines. . These documents are intended to help readers understand how the Board reached its conclusions. accounting pronouncements published with the authority of the US Financial Accounting Standards Board (FASB). These Appendices have been approved by the Board and carry the same level of authority as the document they support.24 Pronouncements issued by bodies authorized to issue accounting standards in other jurisdictions may be useful sources to consult. This Section deals only with those pronouncements that relate to accounting and reporting in financial statements.24-. the "Employee Future Benefits Implementation Guide" and its "Supplement" provide guidance on how to apply EMPLOYEE FUTURE BENEFITS. For example. . Section 3461. .21 In some circumstances.31 identify some of the other sources that an entity might consult to assist in selecting accounting policies and disclosures that comply with paragraph 1100. with an introductory statement specifying that it is illustrative only. the Board authorizes the development of implementation guidance that clarifies certain aspects of a new or particularly complex pronouncement.20 Some EIC Abstracts include material that illustrates the application of a consensus to assist in clarifying its meaning. These EIC Abstracts record the consensus views of the Committee as to the appropriate accounting practice to be followed in the particular circumstances summarized therein.

Extreme interpretations of a source do not constitute evidence that the criteria in paragraph 1100. approved drafts may demonstrate how FINANCIAL STATEMENT CONCEPTS.28. .28 In exercising professional judgment.26 When an entity chooses to consult a source described in paragraphs 1100. Those guides that specifically indicate that they take the Canadian environment into account would be consulted in preference to those that do not.25. . Section 1000. Since conclusions of the Board may differ from those of a study group. However. A document at a more advanced stage of the consultation process supersedes earlier versions. it evaluates the source in the context of the relative manner in which the standard setter requires its pronouncements to be applied. more detailed and fact-specific guidance in the corresponding US or international pronouncement generally satisfies the requirements of paragraph 1100.30 Accounting textbooks.04. as it does an Implementation Guide described in paragraph 1100. similar caution is exercised in using research reports and studies as in using the sources described in paragraphs 1100. . for example. When an accounting standard setter does not have a conceptual framework that is similar to the concepts in FINANCIAL STATEMENT CONCEPTS. The relevance of such a practice would be demonstrated by its compliance with paragraph 1100.21.04 have been met if it is likely that most parties.24-. journals.04. entities need to consider the consequences of any changes that may be made to the proposals as they are finalized. In some cases. For example. Section 1000. The requirements of any existing accounting pronouncement that would be affected by the proposals in draft material remain in force until the effective date of any superseding material. when a primary source of GAAP has been harmonized with. as well as draft Abstracts issued for comment by the EIC. An entity is not required to apply a proposal in an approved draft until the resulting primary source of GAAP becomes effective. a US or international pronouncement.27-.04 and not by its use generally or within a particular industry. However.29 A study group's conclusions in a research report or research study may also be consulted to the extent that they comply with paragraph 1100.31 Sometimes a practice has been established that does not result from written material. . invitations to comment and statements of principles. an entity refers to an exposure draft on a particular topic in preference to a statement of principles on that same topic. an entity might wish to consult approved drafts of primary sources of GAAP when no primary source of GAAP applies to a particular situation. Approved drafts include exposure drafts and other documents for comment approved by the Board. such as discussion papers.. exercising professional .25 It is not necessary to comply with guidance in US or other international literature in order to comply with Canadian GAAP. . as well as in the context of the related pronouncement. Since the proposals in draft material are subject to revision.27 Organizations other than the Board might issue guidance indicating how primary sources of GAAP may be applied in particular circumstances. . The Board does not authorize such guides. an entity needs to take particular care to ensure that the selected source is consistent with Section 1000. an entity would not apply a proposal in an approved draft that conflicts with Section 1000 or a primary source of GAAP. and other principles embedded in Accounting Handbook Sections and Accounting Guidelines can be applied in circumstances for which no primary sources of GAAP currently apply. studies and articles indicating that they take the Canadian environment into account are consulted in preference to those that do not.

32B. in the period in which this Section is adopted. (a) An entity removes from its balance sheet. 2003.32A Paragraph 1100. an entity may have previously recognized revenue and a receivable. Earlier adoption is encouraged. 2009. the entity selects an appropriate accounting policy and applies it consistently to each category. (c) It is reasonable to assume that rates set at levels that will recover the cost can be charged to and collected from customers in view of the demand for the services or products and the level of direct and indirect competition.judgment. The entity makes a corresponding adjustment to net income. .32B This Section applies to the recognition and measurement of assets and liabilities arising from rate regulation in interim and annual financial statements relating to fiscal years beginning on or after January 1. and may conclude on applying this Section that the receivable should not be .31A An entity selects and applies its accounting policies for a period consistently for similar transactions. 2007. Rate regulation exists when all of the following criteria are present: (a) The rates for regulated services or products provided to customers are established by or are subject to approval by a regulator or a governing body empowered by statute or contract to establish rates to be charged for services or products. unless the source of GAAP consulted by the entity specifically requires or permits categorization of items for which different policies may be appropriate. would reject them as not resulting in a fair presentation in accordance with GAAP of the financial position.32 This Section applies to fiscal years beginning on or after October 1. results of operations or cash flows of the entity.32A and 1100. . Consistency of accounting policies Consistency of accounting policies . Transitional Provisions TRANSITIONAL PROVISIONS . except as specified in paragraphs 1100. The following explains how this applies in certain circumstances. . For example.33 The effect of any change in accounting policy made on adopting this Section is applied only to events and transactions occurring after the date of the change and to any outstanding related balances existing at the date of the change. If the source of GAAP consulted by the entity requires or permits categorization of items. assets or liabilities that no longer qualify for recognition in accordance with its new accounting policy. No cumulative catch-up adjustment is made to such balances. other events and circumstances. (b) The regulated rates are designed to recover the cost of providing the services or products.31A applies to interim and annual financial statements relating to fiscal years beginning on or after January 1.

but may conclude on applying this Section that an asset would be recognized arising from similar transactions or events. an entity may have recognized an expense arising from transactions or events before the date of adoption. the entity does recognize assets arising from similar transactions or events after the transition date. in accordance with its previous accounting policy.34-.recognized. The entity does not recognize an asset at the date of adoption resulting from transactions or events before that date. For example. it does not adjust the balance of accumulated depreciation at the transition date. The receivable is removed from the balance sheet in the fiscal period in which this Section is first applied. A corresponding adjustment is made to net income of that period. plant or equipment as a result of applying this Section. (b) An entity does not recognize assets or liabilities at the date of adoption that. (c) When an entity concludes that it is required to change the method of depreciating property.36 deleted) 1300 .Differential Reporting . No cumulative catch-up adjustment is made. However. were not recognized but would have required recognition had this Section been in place. (paragraphs 1100. but depreciates the balance at the transition date using the new depreciation method.