Document Properties
- Type of Publication: Guideline Impact Analysis Statement
- Date: July 2010
- Audiences: Banks / BHC / FBB / T&L / Co-op / Life / P&C / IHC
Revised Guidelines
| C-1 |
Impairment - Sound Credit Risk Assessment and Valuation
Practices for Financial Instruments at Amortized Cost
(previously Impaired Loans) |
| C-5 |
Collective Allowances - Sound Credit Risk Assessment
and Valuation Practices for Financial Instruments at Amortized
Cost (previously General Allowances for Credit Risk) |
| D-1, D-1A, D-1B |
Annual Disclosures |
| D-5 |
Accounting for Structured Settlements |
| D-6 |
Derivatives Disclosure |
| D-9 |
Source of Earnings Disclosure (Life Insurance Companies) |
| D-10 |
Accounting for Financial Instruments Designated
as Fair Value Option |
| E-12 |
Inter-Segment Notes for Life Insurance Companies |
Rescinded Guidelines
| D-2 |
Accounting for READC Project Financing Arrangements |
| D-3 |
Accounting for NHA Mortgage Backed Securities |
| D-4 |
Transfers of Financial Assets with Recourse |
| D-7 |
Accounting for Reinsurance of Short-Term Insurance
Contracts by Property & Casualty Insurance Enterprises |
| D-8 |
Accounting for Transfers of Receivables including
Securitizations |
I. Problem Identification
In January 2006, the Canadian Accounting Standards Board (AcSB)
announced its strategic plan to adopt International Financial Reporting
Standards (IFRSs) rather than continue to develop accounting standards
domestically for publicly accountable enterprises. All Federally
Regulated Entities (FREs) are considered publicly accountable enterprises
and must adopt IFRSs as required in AcSB’s plan for fiscal years
beginning on or after January 1, 2011.
Many of OSFI’s existing guidelines provide additional guidance
to FREs when applying Canadian Generally Accepted Accounting Principles
(CGAAP) or make reference to CGAAP when providing non-accounting
guidance. As these guidelines were not prepared under IFRSs, OSFI
revised them as necessary to reflect the adoption of IFRSs in Canada.
OSFI’s review also determined that a number of its guidelines were
no longer necessary or appropriate. As such, OSFI has rescinded
several guidelines.
II. Objectives
OSFI’s objective is to ensure that its guidelines are necessary
and appropriate given current IFRSs requirements, terminology and
references.
The March 2010 Advisory “Conversion to International Financial
Reporting Standards (IFRSs) by Federally Regulated Entities (FREs)”
communicated OSFI’s accounting and regulatory capital policy decisions
resulting from the move to IFRSs. OSFI performed a detailed review
and analysis of all guidelines in light of these decisions and the
requirements under IFRSs. The detailed review resulted in revisions
to a number of guidelines.
OSFI prioritized the review and analysis of its guidelines according
to their expected impact when moving to IFRSs. Accordingly, OSFI
carried out the work in two phases.
Phase 1 – Core guidelines:
Phase 1 comprised those guidelines associated with the four IFRSs
core policy workstreams identified as having the most impact when
moving to IFRSs, namely:
- loan provisioning: guidelines C-1 and C-5,
- fair value option: guideline D-10,
- securitization: guidelines D-3, D-4, D-8, and
- insurance: guidelines D-5, D-7,
as well as the annual disclosure guidelines D-1, D-1A and D-1B
Phase 2 – Consequential guidelines:
Phase 2 comprised all other OSFI guidelines which may be impacted
by the adoption of IFRSs and which were not identified in Phase
1, namely: D-2, Accounting for READC Project Financing,
D-6, Derivatives Disclosure, D-9, Source of Earnings
(Life insurance companies), and E-12 Intersegment Notes
for Life Insurance Companies. These guidelines required only
minor consequential reference revisions.
III. Options and Assessment
For each guideline, OSFI considered its purpose, whether it is
still necessary and appropriate under IFRSs, and if so, what revisions
were necessary to ensure such guidelines will have the original
intended effect under current IFRSs.
IV. Consultations
In developing the revisions, OSFI consulted with relevant stakeholders
including FREs, audit firms, industry associations and the Canadian
Accounting Standards Board to solicit feedback. Additionally, where
revisions were associated with the Phase 1 Core guidelines, draft
revisions were issued on OSFI’s Web site for broad consultation.
V. Recommendations
Revisions to the guidelines vary as appropriate; some reflect minor
consequential amendments, while others some are more significant.
Additionally, the following guidelines will be rescinded for fiscal
years beginning on or after January 1, 2011 because they are no
longer necessary after the adoption of IFRSs, but will remain effective
for FREs with fiscal years beginning before January 1, 2011:
| D-2 |
Accounting for READC Project Financing Arrangements |
| D-3 |
Accounting for NHA Mortgage Backed Securities |
| D-4 |
Transfers of Financial Assets with Recourse |
| D-7 |
Accounting for Reinsurance of Short-Term Insurance Contracts
by Property & Casualty Insurance Enterprises |
| D-8 |
Accounting for Transfers of Receivables including Securitizations |
VI. Implementation & Evaluation
OSFI reviewed comments received on the Phase 1 draft guidelines
and proposals for rescinding and revised the guidelines as appropriate.
The 10 guidelines that have been revised will be effective with
the date coinciding with the FREs’ adoption of IFRSs for their fiscal
year commencing on or after January 1, 2011. Guidelines that have
been rescinded will remain effective for FRE fiscal years beginning
before January 1, 2011.