Finance

Other Information:  CAUBO response to CICA exposure draft on Not-For-Profit accounting standards

Letter to CICA

The CICA recently requested comments on its exposure draft on not-for-profit accounting standards, contained in section 4400 of the CICA handbook. A copy of the exposure draft and the basis for conclusions is available at the following web address: http://www.cica.ca/index.cfm/ci_id/11252/la_id/1.htm

After careful consideration, discussion, and consultation with regional groups and other interested parties, the CAUBO Finance Committee sent the attached comments to the CICA. Overall the changes proposed have little impact on Universities, with the exception of the two items identified below. These did attract a significant amount of discussion and commentary, and as a result, the Finance Committee would like to identify the reasons and logic for reaching its conclusions on these two issues.

Net Assets Invested in Capital Assets (NAICA)

The exposure draft proposes the elimination of paragraphs providing specific guidance on the disclosure of NAICA. As indicated in the basis for conclusions: “The AcSB has been advised by the AdCom that there are several problems with the present standard in practice. The reported amount of the “investment” can differ significantly depending on the method of financing the capital assets. For example, a mortgage is commonly netted against the investment whereas general bank borrowings or internal resources are not.”

The Finance Committee welcomed the flexibility in determining the most appropriate methodology under specific circumstances in determining NAICA due to current inconsistent applications. The grouping of this item with other internally restricted net assets is more appropriate with this additional flexibility. The separate disclosure of this item in the notes to the financial statements would inform the users that these amounts are not readily convertible to be used for operating purposes.

Reporting controlled and related entities

The exposure draft proposes that all entities under the control of the reporting entity be consolidated. Conversely, related entities that do not meet the definition of controlled entities would not be consolidated. While this topic generated significant discussion, the Finance Committee determined that consolidation of controlled entities is appropriate in all cases since the controlling entity ultimately has access to the financial resources of all entities it controls. This was the overriding factor in reaching its conclusions even in cases where the operations of the consolidated entities differed from those of the controlling entity.

The Finance Committee also felt that moving to an accounting standard that is closer to the profit-sector is more appropriate as this model is better understood by its many board members and would result in greater understanding and accountability.

The Finance Committee welcomes further discussion and exchange on this topic, including any opinions as to whether the changes proposed in the exposure draft would require modification to CAUBO reporting guidelines. Please feel free to contact George Dew at gdew@caubo.ca or 613-230-6760 ext 339.