(December 7 – 09: 20 ET) – The Canadian Institute of Chartered Accountants has issued several abstracts including one on accounting for demutualizations.
The CICA has been considering how a recipient of shares from a demutualization should book those shares. It has decided that the shares should be recorded at fair value with a gain recognized in income from continuing operations.
Apart from demutualizations, the CICA is also addressing several other accounting issues. It has been contemplating whether the investor protection guarantee on guaranteed funds should be recorded by the issuing institution as a contingency or as a derivative. It concluded that a GIF guarantee is similar to a written put option and that the guarantee should be recognized as a liability, measured at fair value. Fair value should be estimated in consideration of factors such as the long-term nature of the guarantee, investor behaviour and the risks associated with underlying estimates and models.
The CICA has also issued opinions on: debtor’s accounting for changes in line-of-credit or revolving-debt arrangements, related party transactions, tax presentation and supplementary earnings per share figures, and accounting for capital assets of a condominium.
-IE Staff
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