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) (ii) Accounting Handbook Sections 1300-4460, including Appendices and Board Notices; 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) (vi) Illustrative material 1 of those pronouncements described in (i)-(iv); and Implementation Guides authorized by the Board.

Sources of GAAP SOURCES OF GAAP

.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. [OCT. 2003] .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, or additional guidance is needed to apply a primary source to specific circumstances, an entity should adopt accounting policies and disclosures that are: (a) consistent with the primary sources of GAAP; and

(b) developed through the exercise of professional judgment and the application of the concepts described in FINANCIAL STATEMENT CONCEPTS, Section 1000. [OCT. 2003] .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. Management is required to be knowledgeable about the primary sources of GAAP. As well, management is required to be aware of changes to the primary sources, because what constitutes GAAP at a particular time changes and adapts to reflect economic or social conditions. .06 No rule of general application can be phrased to suit all circumstances or combinations of circumstances that may arise. As a result, matters may arise that are not specifically addressed in the primary sources of GAAP. 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. .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 1100.04. 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. A source that deals with the specific circumstances is likely to be more relevant than one from which the entity must analogize. (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. (c) The continued relevance of the source. The passage of time may diminish the relevance of certain sources. (d) The development process for the source. A source developed after extensive consultation and debate is likely to be more relevant than a source developed without such discipline. .08 The selection of appropriate accounting policies and disclosures requires the exercise of professional judgment. In exercising professional judgment, an entity takes into account the primary sources of GAAP as well as the concepts described in FINANCIAL STATEMENT CONCEPTS, Section 1000.

.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. .10 An entity considers all sources of GAAP that it consults in the context of FINANCIAL STATEMENT CONCEPTS, Section 1000. Section 1000 describes the concepts underlying the development and use of accounting principles in general purpose financial statements (financial statements). An entity adopts accounting policies that are consistent with the concepts described in Section 1000. 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, the elements of financial statements, and the recognition and measurement criteria in Section 1000. .11 When the concepts in FINANCIAL STATEMENT CONCEPTS, Section 1000, conflict with a primary source of GAAP, the requirements of the primary source of GAAP prevail. The Board is guided by the concepts in Section 1000 in the development of future pronouncements and in its review of existing pronouncements. Therefore, the number of cases of conflict between the concepts in Section 1000 and primary sources of GAAP will diminish over time. .12 An entity may be required to prepare financial statements in accordance with regulatory, legislative or contractual requirements. When these requirements are within the range of acceptable choices allowed by this Section, the basis of accounting can be described as being in accordance with GAAP. The Board seeks to minimize instances when GAAP and regulatory or legislative requirements conflict. However, in those circumstances in which conflict does exist, users of financial statements need to know that the statements are not prepared in accordance with GAAP. Therefore, if the basis of accounting used to prepare such financial statements conflicts with the requirements of this Section, that basis cannot be described as being in accordance with GAAP.
Primary sources of GAAP

Primary sources of GAAP .13 Recommendations and non-italicized paragraphs in Accounting Handbook Sections have equal authority. Recommendations, in italic type, generally indicate the main principles, while non-italicized paragraphs generally explain the Recommendations or their application to a particular situation. In addition, non-italicized paragraphs may include guidance for practices that are encouraged or desirable, but not required. To be in accordance with GAAP, an entity complies with the non-italicized paragraphs as well as the italicized paragraphs. When there appear to be different ways of interpreting the non-italicized paragraphs, an entity selects the treatment that is most consistent with the Recommendations. .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. .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.

.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. The EIC makes information about its deliberations available by publishing Abstracts of Issues Discussed. 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. .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. These documents do not include explanations of requirements or application guidance that properly belong in the related pronouncement. .18 Appendices are an integral part of primary sources of GAAP and include an introductory statement to that effect. These Appendices have been approved by the Board and carry the same level of authority as the document they support. .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. This material is also approved by the Board, and includes illustrative examples, decision trees and other material, with an introductory statement specifying that it is illustrative only. .20 Some EIC Abstracts include material that illustrates the application of a consensus to assist in clarifying its meaning. These illustrations of the application of a consensus have the same level of authority as illustrative material, described in paragraph 1100.19. .21 In some circumstances, the Board authorizes the development of implementation guidance that clarifies certain aspects of a new or particularly complex pronouncement. Such guidance is identified as having been authorized by the Board. For example, the "Employee Future Benefits Implementation Guide" and its "Supplement" provide guidance on how to apply EMPLOYEE FUTURE BENEFITS, Section 3461. .22 The primary sources of GAAP may address matters relating to financial information that is not part of the financial statements. This Section deals only with those pronouncements that relate to accounting and reporting in financial statements.
Other sources

Other sources .23 Paragraphs 1100.24-.31 identify some of the other sources that an entity might consult to assist in selecting accounting policies and disclosures that comply with paragraph 1100.04. .24 Pronouncements issued by bodies authorized to issue accounting standards in other jurisdictions may be useful sources to consult. In particular, accounting pronouncements published with the authority of the US Financial Accounting Standards Board (FASB), or the International Accounting Standards Board (IASB), 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.

.25 It is not necessary to comply with guidance in US or other international literature in order to comply with Canadian GAAP. However, when a primary source of GAAP has been harmonized with, for example, a US or international pronouncement, more detailed and fact-specific guidance in the corresponding US or international pronouncement generally satisfies the requirements of paragraph 1100.04. .26 When an entity chooses to consult a source described in paragraphs 1100.24-.25, it evaluates the source in the context of the relative manner in which the standard setter requires its pronouncements to be applied, as well as in the context of the related pronouncement. When an accounting standard setter does not have a conceptual framework that is similar to the concepts in FINANCIAL STATEMENT CONCEPTS, Section 1000, an entity needs to take particular care to ensure that the selected source is consistent with Section 1000. .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, as it does an Implementation Guide described in paragraph 1100.21. Those guides that specifically indicate that they take the Canadian environment into account would be consulted in preference to those that do not. .28 In exercising professional judgment, 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, invitations to comment and statements of principles, 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. 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. In some cases, approved drafts may demonstrate how FINANCIAL STATEMENT CONCEPTS, Section 1000, 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. However, an entity would not apply a proposal in an approved draft that conflicts with Section 1000 or a primary source of GAAP. Since the proposals in draft material are subject to revision, entities need to consider the consequences of any changes that may be made to the proposals as they are finalized. A document at a more advanced stage of the consultation process supersedes earlier versions. For example, an entity refers to an exposure draft on a particular topic in preference to a statement of principles on that same topic. .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 1100.04. Since conclusions of the Board may differ from those of a study group, similar caution is exercised in using research reports and studies as in using the sources described in paragraphs 1100.27-.28. .30 Accounting textbooks, journals, studies and articles indicating that they take the Canadian environment into account are consulted in preference to those that do not. .31 Sometimes a practice has been established that does not result from written material. The relevance of such a practice would be demonstrated by its compliance with paragraph 1100.04 and not by its use generally or within a particular industry. Extreme interpretations of a source do not constitute evidence that the criteria in paragraph 1100.04 have been met if it is likely that most parties, exercising professional

judgment, would reject them as not resulting in a fair presentation in accordance with GAAP of the financial position, results of operations or cash flows of the entity.
Consistency of accounting policies

Consistency of accounting policies .31A An entity selects and applies its accounting policies for a period consistently for similar transactions, other events and circumstances, unless the source of GAAP consulted by the entity specifically requires or permits categorization of items for which different policies may be appropriate. If the source of GAAP consulted by the entity requires or permits categorization of items, the entity selects an appropriate accounting policy and applies it consistently to each category. Transitional Provisions TRANSITIONAL PROVISIONS .32 This Section applies to fiscal years beginning on or after October 1, 2003, except as specified in paragraphs 1100.32A and 1100.32B. Earlier adoption is encouraged. .32A Paragraph 1100.31A applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2007. .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, 2009. 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. (b) The regulated rates are designed to recover the cost of providing the services or products.

(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. .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. No cumulative catch-up adjustment is made to such balances. The following explains how this applies in certain circumstances. (a) An entity removes from its balance sheet, in the period in which this Section is adopted, assets or liabilities that no longer qualify for recognition in accordance with its new accounting policy. The entity makes a corresponding adjustment to net income. For example, an entity may have previously recognized revenue and a receivable, and may conclude on applying this Section that the receivable should not be

recognized. 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. (b) An entity does not recognize assets or liabilities at the date of adoption that, in accordance with its previous accounting policy, were not recognized but would have required recognition had this Section been in place. For example, an entity may have recognized an expense arising from transactions or events before the date of adoption, but may conclude on applying this Section that an asset would be recognized arising from similar transactions or events. The entity does not recognize an asset at the date of adoption resulting from transactions or events before that date. However, the entity does recognize assets arising from similar transactions or events after the transition date. (c) When an entity concludes that it is required to change the method of depreciating property, plant or equipment as a result of applying this Section, it does not adjust the balance of accumulated depreciation at the transition date, but depreciates the balance at the transition date using the new depreciation method. No cumulative catch-up adjustment is made. (paragraphs 1100.34-.36 deleted)

1300 - Differential Reporting