Please note that this update applies to entities who currently issue Audited or Reviewed Financial Statements in accordance with Accounting Standards for Private Entreprises (ASPE).
Amendments to Section 3856 – Financial Instruments were announced in early 2019. However, due to COVID-19, they actually just came into effect for year-ends starting on or after January 1, 2021.
The changes relate specifically to retractable or mandatorily redeemable shares issued in a tax planning arrangement. New criteria have been set forth to determine if these shares are to be presented as equity versus a liability item.
This will significantly impact the understanding of the financial statements by the reader as well as any covenants or ratios that are currently in place. It is important to analyze your entity’s current share structure to assess how your financial statements will be impacted by the amendments.
Any current tax planning should also proactively take these amendments into consideration, to avoid any surprises.
We’re Here to Help
Not sure how these changes will impact your financial statements? Please feel free to contact a member of our team.