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May 31st, 2013

Mr. Peter Martin, CPA, CA Director, Accounting Standards Accounting Standards Board 277 Wellington Street West Toronto, Ontario M5V 31-12

Dear Mr. Martin:

Re: Exposure Draft — 2013 Improvements to Accounting Standards for Private Enterprises

We thank you for the opportunity to provide comments on the above noted exposure draft regarding the

proposed 2013 improvements to accounting standards for private enterprises.

Please find attached our comments to the specific questions raised in the exposure draft.

Yours truly,

Thomas Kay, CA National Professional Practice Director Deloitte LLP

Member of Deloitte Touche Tohmatsu

011

Deloitte

1) Do you agree with the proposed amendment to Business Combinations, Section 1582, to clarify guidance in respect of contingent consideration?

Yes. We believe this change eliminates uncertainty and will improve consistency with respect to when contingent consideration classified as an asset or a liability should be remeasured. We would however, like to suggest the following wording changes to paragraph 1582.60(6):

1582.60(6) Contingent consideration classified as an asset or a liability shall only be rerneasured to fair value when the contingency is resolved, with any gain or loss recognized in net income. The resulting asset or liability, if a financial instrument, shall subsequently be accounted for in accordance with Financial Instruments, Section 3856 .

We also note a potential issue with respect to the transition guidance as found in paragraph 1582.69. We believe the second sentence should be amended as follows:

1582.69 Amendments to paragraph 1582.60 apply to annual financial statements relating to fiscal years beginning on or after January 1, 2014. These amendments are not applicable when the contingency

has been resolved, and the resulting financial instrument has been or has not been extinguished, in periods prior to the year of adoption.

Alternatively, we suggest ending the second sentence after the word resolved and removing any reference to extinguishment. Without this clarification, we believe there may be an issue in the scenario where the contingency is resolved prior to January 1, 2014 but the resulting financial instrument is extinguished subsequent to January 1, 2014. This would result in a situation where a cumulative catch-up adjustment may be required on the date of extinguishment that would have been more appropriately recorded on the date the contingency was resolved.

2) Do you agree with the proposed amendment to the disclosure requirements in Business Combinations, Section 1582?

Yes. We agree with the clarification that business combination disclosures as found in Handbook Section 1582.6209-(h) be applicable to only those subsidiaries that are consolidated. We do however note that paragraph 1582.62A0) should likely also be applicable to those subsidiaries that are accounted for by the equity method. These disclosure changes make good sense, as without these important distinctions an entity that elected the cost or equity method of accounting for its subsidiaries essentially has to do the work of consolidating its subsidiaries to meet the disclosure requirements.

3) Do you agree with the proposed amendments to Subsidiaries, Section 1590, in respect of a change in ownership interest?

Yes. We agree with the proposed amendment as we think it's important to be clear that accounting for changes in ownership interests should be based on the accounting method chosen. We do, however, believe that this clarification should also be made in Handbook Section 3055 Interests in .Joint Ventures where an accounting policy choice is provided for accounting for joint ventures.

4) Do you agree with the proposed amendments to Non-Controlling Interests, Section 1602, to clarify that non-controlling interests are not a deduction in the calculation of net income, and how to allocate exchange gains and losses arising from the translation of a self-sustaining foreign operation that are attributable to the non-controlling interests?

Yes. We believe that the proposed wording for Handbook Section 1602.14 Non-Controlling Interests and the accompanying amendment to Section 1520.03 clearly articulates how non-controlling interests should be presented in the income statement. We didn't find the current wording unclear however; we believe the suggested wording is an improvement.

With respect to the presentation of non-controlling interests, we noted an apparent oversight in Handbook Section 1540 Cash Flow Statement paragraph .22 with respect to the guidance pertaining to preparing a cash flow statement using the indirect method. 1540.22(a) suggests that non-controlling interests should be an adjustment to net income along with depreciation and other non-cash items. We believe reference to non-controlling interests should be eliminated in this paragraph as it wouldn't make sense to add back with the cash flow starting point being net income including non-controlling interests.

2013 Improvements to Accounting Standards forPrivate EnterprisesMay 31, 2013

, with any gain or loss recognized in net income

centingent-consideratien

We are in agreement with the proposed clarification with respect to the allocation of exchange gains and losses arising from the translation of a self-sustaining foreign operation and attributable to the non-controlling interests. This explicit guidance should eliminate any uncertainty and improve consistency in presentation. We would however like to recommend some wording changes to proposed paragraph 1602.14A.

1602.14A Exchange gains and losses arising from the translation of the financial statements of a self-sustaining foreign operation that are attributable recognized as a separate component of shareholders' equity and that arc attributable to the non-controlling interests are included in the non-controlling interests component of equity (see Equity, Section 3251).

Alternatively, consideration could be given to adding a cross-reference to Section 1651 to explain the accounting for exchange gains and losses arising from the translation of the financial statements of a self-sustaining foreign operation.

We would like further consideration to be given to the transition provision as found in Section 1602.17. Given the fact that the accounting for non-controlling interests hasn't changed but the wording has simply been clarified, does it make sense that the change be applied prospectively? If it was incorrectly classified in prior years, should this be considered an accounting error and corrected retrospectively?

5) Do you agree with the proposals to amend Financial Instruments, Section 3856, to improve the application of hedge accounting when a foreign exchange forward contract is settled gross prior to recognition of the underlying hedged transaction?

Yes. We agree with the addition of paragraph A. 62A in Handbook Section 3856 Financial Instruments. However, it is not entirely clear whether the cash must be held continuously between the date the contract is settled and the date the purchase transaction is recognized. For example, assume that a contract settles for $1,000 US dollars on the 15" of the month. On the 30th of the month, the purchase transaction is recognized for $1,000 US dollars. Must the $1,,P00 US dollars be held continuously in a US dollar bank account for the 15 day period between the IS' and the 30"? It is not clear from the proposed wording what the resulting impact would be on the foreign currency gain / loss if the cash was not held continuously. Can the cash be withdrawn and replenished during that 15 day period without impacting the foreign currency gain / loss? What happens when the cash is withdrawn before the 15 day period has elapsed?

We would also like to suggest that consideration be given to adding explicit wording that the guidance is not applicable and cannot be analogized to sales transactions.

6) Do you agree with the proposals to amend Financial Instruments, Section 3856, in respect of economic compulsion and financial liabilities?

We agree with the change in principle however, we don't believe the proposed wording is clear and is somewhat disorganized in its flow. We believe that the example that immediately precedes the introduction of the term economic compulsion is not on point but rather more of an example to illustrate the concept of a probability test where the holder has the right to redeem the instrument based on a contingency. We would like to suggest that consideration be given to segregating economic compulsion and the concept of a probability test / assessment.

We don't believe that the proposed wording makes it clear that a financial instrument that would only be redeemed by economic compulsion rather than any contractual requirement would not be classified as a financial liability. This is only clear from reading the preamble to the exposure draft. We would like to suggest consideration be given to providing an economic compulsion example to illustrate such as the accelerating dividend preferred shares example as discussed in Part V 3861.15.

We would also like to provide comments broadly related to changes in ownership interests and to question # 3 above.

We note that the ASPS guidance is not always explicit in terms of accounting for changes in ownership interests. Furthermore, this area of accounting is complicated by the fact that policy choices exist within the framework that may or may not match the degree of influence. There seems to be more explicit and interpretative guidance on this topic in IFRS.

2013 Improvements to Accounting Standards forPrivate EnterprisesMay 31, 2013

2013 Improvements to Accounting Standards forPrivate EnterprisesMay 31, 2013

Specifically, it is not always clear in ASPE when accounting for increases or decreases in interests whether one should revalue the original interest on the balance sheet or keep the original interest at its previously recorded amount before adding or deducting from that amount.

As an example, consider an increase in ownership interests which results in an investment that used to be accounted for by the cost method now being accounted for by the equity method because significant influence has been acquired. The guidance for this accounting is not explicit. By analogy to Section 1582.44, one view would be that the acquisition of significant influence would require the investor to derecognize the cost investment and recognize an equity investment for the entire amount of the investment at acquisition date fair value with resulting gain / loss being recorded in profit and loss. This is supported by the requirement in Section 3051.03(a) to apply the consolidation method to determine the carrying value of the equity method investment. Under this view, all of the relevant principles in 1582 should be applied in determining the initial recognition of the equity method investment including the guidance in Section 1582.44. Alternatively, one could refer to Section 3051.12(a) which indicates that the equity account includes the cost of the investment and from that, infer that the equity investment is determined based on an accumulation of the cost of the initial investment plus the cost of the incremental investment. This cost accumulation view is also further supported by the guidance in Section 3051.24 which indicates that the gain or loss on the disposal of an investment is determined based on cost which is calculated on the basis of average carrying value.

Furthermore, the guidance doesn't clearly provide the general principles with should be applied to the various types of changes in ownership interests that result in a change in accounting method such as cost method to equity method or vica versa as compared to a change in ownership interest which does not result in a change in accounting method. We would like to suggest that the accounting guidance in this area be re-visited more broadly than the narrow changes being proposed in question /1 3 above. We understand that there is also additional complexity in this area because of the range of accounting policies available to preparers to determine the measurement basis for investments.