Proposed reclassification of redeemable preferred shares issued in a tax planning arrangement

As announced in the November 11, 2014 issue of the CPA Newsletter, the Accounting Standards Board (AcSB) issued an Exposure Draft on accounting for redeemable preferred shares issued in a tax planning arrangement, specifically for shares issued in transactions commonly known as an “estate freeze.”

According to the proposals, the exception allowing for equity classification (paragraph 3856.23) would be eliminated and these shares would be treated in the same manner as any other redeemable preferred shares, i.e. as a financial liability.

Since the proposals would have major implications for many private companies, it is important that CPAs assist in the process by inviting financial statement users to communicate their needs as they will be a determining factor in the AcSB’s decision making.

Users can submit their comments in writing, or participate in a roundtable discussion to be organized by the Order in early January, by confirming their interest as soon as possible. In both cases, they are asked to contact Sophie Pelletier at spelletier@cpaquebec.ca.

Please note that comments to the AcSB must be received by January 15, 2015, and the roundtable discussion will be held during the week of January 8 or 13, 2015.

You can consult the AcSB’s FYI Article for more information about the Exposure Draft [+]