2013-11 Assets, Contingent Assets, Contractual Rights RESPONSES

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Response Questionnaire

To be considered, comments must be received by

November 29, 2013

Assets, Contingent Assets and Contractual Rights

Statement of Principles

PSAB welcomes comments on all aspects of the Statement of Principles.

This form is not intended to constrain your response. Each text box will accommodate your full comments.

You are able to save and forward this form to others in your organization for review prior to submission.

Name: Greg MacBeth

Organization: Office of the Auditor General - Manitoba

E-mail: [email protected]

General comments:

I am replying on behalf of the Office of the Auditor General - Manitoba. My comments are from the perspective of the public sector within our jurisdiction.

Effects Analysis

1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation.

No.

Part I – Assets

1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered?

It is useful.

2. Do you agree with how PSAB has dealt with service potential in paragraph .052?

Yes.

3. Do you agree with the proposed disclosure requirements?

Yes

Part II – Contingent Assets

1. Do you agree with the proposed definition of contingent assets?

Yes

2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?

Yes


Yes

4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized?

No

5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?

Yes

Part III – Contractual Rights

1. Do you agree with the proposed definition of contractual rights?

Yes

2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered?

Yes


Yes





November 29, 2013






Name: Armand Capisciolto, National Accounting Standards Partner

Organization: BDO Canada LLP


General comments:

We do not have any general comments that were not addressed below.

Effects Analysis


We have addressed implications in our responses below.

Part I – Assets


Yes, the proposed guidance relating to the definition of assets is useful. However, it is clear from the definition that intangible assets would meet the definition of an asset. We believe the scope of the proposals should be expanded to address recognition of intangible assets in public sector financial statements.


Yes, we agree with how PSAB has dealt with service potential in paragraph .052.


We agree with the proposed disclosure requirements. However, we believe an important improvement to the PSA Handbook is being missed in regards to this proposed standard. Paragraph .067(b) of the proposed assets standard

requires disclosure of economic resources that may meet the definition of an asset but are prohibited from being recognized by other Sections of the PSA handbook. This would include intangible assets which are currently prohibited from being recognized by PS 1000.58. The disclosure requirements of paragraph .067(b) appear to require a public sector entity to go through the process of identifying all of its intangible assets in order to provide disclosure about them. This would require a substantial amount of work for many entities. We believe that if all of this work is going to be required for disclosure purposes, it would be more valuable for the new assets standard to specifically address recognition and measurement of intangible assets so that these important assets could be recognized in a public sector entity's financial statements. We believe the scope of the proposed standard should be expanded to address intangible assets. We also believe the concept of materiality needs to be introduced in the disclosure requirements. The definition of an asset is very broad and as a result, a significant number of items could meet the definition of an asset, yet not be recognized in an entity's financial statements. If the disclosure requirements do not include a concept of what is material or significant, all of these items would be required to be disclosed. Disclosure of non-significant items would not be useful to financial statement users.



Yes, we agree with the proposed definition of a contingent asset.


Yes, we find the proposed guidance on contingent assets useful. There are no other aspects we believe need to be considered at this time.


Yes, we agree with the proposed disclosure requirements.


No, we do not believe there is a threshold at which contingent assets should be recognized.


Although we do not want to overstate liabilities, we believe the criteria to recognize a contingent asset as part of a reduction to a contingent liability should be a higher threshold (i.e. virtual certainty) than the criteria required to recognize a contingent liability (i.e. likely).



No, we do not agree with the proposed definition of contractual rights. Entering into a contract is a past event; therefore, we believe some contractual rights do meet the definition of an asset.


Any information could be considered useful, however, there is a need to balance the information provided in financial statements to avoid information overload for financial statement users. Due to this and the fact that no other standard setter has a standard on contractual rights, we feel that Board should reconsider the need for this proposed standard.


If the Board believes it is appropriate to proceed with this standard, then the practical limits should be expanded to limit the disclosure of contractual rights to those that result in new or non-recurring sources of revenue. Users would typically assume normal revenue sources would continue unless they were told otherwise. If this is not done, users will receive a large amount of information on contractual rights, however, if the majority of the disclosures relate to regular recurring revenues sources what new information is actually being provided that users would not already know.


November 29, 2013

Tim Beauchamp

Director, Public Sector Accounting

277 Wellington Street West

Toronto, Ontario M5V 3H2

Dear Mr. Beauchamp,

RE: Assets, Contingent Assets, and Contractual Rights – Statement of Principles

Thank you for the opportunity to provide comments on the Assets, Contingent Assets, and

Contractual Rights Statement of Principles. Our thoughts on the proposed principles are below.

Effects Analysis

1. Are there other implications of the proposals that should be considered? If so, please

provide a detailed explanation.

We believe there are other implications of the proposals that should be considered. These relate

to potential impacts on PS 3410 Government Transfers and PS 3390 Contractual Obligations.

They are explained in detail in the responses below.

Part I – Assets

1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects

that should be considered?

We believe the proposed guidance relating to the definition of assets has the potential to be

useful. However, we are concerned about how this guidance will interact with requirements for

transferors in PS 3410. Specifically, PS 3410.12 and .13 state:

.12 A government transfer should be recognized by a transferring government as an expense in

the period the transfer is authorized and all eligibility criteria have been met by the recipient.

[APRIL 2012]

.13 Given the non-exchange nature of government transfers, a transferring government does not

receive a direct economic benefit that it can control in exchange for a transfer, as is required by

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the definition of an asset. As a result, the transferring government incurs an expense and does

not acquire an asset by providing a transfer.

An issue arises when a government has contracted with a service provider to deliver public

service programs. Based on the existing guidance in the PSA Handbook, we have treated these

payments as “government transfers” since the public, and not government, is the direct recipient

of the economic benefit; the organization is simply acting as an intermediary between

government and the ultimate recipients of the transfer. Given the guidance in PS 3410.13, we

record an expense when funds are provided to these organizations, even if this is before the fiscal

year in which the related programs are to be delivered. We feel the proposed Asset guidance,

which does away with the concept of a “direct benefit” and focuses exclusively on “control of an

asset”, may lead to ambiguity regarding how to treat such advance disbursements. Specifically,

we feel it can be argued that they represent an asset controlled by government because

government:

(a) determines how the economic resource will be used (government sets the program objectives

and targets to be achieved by the service provider);

(b) benefits from the economic resource through the capacity to provide goods and services

(government now has a prepaid capacity for delivering public services);

(c) denies or regulates access to those benefits by others (government determines who is eligible

for the programs in question and holds the service provider accountable for adhering to these

standards; further, no one else can make use of the government’s prepaid right to future service

delivery); and

(d) is exposed to the risks associated with the economic resource (the risk associated with the

prepayment is that the service provider will not deliver the programs as required and will use the

funds for other purposes; in this case government is still responsible for finding, and funding, an

alternate service delivery mechanism).

In light of the above, it would seem that payments made to contracted public service providers

are government controlled assets. In this case, advances to such organizations would be set up as

assets which would contradict the present guidance in PS 3410. PSAB could potentially scope

these contracted service providers out of PS 3410 to alleviate the problem. However, this could

create a situation where government consistently uses intermediaries to deliver its services in

order to avoid the provisions of PS 3410. Before proceeding with the planned guidance on

Assets, we feel PSAB should address the potential confusion and inconsistent application that

could result from this issue. In particular, PSAB should determine what modifications are

needed to PS 3410 in order to accommodate the asset definition and how these revisions will

affect transfers to intermediaries who deliver government transfers on government’s behalf.


Yes, we agree with how PSAB has dealt with service potential in paragraph .052. It seems

reasonable that a new definition not be introduced.


Yes, we agree with the proposed disclosure requirements.



We agree with the proposed definition of contingent assets but do not feel that it represents a

material change to the existing definition.

2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects

that should be considered?

We don’t believe the proposed guidance on contingent assets is detrimental, but we also do not

see what value it adds. From our perspective, accounting for contingent assets has never been a

highly contentious issue. Most practitioners already have a good understanding of what a

contingent asset is along with how it should be handled for financial reporting purposes. We

don’t believe a standard on this matter is needed, at least not in the form proposed, as it simply

reiterates the existing treatment of contingent assets. The proposed guidance is either directly

stated in, or can be easily inferred from, existing PSA guidance. That said, contingent asset

guidance would be required should PSAB decide to proceed with our recommendations at

questions 4 and 5 below.


We agree with the proposed disclosure requirements but do not feel that they represent a material

change to existing requirements.

4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent

assets should be recognized?

We do believe that contingent assets that are virtually certain should be recognized. There are

circumstances under which recognition prior to the confirming future event would be

appropriate. The example provided in the Statement of Principles, regarding the bridge

construction, is a case in point. Here, it is virtually certain that the government is entitled to a

recovery of its grant. At year-end, the grant recipient has failed to meet the conditions of the

grant because it is not realistically possible for them to comply with the terms. As a result, the

past event giving government control of the benefit has already occurred. In this case, it seems

clear that the definition of an asset has been met and a receivable should be accrued at the year-

end date.

5. In some cases, likely contingent assets may be recognized as part of a reduction to a

contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of

contingent assets to this situation only?

It seems inconsistent to allow the recognition of contingent assets that are tied to contingent

liabilities but to prohibit the recognition of all other types of contingent assets. It is not clear on

what basis the first type of contingent asset is more likely to be realized than the second type.

Presumably, the two items would, in substance, have the same economic characteristics, so we

question the theoretical rationale for the distinction. In line with our comments at question 4, we

recommend that contingent assets linked to contingent liabilities only be recorded when their

realization is virtually certain.



We agree, for the most part, with the proposed definition of contractual rights but question the

last part which states “in either the same period or different periods.” We believe the concept is

sufficiently conveyed by stating:

Contractual rights are rights to assets and revenue arising from legally enforceable contracts or

agreements that will, when the terms of those contracts or agreements are met, become assets

and revenue.

It is not clear what the extraneous words are for and they seem to complicate the definition.

In reading the proposed definition of contractual rights, it occurred to us that users could benefit

from a similar definition regarding contractual obligations. The guidance at PS 3390.03 does not

seem as robust as the proposed definition of contractual rights. As a result, we recommend an

amendment to the definition of contractual obligations so that it mirrors the proposed guidance

on contractual rights.

2. Do you find the proposed guidance on the contractual rights useful? Are there other

aspects that should be considered?

We find the proposed guidance on contractual rights useful as there is a strong theoretical basis

for presenting a balanced view of a government’s future revenues and expenditures. However,

we believe there needs to be a clear limit on the scope of the contractual rights to be reported.

We are concerned that the cost of compiling the information will quickly outweigh the benefit if

the scope is not sufficiently narrow. At present, the standard proposes to let the concept of

materiality dictate the number of items reported. Materiality is determined through the use of

professional judgment and is susceptible to widely different interpretations. The problem is

compounded because we most often assess materiality within the context of one fiscal period.

Contracts, of course, often extend over numerous periods. As a result, a long-term contract, by

its nature, could easily approach and surpass a materiality level established by reference to one

fiscal year. We believe the concept of materiality, as it applies to an extended-term contract,

needs to be different than what would be viewed as material in a stand-alone fiscal period. To

address this issue, we believe a final standard should require that contracts be viewed as material

only when they:

1) have an average annual impact (rather than total impact) that is material; or

2) have material single year outflows

This will prevent entities from disclosing contracts that would not be viewed as material in any

one year of their existence. This guidance should be applicable to both contractual rights and

contractual obligations.


We agree with the proposed disclosure requirements. The need to report “nature, extent and

timing” seems reasonable and is consistent with what is required for contractual obligations.

Other comments:

The SOP proposes to create three new sections for all the items discussed (Assets, Contingent

Assets, and Contractual Rights). We don’t believe stand-alone standards are needed for the last

two items. Guidance on these matters would fit logically within existing sections PS 3300

Contingent Liabilities and PS 3390 Contractual Obligations. The relevant guidance could be

incorporated into sections retitled “Contingencies” and “Contractual Rights and Obligations”,

respectively.

While we appreciate the efforts put forth in the development of this SOP, we question whether

this is the best use of PSAB’s limited resources. There are critical matters currently facing

public sector entities with respect to government transfers, financial instruments, and the

conceptual framework for financial reporting. While much of the guidance in this SOP is useful

to a certain degree, we feel PSAB’s time would be better spent resolving the issues that are of

most importance to its stakeholders.

This concludes our thoughts on the Assets, Contingent Assets, and Contractual Rights Statement

of Principles. We would be pleased to discuss any questions or comments you may have with

respect to this letter. To do so, please contact Jill Devanney ([email protected]) or the

undersigned.

Regards,

Robert Bourgeois, CA

Director - Financial Accounting, Government Accounting

Nova Scotia Department of Finance

mailto:[email protected]

Montréal, le 29 novembre 2013 Tim Beauchamp, directeur Comptabilité du secteur public 277, rue Wellington Ouest Toronto (Ontario) M5V 3H2 Monsieur, Vous trouverez ci-joint les commentaires du Groupe de travail technique Secteur public — Comptabilité dans le secteur public de l’Ordre des comptables professionnels agréés du Québec concernant l’énoncé de principes « Actifs, actifs éventuels et droits contractuels ». Nous vous serions reconnaissants de nous faire parvenir une copie de la traduction anglaise de nos commentaires. Veuillez prendre note que ni l’Ordre des comptables professionnels agréés du Québec, ni quelque personne que ce soit ayant participé à la préparation des commentaires ne peuvent être tenus responsables relativement à leur utilisation et ils ne sont tenus à aucune garantie de quelque nature que ce soit découlant de ces commentaires, comme décrit dans le déni de responsabilité joint à la présente. Veuillez agréer, Monsieur Beauchamp, l’expression de mes sentiments distingués. Représentante du Groupe de travail technique Secteur public — Comptabilité dans le secteur public, Annie Smargiassi CPA, CA p. j. Déni de responsabilité et commentaires

DÉNI DE RESPONSABILITÉ

Les documents préparés par le Groupe de travail technique Secteur public — Comptabilité dans

le secteur public de l’Ordre des comptables professionnels agréés du Québec (Ordre) ci-après

appelés les « commentaires », sont fournis selon les conditions décrites dans la présente, pour

faire connaître leur opinion sur des énoncés de principes, des documents de consultation, des

exposés-sondages préliminaires ainsi que des exposés-sondages publiés par le Conseil des

normes comptables, le Conseil des normes d’audit et de certification, le Conseil sur la

comptabilité dans le secteur public, le Conseil sur la gestion des risques et la gouvernance et

d’autres organismes.

Les commentaires fournis par ce comité ne doivent pas être utilisés comme substitut à des

missions confiées à des professionnels spécialisés. Il est important de noter que les lois, les

normes et les règles sur lesquelles sont émis les commentaires peuvent changer en tout temps

et que, dans certains cas, les commentaires écrits peuvent être sujets à controverse.

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peuvent être tenus responsables relativement à l’utilisation de ces commentaires et ils ne sont

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commentaires donnés ne lient pas, par ailleurs, les membres du Groupe de travail technique

Secteur public — Comptabilité dans le secteur public, l’Ordre ou, de façon plus particulière, le

Bureau du syndic de l’Ordre.

La personne qui se réfère ou utilise ces commentaires assume l’entière responsabilité de sa

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décision qu’elle aurait pu prendre en fonction de ces commentaires. Elle reconnaît également

avoir accepté de ne pas faire état de ces commentaires reçus via le Groupe de travail dans les

avis exprimés ou les positions prises.

COMMENTAIRES DU GROUPE DE TRAVAIL TECHNIQUE SECTEUR PUBLIC — COMPTABILITÉ DANS LE SECTEUR PUBLIC DE L’ORDRE DES COMPTABLES PROFESSIONNELS AGRÉÉS DU QUÉBEC RELATIFS AU DEUXIÈME EXPOSÉ-SONDAGE « ACTIFS, ACTIFS ÉVENTUELS ET DROITS CONTRACTUELS »

MANDAT DU GROUPE DE TRAVAIL

Le Groupe de travail technique Secteur public — Comptabilité dans le secteur public de l'Ordre des

comptables professionnels agréés du Québec a comme mandat notamment de recueillir et de

canaliser le point de vue des praticiens exerçant en cabinet et de membres œuvrant dans les affaires,

dans les services gouvernementaux, dans l'industrie et dans l'enseignement ainsi que le point de vue

d’autres personnes concernées œuvrant dans des domaines d’expertise connexes.

Pour chaque exposé-sondage ou autre document étudié, les membres du Groupe de travail

technique mettent leurs analyses en commun. Les commentaires ci-dessous reflètent les points de

vue exprimés et, sauf indication contraire, ces commentaires ont fait l'objet d'un consensus parmi les

membres du Groupe de travail ayant participé à cette analyse.

Les commentaires formulés par le Groupe de travail ne font l'objet d'aucune sanction de l'Ordre. Ils

n'engagent pas la responsabilité de celui-ci.

COMMENTAIRES GÉNÉRAUX

Les membres sont d’avis que le CCSP devrait tenir compte des actifs incorporels dans ses

propositions concernant les actifs, les actifs éventuels et les droits contractuels. Ils constatent que les

organismes sans but lucratif (OSBL) du secteur public, entre autres, comptabilisent les actifs

incorporels qui répondent à certains critères précis, et que ces critères pourraient être appliqués

facilement par les autres entités du secteur public. Plusieurs actifs incorporels résultent de droits

contractuels et il leur apparaît incohérent de ne pas les comptabiliser dans les autres entités du

secteur.

Ils souhaiteraient que la définition d’actif proposée dans l’énoncé de principes « Actifs, actifs

éventuels et droits contractuels » soit harmonisée avec celle qui est incluse dans l’énoncé de

principes « Amélioration des normes pour les OSBL ». Ils s’expliquent mal les différences dans les

définitions au niveau conceptuel.

Les membres ont indiqué que le CCSP devrait régler des problématiques plus urgentes avant de

finaliser le projet sur les actifs. Notamment, les éléments qui sont exclus de l’énoncé de principes au

paragraphe .04, étaient, selon eux, des questions plus importantes à régler, car plusieurs de ces

éléments ne sont actuellement pas comptabilisés dans le bilan, situation qu’on tente d’éviter en

général dans les autres référentiels comptables canadiens. Ils sont d’avis que les éléments qui font

l’objet de l’énoncé de principes ne causent pas de problèmes actuellement en pratique, et ils

s’expliquent mal la nécessité d’une nouvelle norme sur ces éléments.

Les membres croient que le projet devrait traiter également des critères de comptabilisation et ils ne

comprennent pas l’exclusion totale de telles exigences dans l’énoncé de principes. Ils proposent au

CCSP d’attendre avant la publication d’un exposé-sondage de considérer l’ensemble des questions,

sans exclusion.

Questions du CCSP Analyse des incidences 1. Les propositions ont-elles d’autres incidences qui devraient être prises en considération? Dans l’affirmative, veuillez fournir une explication détaillée. Les membres ont relevé des différences dans certaines définitions par rapport au cadre conceptuel

actuellement en vigueur et ont indiqué que ceci pourrait avoir des impacts sur des interprétations en

pratique. Ils ont détaillé ces différences dans leurs commentaires sur la partie III ci-dessous.

Partie I – Actifs 1. Les indications proposées relativement à la définition des actifs sont-elles utiles? Y a-t-il d’autres aspects qui devraient être pris en considération? Les membres sont d’avis que les propositions ne changent pas l’application des concepts actuels. Ils

ne croient pas que les indications seront très utiles, en regard de leur pratique. Selon eux, des

indications sur les éléments exclus au paragraphe .04 auraient été plus utiles.

Certains membres ont noté que la présence d’emphytéoses est importante dans les municipalités du

Québec. Ces types de contrats semblent être couverts par la question des droits contractuels, mais ils

croient que ceci devrait être clarifié dans les propositions.

2. Êtes-vous d’accord avec le traitement proposé au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service? Oui, les membres sont d’accord avec les propositions du paragraphe .052. 3. Êtes-vous d’accord avec les obligations d’information proposées? Oui, les membres sont d’accord avec les obligations d’information proposées. Partie II – Actifs éventuels 1. Êtes-vous d’accord avec la définition des actifs éventuels proposée? Oui, les membres sont d’accord avec la définition des actifs éventuels proposés. 2. À votre avis, les indications proposées au sujet des actifs éventuels sont-elles utiles? Y a-t-il d’autres aspects qui devraient être pris en considération? Oui, les membres sont d’avis que les indications sont adéquates et n’ont pas proposé d’autres

aspects à prendre en considération.

3. Êtes-vous d’accord avec les obligations d’information proposées? Oui, les membres sont d’accord avec les obligations d’information proposées. 4. Estimez-vous que les actifs éventuels devraient être constatés à partir d’un certain seuil (c.-à-d. la quasi-certitude)? Les membres étaient partagés sur la question.

Certains membres estiment que les actifs éventuels devraient être constatés à partir du moment qu’il

existe une quasi-certitude de réalisation. Certains membres croient que non, car ils sont d’avis qu’un

actif ne peut être contrôlé partiellement.

Plusieurs membres croient que les libellés actuels portent à confusion, ils indiquent qu’à partir du

moment où un élément est comptabilisé, il ne devrait pas être considéré comme éventuel.

Conséquemment, ces membres sont d’avis que l’élément en cause répondrait à la définition d’un actif

lorsqu’un seuil de quasi-certitude quant à la réalisation est atteint, de sorte qu’un actif éventuel ne

serait jamais constaté.

5. Dans certains cas, des actifs éventuels probables peuvent être constatés à titre de réduction d’un passif éventuel (voir le paragraphe .111). Êtes-vous d’accord pour que la constatation des actifs éventuels soit limitée à cette situation seulement?

Oui, les membres sont d’accord avec les propositions. Ils précisent que les cas les plus fréquents

concernent les remboursements d’assurance.

Partie III – Droits contractuels 1. Êtes-vous d’accord avec la définition des droits contractuels proposée? Oui, les membres sont d’accord avec la définition proposée à l’exception de l’élément décrit dans le

paragraphe ci-dessous.

Les membres se questionnent sur l’expression « juridiquement exécutoire » incluse dans la définition

des droits contractuels. Cette expression n’est pas incluse, entre autres, dans la définition des passifs

dans le cadre conceptuel du chapitre SP 1000, et ils ne comprennent pas pourquoi elle est ajoutée à

la définition des actifs. Pour eux, un accord contractuel est, de toute façon, juridiquement exécutoire,

autant qu’un accord verbal pourrait l’être. Ils proposent de retirer cette expression de la définition, car

elle risque de causer des difficultés d’interprétation en pratique.

2. À votre avis, les indications proposées au sujet des droits contractuels sont-elles utiles? Y a-t-il d’autres aspects qui devraient être pris en considération? Oui, les membres sont d’avis que les indications proposées au sujet des droits contractuels seront

utiles et ils n’ont pas proposé d’autres aspects à prendre en considération.

3. Êtes-vous d’accord avec les obligations d’information proposées? Oui, les membres sont d’accord avec les obligations d’information proposées.

Cliquez ici pour soumettre

Formulaire de réponse Pour être pris en considération,

les commentaires devront être reçus

le 29 novembre 2013 au plus tard.

Actifs, actifs éventuels et droits contractuels

Énoncé de principesLe CCSP invite les intéressés à formuler des commentaires sur tous les aspects des principes proposés dans l'énoncé

de principes.

Ce formulaire ne vise pas à restreindre votre réponse. Chaque boîte de texte acceptera l'intégralité

de vos commentaires. Vous pouvez sauvegarder le formulaire et l'envoyer, pour examen, à d'autres personnes de votre

organisation avant de le soumettre.

Nom : Véronique Harvey

Organisation : Société de Transport de Montréal (STM)

Courriel : [email protected]

Commentaires généraux :

Nous croyons que la publication de ces trois nouveaux chapitres permettrait de mieux représenter la réalité des organismes du secteur public et permettrait de fournir des informations supplémentaires importantes aux utilisateurs des états financiers.

Analyse des incidences

1. Les propositions ont-elles d'autres incidences qui devraient être prises en considération? Dans l'affirmative, veuillez fournir une explication détaillée.

Non

Partie I - Actifs

1. Les indications proposées relativement à la définition des actifs sont-elles utiles? Y a-t-il d'autres aspects qui devraient être pris en considération?

Oui, les indications proposées relativement à la définition des actifs sont utiles puisqu'elles sont plus explicites et axées sur la réalité des organismes du secteur public. Les indications permettent de faire le lien avec les objectifs des organismes qui sont différents des entreprises du secteur privé. Il y a beaucoup d'exemples concrets qui permettent de mieux comprendre les notions. Au paragraphe .061, on mentionne que les avantages économiques futurs peuvent également prendre la forme d'une capacité de réduire les sorties de trésorerie. Il aurait été intéressant d'expliquer la différence entre la constatation à titre d'actifs ou à titre de diminution de passifs dans le cas où l'avantage est une réduction de sortie de trésorerie.

2. Êtes-vous d'accord avec le traitement proposé au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service?

Oui, il est plus facile de déterminer le traitement comptable approprié quand les notions sont clairement définies.

3. Êtes-vous d'accord avec les obligations d'information proposées?

Oui, puisqu'il y aurait des informations sur la nature des actifs non constatés et la raison de la non-constatation. Des actifs importants peuvent être détenus par un organisme et ne pas être mentionnés puisque les normes ne permettent pas leur constatation. Cette norme permettra d'inclure des informations afin que l'utilisateur des états financiers soit informé de ce que détient en totalité l'organisme. De plus, les informations à fournir permettraient d'informer le lecteur des actifs dont une norme empêche leur constatation, par exemple dans le cas du SP 3410 - Paiements de transfert, où les différentes interprétations divergent. Il faudrait par contre être plus explicite sur le type d'informations à fournir. Il serait intéressant de mentionner l'impact qu'il y aurait sur les états financiers dans le cas où l'actif aurait été constaté.

Partie II - Actifs éventuels

1. Êtes-vous d'accord avec la définition des actifs éventuels proposée?

Oui, l'accent est mis sur l'incertitude et permet de bien distinguer la différence entre un actif et un actif éventuel.

2. À votre avis, les indications proposées au sujet des actifs éventuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient être pris en considération?

Oui, les indications permettent une meilleure compréhension de la définition puisqu'elles viennent clarifier les termes et les notions utilisés. Les aspects importants nous semblent avoir été pris en considération.


Oui, puisque ces informations aident les utilisateurs à évaluer les ressources économiques qui pourront devenir disponibles. Parfois, la limite est faible entre un actif et un actif éventuel puisque la probabilité que l’événement futur survienne est quasi assurée. Les informations permettront à l'utilisateur d'évaluer plus adéquatement les chiffres au rapport financier. Il est intéressant de constater qu'un paragraphe a été ajouté pour les informations de nature délicate.

4. Estimez-vous que les actifs éventuels devraient être constatés à partir d'un certain seuil (c.-à-d. la quasi-certitude)?

Non puisque tout est question de jugement professionnel. Le jugement professionnel peut différer d'une personne à l'autre et donc la comparaison entre les différents organismes pourrait être biaisée.

5. Dans certains cas, des actifs éventuels probables peuvent être constatés à titre de réduction d'un passif éventuel (voir le paragraphe .111). Êtes-vous d'accord pour que la constatation des actifs éventuels soit limitée à cette situation seulement?

Oui, parce que dans ce cas-ci, il y a un lien direct avec le passif éventuel, qui lui ce doit d'être constaté. Dans les faits, c'est le passif éventuel qui est moindre. Il résulte donc en une meilleure estimation du passif éventuel.

Partie III - Droits contractuels

1. Êtes-vous d'accord avec la définition des droits contractuels proposée?

Oui. En limitant les droits contractuels aux droits qui deviendront des actifs et donneront lieu à des revenus, ceci évite un surplus d'informations moins pertinent pour le lecteur.

2. À votre avis, les indications proposées au sujet des droits contractuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient être pris en considération?

Les indications proposées sont utiles et il y a une différenciation entre les définitions d'actifs, d'actifs éventuels et de droits contractuels. Les différences sont clairement mises en lumière ce qui favorise la compréhension. Les aspects importants nous semblent avoir été pris en considération.


Oui, le fait de donner de l'information sur les droits contractuels permet de se coller à la réalité des organismes du secteur public. Les organismes étant fortement financés en vertu d'entente de partage de frais, les utilisateurs doivent être informés sur les entrées futures de ressources économiques dont l'organisme disposera pour honorer ses obligations futures. Toutefois, l'énoncé parle peu du type d'information qui serait à fournir. Il faudrait clarifier pour mentionner le type d'information demandé. Dans le principe 4 on mentionne qu'il est question de l'ampleur des droits, mais est-ce que ceci signifie que les montants devront être présentés? Dans plusieurs ententes de partage des coûts, il est entendu que le gouvernement cédant partagera le coût des actifs payés par le gouvernement bénéficiaire, toutefois les montants ne sont pas clairement identifiés puisque les sommes n'ont pas encore été dépensées. Dans un cas comme celui-ci, il serait pertinent de savoir de quelle façon l'information doit être présentée.


Wayne Morgan Office of the Auditor General of Alberta Edmonton, Alberta November 29, 2013 Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario Dear Mr. Beauchamp, Our response to PSAB Statement of Principles Assets, Contingent Assets and Contractual Rights is below. Given that PSAS is based on primarily on an asset/liability view, and that it is from the definition of an asset that other elements are derived, this is an important project. Effects Analysis


There are several other implications that should be considered. PSAS should consider whether the distinction between financial and non-financial assets is still worthwhile, given there is nothing inherent in the definition or concept of asset that leads to the distinction. Correspondingly, while developing guidance for assets/contingent assets/contractual rights that is more consistent with the existing treatment for liabilities, we encourage PSAB to consider whether changes also should be made to the presentation of liabilities. The replacement of PS 3410 has introduced a new nature of liability into PSAB – an obligation to use an asset for a restricted purpose, such that revenue is recognized over the life of the asset, and this liability settles with use of the asset. The presumption in PSAS (see PS 1100.28) is that net debt represents financing of past transactions/events that require future revenues to pay for, but no financial assets will be needed or used to settle the PS3410 liability. This creates an accounting inconsistency and distorts the net debt indicator because the asset that will be used to settle the PS3410 liability is classified as a non-financial asset. So, if the distinction between financial and non-financial assets can be demonstrated to flow from the definition of an asset and remains part of PSAS, PSAB should consider including a distinction between financial and non-financial liabilities with the latter representing

liabilities that will be settled through the use of non-financial assets (i.e. will require no financial assets to settle). It may be that the underlying issue is the use of the net debt indicator itself, and that there is little justification for the financial/non-financial distinction of assets if there is not a similar distinction for liabilities. A new asset standard should explain whether appropriations by government components meet the definition of an asset, and when they would meet the definition. For example, a government may approve, via legislation passed before the financial statement date, a component’s appropriation for a current or subsequent year(s). It is not clear whether this authority to spend is an intangible asset, or tangible in the same sense as, for example, accounts receivable. More broadly, we strongly encourage PSAB to include intangible assets and assets acquired by right of the Crown as part of the project. These are substantial resources of governments. Further study and working through the details of the issues involved in recognition, measurement and reporting of these may improve the overall asset standard.

Part I – Assets

1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? We see potential confusion in applying the guidance on control of the asset, particularly in reconciling the strong definition of control in paragraph .036 with the exception that external restrictions do not negate control (paragraph .038). PSAB should explain why “such restrictions on the use of an economic resource do not negate the public sector entity’s control of the economic resource” (.038) when the purpose of restrictions is to limit how the entity can “determine how the economic resources will be used.” The statement of principles could better explain why control is a necessary characteristic of an asset, rather than simply that evidence exists that the public sector entity will receive future benefit from the economic resource. Control may be seen as making this benefit more likely to occur, but this makes the characteristic of control really an implicit threshold criterion, something that helps determine likelihood and length and nature of the benefit. The essential characteristic is future benefit to the entity. Under the current definition, it is necessary to work around what the recipient is not allowed to do with a transferred resource to still come to a conclusion that the recipient controls the resource. Instead, it may be more useful to focus on what the entity has the right to do with the resource, and how the entity is expected to benefit, on the presumption that it will comply with all restrictions and stipulations. This may be made clearer in the statement of principles, if this is indeed the basis of recording assets that have restrictions that impede control. Another alternative is an approach that says that some of the rights are unrestricted (and therefore qualify as assets because control is met) and other rights are restricted (and therefore do not qualify as assets). This, however, leads to measurement difficulties, but .039 seems to support this approach to evaluating control over individual

rights instead of to the asset as a whole. In our view, the statement of principles should more clearly distinguish among which of these concepts are appropriate. Some specific examples may be added in the statement of principles to help clarify this issue. For example, consider an entity given cash to build a variety of tangible assets. The cash is subject to another entity monitoring its use, approving specific projects, and requiring the cash to be returned if no projects are approved. Another example is transfers provided with conditions that they be distributed to others – the “flow through” arrangements excluded from PS3410. PSAB could explain what principles determine whether the cash is an asset (with a corresponding liability under PS3100), or not an asset of the entity at all, when control is uncertain or is more administrative in nature. The statement of principles could add discussion of assets that have liabilities associated with them. One example is asset retirement obligations; another example is an entity receiving an asset, but there are substantial ongoing operating costs associated with the asset. The issue is whether the entity actually has an asset when the closely related expected future costs are more than the value of the asset. This is a complex issue but could be explored in more detail in this project. Further guidance may be provided for assets held in trust where the public sector entity is the beneficiary. Paragraph .042 correctly excludes trusts held by the public sector entity on behalf of external beneficiaries, with a strong implication that the trust is an asset if the public sector entity is both trustee and beneficiary. But it is less clear how to account for externally administered trust funds where the public sector entity is the sole beneficiary. For example, if there is a trust on behalf of a public sector entity where the trustee must approve all projects for use of the funds at the entity but cannot fund any other entity, how would this fit into the definition of an asset? The statement of principles could expand upon the concept of amortization or other valuation allowances attached to assets. Should amortization reflect the attaching of costs to a period in which services are provided (the revenue-expense view) or reflect a decline in capacity to provide goods and services between periodic revaluations of the asset (the asset-liability view)? Why should some asset revaluation changes flow directly through income, while others (i.e. portfolio investment at fair value) are accumulated as remeasurement gains/losses? Are valuation allowances only measurement related, to reflect assets at their recoverable value, or in the context of public sector entities are they also somehow related to recognition as well, and to concepts such as decline in capacity to provide goods and services, as may be the case with accumulated amortization, for example? To what extent is “accumulated amortization” the recognition and measurement of a counter-asset, or something else such as a liability given that it is a credit outside the net debt model?

2. Do you agree with how PSAB has dealt with service potential in paragraph .052? Yes. We prefer guidance applying existing terminology over establishing new terms.

3. Do you agree with the proposed disclosure requirements? We agree. However, as noted, we believe PSAB should consider recognition and measurement of intangibles, Crown rights, etc.


1. Do you agree with the proposed definition of contingent assets? Yes, as it is consistent with that already followed for contingent liabilities.

2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered? The guidance is useful because identifying the concept of “contingent assets” may help resolve whether an entity has an asset, or only a contingent asset.


No. We do not support disclosure of contingent assets. It is unclear what decision a user should make – should they be considered part of net debt or not, partially considered, etc. The most important argument is in .108 of the statement of principles: because there is a bias in effect/impact/consequences of having a liability you didn’t know about versus having an asset you didn’t know about, the bias is acceptable. PSAB should preserve the principle of conservatism, even if it must be relabeled “prudence.” We note that the thresholds, if they are retained, are somewhat unclear. To be useful, categories should be mutually exclusive, but these are not. For example, “not determinable” may mean the space between slight and likely. “Unknown %” is not determinable. But “45%,” for example, is determinable, but neither likely nor slight. A more logical approach is to use mutually exclusive categories, such as likely, not likely, and not determinable. Or the fix may be as simple as describing “not determinable” as “not determinable to be either high or slight.” PS3300 could be similarly improved.

4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized? No. Conservatism remains one of the qualitative characteristics of financial statements under PSAS. There is no “certainty” in the sense of knowing the future with respect to all asset recognition, which is based on evidence available today. But the problem with virtual certainty is that it is not certainty.


Yes. In these cases, these clearly arise from contractual rights, for example, and are factors in evaluating the overall likelihood and impact of loss for the entity.


1. Do you agree with the proposed definition of contractual rights? Yes. The nature of exchange contracts is that virtually all contractual obligations also give rise to some form of contractual rights. Narrowing the focus to rights that become assets and revenue provides specific information about future revenues that will be available to fund the net debt or future operations of government.

PSAB may consider whether the definition should include not only “and revenue” but also “or reductions of expenses.” A simple example may be a contract whereby a third party takes over some cost of service delivery. This is not revenue but instead a reduction of cost, but the economic result seems similar so treatment should be similar. In several places the statement of principles is balancing what already exists for liabilities. Some additional language may clarify whether “constructive assets” may or may be recognized, similar to “constructive liabilities” meriting recognition in particular circumstances, or should not be recognized, because of uncertainty regarding future benefit, for example.

2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered? The statement of principles suggests that signing of a contract does not create an asset; some transaction or event must occur. Paragraph .143 clearly indicates that contractual rights are not assets. It could be better explained why this is the case and what principle this is based on. Further, it should be explained, rather than simply asserted in paragraph .142, why contractual rights to cash under derivatives meet the definition of an asset on commitment date rather than settlement date. It is unclear how a derivative meets any of the characteristics of an asset, and it is unclear in what sense “derivatives are existing assets and liabilities” at the commitment date or financial statement date when a derivative asset is unrealized. It would be a substantial effort to reopen PS3450, but if existing standards contradict clear concepts that emerge from this study, then consequential adjustments should be made to those standards. Derivatives may meet the definition of a contingent asset; there is no certainty or even virtual certainty that the entity will receive the cash. Derivatives may be disclosed as contractual rights and obligations. It is not explained why derivatives are singled out as an exception in paragraph .142 – is this the only exception, or are there others? A more general exception may be appropriate–for example, stating that where an existing standard establishes recognition and measurement and/or disclosure, then that standard applies, as in paragraph .150. But this considerably weakens the general principles. It should also be made clear whether

“exceptions in other standards” would also include application of alternate sources of GAAP under PS1150.

3. Do you agree with the proposed disclosure requirements? Yes, as the requirements are similar to the disclosures required for contractual obligations.

Thank you for the opportunity to comment. Sincerely, Wayne Morgan, PhD, CA, CISA




November 29, 2013






Name: Megan Cimaglia, CA, CFE, Senior Manager Professional Practices & Danielle Costello, CA Manager Professional Practices

Organization: Office of the Auditor General of British Columbia, Professional Practices

E-mail: [email protected] [email protected]

General comments:

Overall, we do not have any significant concerns with the proposals outlined in this SOP. We believe the additional guidance will contribute to better consistency and comparability in financial reporting. However, while these proposals do not address the recognition of intangibles, inherited Crown Lands and art and historical treasures, which in all respects likely meet the definition of an asset, we encourage PSAB to revisit in the near future the appropriateness of these exclusions.

Effects Analysis


None.

Part I – Assets


We do not see other significant implications of the proposals beyond those already outlined in the SOP. However, we note that this guidance does raise the issue as to the appropriateness of not recognizing intangible assets and inherited Crown lands as noted above in our general comments.


As the term “service potential” already exists in the PSA Handbook (PS 3150 Tangible Capital Assets) which has a definition slightly more specific from the currently proposed “capacity to provide goods and services”, we agree with PSAS instead clearly explaining what is meant by such capacity in the proposed standard.


We support the disclosure of currently unrecognizable assets (i.e. intangibles). This produces more relevant information for financial statement users and contributes to improved understanding of the full extent of economic resources available to the public sector entity.



We agree with the proposed definition of contingent assets. Using this definition will result in improved representation of the substance underlying transactions and will provide users with more balanced information.


We found that the proposed guidance on contingent assets further elaborating on the meaning of “existing condition or situation” and “confirming future event” to be useful. In particular, we are pleased with the additional guidance that a contingent asset usually arises from an unplanned or other unexpected event. This guidance is necessary to distinguish between contingent assets characterized by uncertainty as to the existence of an asset versus an asset characterized by uncertainty with respect to measurement. We could not think of any other aspects to consider.


We agree with the proposed disclosure requirements. Making the financial statements relevant means they should be less conservative and more neutral and disclosing contingent assets as well as contingent liabilities in the financial statements helps achieve this goal.


Given the few expected circumstances where there would be a “virtually certain” contingent asset occurring at year end date and the limited additional benefit that recognition of the contingent asset would offer over disclosure of the existence of the contingent asset, we do not feel the benefits of recognition outweigh the risks/costs.


We agree with limiting the recognition of contingent assets to the situation addressed by PS 3300.25 described above despite the fact that it is inconsistent with the proposed reporting of contingent assets. The situation in PS 3300.25 is very specific and in this situation there exists strong evidence related to likelihood of recovery. Recognition in this situation is more balanced and is auditable. Recognition of contingent assets in other situations will not provide significant incremental benefit over simply disclosing the existence of the contingent asset.



We agree with the proposed definition of contractual rights. The specific definition limiting contractual rights to those rights to assets and revenue arising from contracts is an appropriate boundary to set to make the disclosures cost effective and auditable.


Guidance on contractual rights, specifically the definition limiting contractual rights to those that will result in revenue, is useful. However, we think additional practical examples of contractual rights should be provided. Also, we found the one example provided, a prepaid lease in paragraph.139, to be somewhat confusing. In this respect, we offer the following

wording changes to this example to enhance its clarity: “In other cases, such as when cash is received in advance for a multi-year lease arrangement (prepaid lease), a transaction may give rise to a recognized asset, but…”


We don’t agree with the proposed disclosure requirements because, while they would provide more balanced information, we feel the cost of providing such information exceeds the benefits. The argument could be put forward that having this information in the audited financial statements increases the credibility associated with the information; however, the definition of contractual rights limits the disclosure to legal contracts resulting in assets/revenue. Future revenue of public sector organizations that is subject to judgment and estimation where it would be beneficial to have audit assurance (i.e. tax revenue, royalty revenue, premium or fee revenue) is excluded from disclosure requirements. Auditability is also a concern given the number of material contracts public sector entities often have. Such limited disclosure (revenue from contracts) wouldn’t provide significant further information for users beyond what they would find by reviewing future oriented financial information already provided by public sector entities (i.e. in service or business plans).








de principes.




Nom : Vicky Lizotte, CPA, CA

Organisation : Contrôleur des finances - Québec





Bien qu’il soit précisé à l’énoncé de principes que la comptabilisation des actifs incorporels, des ressources naturelles, des terres du domaine public dévolues à l’État et des œuvres d’art et trésors historiques constitue une question distincte qui doit faire l’objet d’une étude approfondie , nous sommes d’avis que ceux-ci auraient dû être traité dans le cadre de cet énoncé de principe puisque ce sont des actifs importants pour les gouvernements.

Partie I - Actifs


Oui, les indications fournies permettent de préciser les termes importants inclus dans la définition d’un actif. Ces indications seront utiles pour évaluer si un actif doit être comptabilisé ou non lorsqu’il n’y a pas de directives dans les chapitres particuliers. Toutefois, nous sommes d’avis que l’énoncé de principes aurait également dû traiter de la dévaluation des actifs. C’est un aspect important qui n’est pas couvert adéquatement par les directives du Manuel de comptabilité de CPA Canada pour le secteur public.


Nous sommes en accord avec le traitement proposé, à savoir d’expliquer clairement ce qu’on entend par « potentiel de service » avec des indications relatives aux avantages économiques futurs. De plus les indications proposées aux paragraphes .056 à .062 portant sur la contribution à la fourniture de biens ou de services, la génération des rentrées de

trésorerie nettes futures ou la réduction des sorties de trésorerie aident à comprendre les concepts liés aux avantages économiques futurs ainsi qu’au potentiel de service.


Il est utile que les utilisateurs connaissent les actifs qui ne sont pas constatés par les entités du secteur public afin de connaître toutes les ressources économiques à sa disposition, comme par exemple les terres du domaine public dévolues à l’État, les œuvres d’art ou les trésors historiques. Toutefois, compte tenu de l’ampleur des travaux qui pourrait être importante et de la difficulté possible de recenser l’intégralité des actifs non constatés, nous sommes d’avis que la recommandation devrait plutôt être à l’effet qu’il est souhaitable de présenter cette information.



Nous sommes en accord avec la définition proposée.


Les indications proposées sont utiles et permettent d’évaluer si l’entité du secteur public est en présence ou non d’un actif éventuel, et s’il est nécessaire d'en divulguer de l’information ou non.


Oui, nous sommes en accord que seuls les actifs éventuels probables soient divulgués et ce, selon l'étendue de l'information demandée.


Non, nous sommes d’avis qu’il est difficile de comptabiliser un actif éventuel puisqu’il ne rencontre pas l’ensemble des critères pour répondre à la définition d’un actif. Bien que certains puissent juger que la même argumentation soit valable pour les passifs éventuels, les états financiers doivent refléter la prudence du préparateur. Par ailleurs, la constatation d'un actif éventuel lorsqu'il y a quasi-certitude exige l’évaluation des seuils qui est subjective. En effet, il est difficile de différencier si la probabilité d’un événement est probable ou quasi-certaine.


Non, nous sommes en désaccord puisque cela va à l’encontre des directives proposées dans ce projet qui ne permettent pas de comptabiliser un actif éventuel, même probable. Par contre, nous croyons que la compensation d’un passif éventuel avec les éléments qui répondent à la définition d’un actif est acceptable.



Nous sommes en accord avec la définition proposée.


Oui, les indications proposées sont utiles et complètes.


Non. Nous sommes d’avis que les droits contractuels devraient être présentés aux états financiers dans certaines circonstances particulières, tout comme les obligations contractuelles. Le CCSP devrait d’ailleurs s’inspirer de ces caractéristiques pour préciser quelles obligations contractuelles devraient être présentées, et ce, afin de ne pas surcharger d’information les utilisateurs des états financiers.


Finance Comptroller’s Division Comptroller’s Office 715 – 401 York Avenue Winnipeg, Manitoba R3C 0P8 Phone: (204) 945-4919 Fax: 948-3539 E-mail: [email protected]

November 29, 2013 Mr. Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario M5V 3H2 Dear Mr. Beauchamp:

Re: Statement of Principles: Assets, Contingent Assets and Contractual Rights Thank you for the opportunity to comment on the Statement of Principles (SOP): Assets, Contingent Assets and Contractual Rights. The Province has included responses to the specific questions in the attachment. The Province is quite supportive of the SOP in general and especially supportive of the proposed improvements in the definition of an asset. Currently PS1000.38 describes that:

For an asset to be a government's asset, that government must control the future economic benefit associated with the asset to the extent that it can benefit directly from the asset and generally can deny or regulate access to that benefit by others.

The phrase “it can benefit directly” misrepresents the nature of assets in the public sector. Governments do not receive direct benefits from many of their tangible capital assets. The nature of most tangible capital assets in the public sector is to provide goods and services (Section .058 of the SOP). Conceptually, the inclusion of the phrase “benefit directly” could be interpreted to exclude many of the Province’s tangible capital assets. The current description of assets is more appropriate to the private sector of which the principal objective is profit. The definition of an asset has to place greater focus on control of an asset which is the ability to or regulate access to those benefits. Guidance on what is control over an asset should include the concept of “risk of loss to the government” as well as the expected benefits. IPSASB’s description of assets (section .033 of the SOP) is more appropriate to the public sector than PSAB’s current definition. Canadian Public Sector Accounting (PSA) has never viewed legal

Page 2 of 4

ownership as an indicator of control, however PS1300 and PSG-2 does include the concepts of risk of loss and benefits of ownership. As an example, the Province of Manitoba has constructed many water and sewage treatment facilities and distribution networks in unincorporated local communities. The Province is responsible for the maintenance and replacement of the infrastructure. The Province does not question the fact that it is the local community that benefits directly from the Province’s investment in the infrastructure. But it is the Province that controls the access to the services and sets the rates for service. The future net cash flows are insufficient to cover the full cost of providing the services. The provision of goods and services to the community is the primary objective. Therefore the infrastructure should be viewed as assets of the Province. We appreciate the opportunity to comment on the SOP. If you have any questions or concerns related to these comments please contact the undersigned. Yours truly, Betty-Anne Pratt, CA Provincial Comptroller Province of Manitoba

Page 3 of 4

Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please

provide a detailed explanation.

No. We did not consider any other implications of the proposals other than those described in paragraphs .009 to .011

Part I – Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other


Yes. We agree with the proposed changes relating to the definition of an asset. We agree with the improvements to PS1000.36 and the deletion of PS1000.37 and .38. PS1000.37 does not add value. PS1000.38 misrepresents the nature of many of the Province’s tangible capital assets.


Yes. We believe that the phrase “provides goods and services” is more appropriate for the public sector than the term “service potential”.


Yes, we agree that the PSA Handbook should provide general disclosure for all unrecognized assets. Unrecognized assets are not capable of being recognized in the financial statements because an appropriate basis of measurement and a reasonable estimate of the amount cannot be made; or sections of the PSA Handbook prohibit its recognition. This would be consistent with the general disclosure requirement for all unrecognized liabilities in PS3200 We agree with the disclosure of unrecognized assets along with the reasons why a reasonable estimate cannot be made in accordance with Principle 1.



Yes, we agree with the proposed definition of a contingent asset. 2. Do you find the proposed guidance on the contingent assets useful? Are there other


Yes. The proposed guidance (.075 to .078) is useful in understanding the nature of a contingent asset.


Yes. When the confirming future event is likely, information on a contingent asset should be disclosed in the notes and schedules in accordance with Principles 2 and 3.

Page 4 of 4

4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent

assets should be recognized?

No. Contingent assets should not be recognized as the public sector entity does yet have control over the asset.

5. In some cases, likely contingent assets may be recognized as part of a reduction to a

contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only? Yes. We agree with limiting the recognition of contingent assets to this situation only. It is conceptually inconsistent to use a contingent asset to reduce a recognized contingent liability when contingent assets, which are viewed as likely, should only be disclosed in the notes or schedules to the financial statements. However, recoveries such as counterclaims and insurance are often elements of contingent liabilities. The recovery is not a separate transaction distinct from the occurrence of the obligation. The recovery should be recognized provided it is likely. Reducing the amount of the contingent liability by the contingent asset better presents the public sector entity’s exposure.



Yes. We agree with the proposed definition of contractual rights. Contractual rights should be limited to legally enforceable contracts or agreements that will become assets and revenues when the terms are met.

2. Do you find the proposed guidance on the contractual rights useful? Are there other


Yes. We find the proposed guidance on contractual rights useful (sections .137 to .142). We did not consider any other aspects.


Yes. We agree the proposed disclosure requirements for contractual rights as disclosed in Principle 4.




November 29, 2013






Name: Darwin Bozek

Organization: Alberta Treasury Board and Finance - Office of the Controller


General comments:

Thank you for the opportunity to comment We agree that the proposed additional guidance on the three elements of financial statements would potentially enhance the quality of financial reporting. We are, however, concerned that due to the potential inconsistencies of some of the definitions with the eventual outcome of the "Concepts Underlying Financial Performance" Project, these proposals may have to be revised shortly after completion. The potential inconsistencies may also create an element of uncertainty and ambiguity in the interim period.

Effects Analysis


The transitional impact and the volume of additional work may be of some concern. As these issues were traditionally not addressed in the governments' financial statements, there may be some communication issues with the stakeholders. The Task Force has to demonstrate clearly that the expected benefits of additional disclosure exceed the additional costs involved.

Part I – Assets


Yes. - We agree that removal of the term "direct" from the current definition of control prevents potential confusion as in many situations it is the members of the public - and not the public sector entity concerned - who are considered to benefit directly from the services provided. - In ¶ .036, it should be clarified whether benefiting from economic resources and ability to deny access to others should be enjoyed by the public sector entity to the total exclusion of others or does this apply to a significant or a major portion of such rights.

- In ¶ .038, in the discussion about economic resources that are subject to certain external restrictions, some reference to implications of PS 3100 - restricted assets and revenues may be helpful. - ¶s .043 - .050 under Past Transactions or Events - some of the proposed characteristics of assets have some common features with the notion of "deferred outflow" element as discussed in the Consultation Paper 2 - Measuring Financial Performance in Public Sector Financial Statements. A discussion of deferred outflows in the SOP may be helpful. The SOP should not be discussed in isolation and without considering its interactions with the Concepts Underlying Financial Performance Project. We are not convinced about the efficacy or relevance of the term "future" in the definition of assets in paragraph .012 access to economic benefits implies both current and future periods. The use of the term “expected” in ¶ .013 definition, if it is used with its general meaning, as used in ¶ .56 of PS 1000 – FINANCIAL STATEMENTS CONCEPTS, i.e. “that which can reasonably be anticipated, contemplated or believed on the basis of available evidence or logic but is neither certain nor proved” introduces an element of uncertainty. Consideration should be given if use of the term “expected” is meaningful and relevant in this context. GASB in its Concept Statement No 4, has defined "assets" as follows by avoiding the terms "future" and "expected": Assets are resources with present service capacity that the government presently controls.


Yes. The proposed guidance better explains what is meant by "future economic benefits" in the context of public sector entities. However, see our comments on the use of terms "expected" and "future" in 1 above.


Yes. It is noted, however, that the disclosure of unrecognized assets is limited to their "nature". It is not clear what is exactly meant by this term. This may create some inconsistency among public sector entities. in some cases, the unrecognized assets of some governments may be significant. Therefore, it may be useful, within the realm of cost/benefit constraints, that some additional information could be provided about the scale and significance of such assets.



Yes. However, there appears to be opportunities to further condense the definition while achieving the same objectives as follows: 1. The term " possible resources that may result in future economic benefits" could be replaced with the term "possible assets". 2. The meaning of the last sentence "the resolution of the uncertainty will confirm the existence or nonexistence of an asset." is already reflected in the previous sentence.


Yes. We agree that a threshold approach is more practical, provided that all the available evidence - as suggested in ¶ .093 - is taken into consideration.


Yes.


No. Introductory of a threshold may create an element of arbitrariness. If an inflow of economic benefits is "virtually certain", then the related asset is not "contingent" on the occurrence of an event and, therefore it should be recognized in the financial statements.


Yes. There appears to be another example of this in ¶ .62 of PS 3260 - Liability for contaminated sites.



No. We question the use of the term "revenue"? In our view, based on the current conceptual framework, revenue would entail change in assets. Therefore, it appears that the term "revenues" is redundant.


It appears that contractual rights and obligations equally exist in all exchange type executory contracts. Under executory contracts each party equally fulfills its obligations and any difference is represented by asset and liability balances between the parties involved. Therefore, there should be an equal balance of contractual rights for all contractual obligations under exchange type contracts. The same may not be true for non-exchange agreements, for example multi-year grant agreements from the perspective of recipient public sector entities. Also, because public sector entities currently do not recognize or record their natural resources, contractual rights under royalty agreements are not necessarily represented by contractual obligations. Therefore, disclosing contractual assets under such agreements may not provide a balanced view of a public sector entity's future revenue and expense.


Subject to our comments under 2 above, we agree with the proposed disclosure requirements for certain types of non-exchange contracts.





November 29, 2013






Name: Terry Paton, Provincial Comptroller

Organization: Province of Saskatchewan


General comments:

None

Effects Analysis


We appreciate that accounting for intangibles, as referenced in paragraph .004, is a complex issue. However, it seems inappropriate that a group of items that meets the definition of an asset are excluded from the standard. Certain purchased intangibles have a basis of measurement even if inherited intangibles do not. We encourage PSAB to undertake a project to address the accounting for intangible assets.

Part I – Assets


Yes, the proposed definition of an asset is useful to PSE financial statement preparers due to the additional clarity provided.


Yes, we agree with the concept of "service provision" and believe that the terminology used to describe this is less important. PSAB has appropriately dealt with this issue.


Yes, we agree with the proposed disclosure requirement; however, note our concern about intangibles as explained in our response to question one.



Yes, we agree with the definition of contingent assets. However, it would be useful to have specific examples of contingent assets, and not just examples of what are not contingent assets.


We acknowledge the issue raised in paragraph .105 regarding control. However, the standard for contingent assets is more conservative than neutral when considering the treatment of contingent liabilities. We recommend that the task force further consider whether this is an appropriate bias in the accounting treatment of contingencies.


Yes, we agree with the proposed disclosure requirements, noting our comments under question two. However, we recommend that PSAB expand upon and clarify the reason for the wording "Except when covered by another section...." It is not clear why this wording is required nor how it would be applied.


Noting our comments under question two, it is possible that it may be appropriate to recognize contingent assets that are virtually certain. This would result in accounting standards for contingent assets and contingent liabilities that would be slightly more neutral. However, we recommend that the PSAB Task Force further consider the potential impact on other accounting standards (i.e. Taxes and Government Transfers) if such a change were made.


We view the recognition of contingent assets as an offset to a contingent liability as part of the measurement of a contingent liability. Noting our comments under question two, at this point we agree with the reduction of a contingent liability for likely recoveries from a counterclaim or claim against a third party.



Yes, we agree with the proposed definition.


We would appreciate more specific examples of contractual rights. In addition, we note that the Decision Tree in Appendix A as presented indicates that disclosure would be required for those economic resources from which future benefits are to be obtained are not yet controlled, even if they do not result from legally enforceable contracts or agreements. That would include items that are collected through legislation, such as royalties and taxes. We recommend that an additional decision box be added to the Decision Tree. This would be placed under the "No" arrow that follows the box that asks "Do you control the economic resource as a result of a past transition or event?" and would read "Does the economic resource result

from a legally enforceable contract or agreement?" Only if the response is yes, would this lead to disclosure.


We suggest PSAB expand upon and clarify the reason for the wording "Except when covered by another section...." It is not clear why this wording is required nor how it would be applied.








de principes.




Nom : Michel Samson, vérificateur général par intérim

Organisation : Vérificateur général du Québec



En général, nous n'avons pas de problème particulier avec l'énoncé de principes, sauf pour les éléments de réponse à la notion d'actif éventuel (voir notre réponse à la Partie II - Actifs éventuels, question 1). De plus, nous considérons que les incidences directes et indirectes de ce projet sont difficiles à évaluer.



Il est difficile d'identifier les incidences des modifications proposées particulièrement celles reliées à la définition d'un actif. Nous aimerions obtenir des exemples d'éléments d'actifs qui ne répondraient plus à la définition d'actifs avec les modifications proposées.

Partie I - Actifs


Oui, les indications proposées relativement à la définition des actifs sont utiles en tenant pour acquis que toutes les indications proposées feront partie intégrante de la norme. Aucun autre aspect n'a été identifié.


Nous sommes en accord avec le traitement proposé au paragraphe .052 par le CCSP, car il est sans incidence sur la définition d'actif du paragraphe .36 du chapitre SP 1000. De plus, la notion de potentiel de service est traitée dans le SP 3150 Immobilisations corporelles.


Oui



Nous sommes en accord avec la définition des actifs éventuels, mais nous avons certaines précisions à ajouter. Nous sommes d'avis que nous ne pouvons pas avoir d'actifs éventuels si l'autre partie à la transaction (gouvernement cédant) ne considère pas avoir un passif éventuel. Il faut baser l'appréciation de la probabilité de l'actif éventuel en fonction des éléments probants disponibles par rapport à l'autre partie à la transaction (paragraphe .92). Nous faisons donc référence ici à la symétrie des transactions en fonction du SP 3300 Passifs éventuels. Nous considérons qu'il y a un risque qu'une partie considère qu'elle possède un actif éventuel probable alors que l'autre partie (cédant) n'a pas considéré le passif éventuel comme étant probable. Cela est vrai particulièrement dans le contexte d'entités faisant partie du même périmètre comptable ou qui sont dans le secteur public selon des paliers de gouvernements différents. En effet, il ne serait pas logique qu'un gouvernement municipal présente en note à ses états financiers un actif éventuel qui provient d'un gouvernement provincial alors que ce dernier dans ses propres états financiers ne comptabiliserait pas le passif éventuel afférent. Nous sommes d'avis que le CCSP ne peut aller de l'avant avec ce projet d'énoncé de principes si au préalable il n'y a pas de lien entre le SP 3410 Transferts et le SP 3300 Passifs éventuels. En effet, il faudra des indications en lien avec le chapitre sur les transferts SP 3410 pour savoir à quel moment un bénéficiaire de subvention présente un actif éventuel en notes aux états financiers ou comptabilise un actif. Il y a déjà des enjeux à l'égard de la comptabilisation de l'actif par le bénéficiaire quant au moment de l'autorisation du transfert à régler au préalable avant de continuer ce projet. De plus, on invite le CCSP à porter une attention particulière à la cohérence de cette définition avec le chapitre sur les recettes fiscales particulièrement dans les cas de l'évaluation initiale (SP 3510.23). L'information additionnelle obtenue par suite d'événement comme les vérifications, les appels ou les décisions judiciaires sont alors comptabilisés comme des révisions d'estimations comptables. En effet, il faudrait déterminer s'il s'agit d'un actif ou d'un actif éventuel compte tenu du paragraphe .078 de cet énoncé de principe et de la définition d'un actif éventuel proposé.


Les indications proposées au sujet des actifs éventuels sont utiles, mais elles peuvent engendrer un autre problème si l'on ne règle pas le problème de symétrie de la transaction mentionné à la réponse précédente.


Oui, nous sommes d'accord avec les obligations d'information proposées.


Non, par mesure de prudence et en fonction du cadre conceptuel nous sommes d'accord avec la prise de position du CCSP. La comptabilisation des actifs éventuels pourrait amener un biais de la direction des entités.


Oui . C'est déjà prévu dans le SP 3300 Passifs éventuels et nous sommes d'accord à ce que la constatation des actifs éventuels soit limitée à cette situation seulement.



Nous sommes en accord avec la définition des droits contractuels proposée. Il s'agit d'une obligation contractuelle pour l'une des parties, il devrait donc s'agir d'un droit contractuel pour l'autre. Cette information serait donc utile aux utilisateurs des états financiers.


Oui, nous considérons que les indications proposées au sujet des droits contractuels sont utiles. Nous ne croyons pas qu'il y est d'autres aspects à prendre en considération.


Oui, nous sommes en accord avec les obligations d'informations proposées.


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2013-11 Assets, Contingent Assets, Contractual Rights RESPONSES

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