Public Sector Accounting Board
(PSAB) – Annual Update
The PSA Handbook is the
primary authoritative source
of public sector GAAP.
The opinions stated in the presentation are those of the author
and do not necessarily reflect the views of PSAB. Official
positions of PSAB are established only after extensive public
due process.
Canadian Association of Government Finance Officers (CAGFO)
October 2nd, 2019
2017-2021 Strategic plan
International
Strategy
GNFP Strategy
Conceptual Framework
Stakeholder
Acceptance
Public Interest
Agenda
• Approved Standards coming in effect
– Asset Retirement Obligations
– Revenue
– Financial instruments
Agenda
• Standards Under Development
– International Strategy
– Conceptual Framework & Reporting Model
– Public Private Partnerships
– Employment benefits
– Government Not-for-Profit
Project update
Documents Project
Final Standard (FS) Asset Retirement Obligations
Revenue
Exposure Draft (ED) Conceptual Framework & Reporting Model
Employment benefits (Pensions)
Financial Instruments (Narrow Scope)
Public Private Partnerships
Purchased Intangibles
Annual Improvements
Consultation Paper (CP)
Review of International Strategy – CP #2
Government Not-For-Profit
Approved Standards
- Local Government Considerations
The PSA Handbook is the
primary authoritative source
of public sector GAAP.
The opinions stated in the presentation are those of the author
and do not necessarily reflect the views of PSAB. Official
positions of PSAB are established only after extensive public
due process.
Effective dates
Date Topic
April 1, 2021 Governments and some organizations only:
• F/S Presentation PS 1201
• Foreign Currency Translation PS 2601
• Financial Instruments PS 3450
• Portfolio Investments PS 3041
April 1, 2021
Government and Government Organizations
• Asset Retirement Obligations, Section PS 3280
April 1, 2022 Government and Government Organizations
• Revenue, Section PS 3400
Asset Retirement Oligations
8
Scope
A legal obligation associated with the retirement of a
tangible capital asset
Asset retirement
obligation
Scope considerations
• controlled by the public
sector
• In productive use, or
no longer in productive
use
• Includes leased
tangible capital assets
Which tangible capital
assets? Examples of what scope includes
• Solid waste landfill closure and post closure
liabilities (PS 3270)
• Asbestos
• Routine replacement
• Contaminated sites (PS 3260)
• Improper use
• Unexpected events
• Alternative use
• Waste and by-products
Scope excludes
9
Implementation Considerations
• Communication with Finance and other part of your organization
– Review agreements – determine if unrecorded
liabilities
– Start with complete TCA listing
– Tag assets that could potentially have ARO’s
– Determine if there are ARO’s for TCA’s not
recorded
– Leverage work and logic used for adoption of
PS 3260
10
Questions and/or Comments
11
• Do you think your organization will have an ARO to recognize?
• What steps are you taking to prepare for implementation?
• “In Brief” plain language document
Revenue
• Provide guidance for the recognition of revenues earned by public sector entities
– Not already addressed within the CPA Canada
Public Sector Accounting (PSA) Handbook
• More consistent recognition and measurement of these types of revenue transactions
12
Principles – Scope
13
Revenues, including gains, are increases in economic resources, either
by way of increases of assets or decreases of liabilities, resulting from
the operations, transactions and events of the accounting period. Revenues
Out of scope
Government
transfers
Tax revenue
Inflows from
restricted economic
resources
Financial
instruments
Restructuring
transactions
Revenues from
government
business enterprises
Final Revenue Standard
• Local Government Considerations:
• Building permits are in scope
– Identify performance obligations and recognize
revenue when satisfied
• Development Charges are out of scope
– Section 3100 will continue to apply
• Review agreements and determine performance obligations
14
Questions and/or Comments
15
• Will the guidance change the recognition of revenue from building permits on your organization?
• What steps are you taking to prepare for implementation?
• “In Brief” plain language document
Financial Instruments
• Extensive Consultation Process
– Consultation with Sr Governments, Auditor
Generals, Local Governments and Government
Not-For-Profits across Canada
• Effective date extended to 2021
16
Financial Instruments
• Narrow scope amendments project targeting specific items:
– Transitional provisions
– Clarifying scope
– Bond repurchase issue
• Exposure Draft approval December 2018
• “In Brief” plain language explanation of
decision
17
Next Steps
• PSAB to approve final amendments for handbook in December 2019
o Final handbook updated mid-2020
• Financial instruments suite of standards remain effective for year ends on / after April 1, 2021
Questions
Under Development
The PSA Handbook is the
primary authoritative source
of public sector GAAP.
The opinions stated in the presentation are those of the author
and do not necessarily reflect the views of PSAB. Official
positions of PSAB are established only after extensive public
due process.
The PSA Handbook is the
primary authoritative source
of public sector GAAP.
The opinions stated in the presentation are those of the author
and do not necessarily reflect the views of PSAB. Official
positions of PSAB are established only after extensive public
due process.
Review of International
Strategy
2017-2021 Strategic Plan
Review our approach
to International Public
Sector Accounting
Standards
• Conduct research on the differences between PSAS & IPSAS
• Learn about experiences of other jurisdictions that follow IPSAS
• Issue a public consultation paper to get the opinion of stakeholders
• Develop options for our international strategy
22
Timelines
23
Consultation Paper 1 Issued
Comment Period & Outreach
Activities
Review of Comments
Consultation Paper 2 Issued
Comment Period & Outreach
Activities
Review of Comments
In a position to make a
decision on International
Strategy
Basis for Conclusions Issued
June Sept Dec Mar June Sept Dec Mar June
2018 2019 2020
The Options
The Criteria
Questions and/or Comments
26
• Which option do you believe best meets the Canadian Public Interest?
• Comments Due September 30, 2019
Conceptual Framework
and Reporting Model
What is a Conceptual Framework?
Purpose of Project
Existing Conceptual Framework
• Section PS 1000, Financial Statement Concepts
• Section PS 1100, Financial Statement Objectives
Proposed Conceptual Framework
• Chapter 1: Introduction to the Conceptual Framework
• Chapter 2: Characteristics of Public Sector Entities
• Chapter 3: Financial Reporting Objective
• Chapter 4: Role of Financial Statements
• Chapter 5: Financial Statement Foundations
• Chapter 6: Financial Statement Objectives
• Chapter 7: Qualitative Characteristics and Related Considerations
• Chapter 8: Elements of Financial Statements
• Chapter 9: Recognition and Measurement
• Chapter 10: Presentation Concepts
(1) Revised Conceptual Framework (2) Revised Reporting Model
Section PS 1201, Financial Statement
Presentation
Section PS 1202, Financial Statement
Presentation
Proposed Conceptual Framework
Chapter 1: Introduction to the
Conceptual Framework
Chapter 2: Characteristics of
Public Sector Entities
Chapter 3: Financial Reporting
Objective Chapter 4: Role of Financial
Statements
Unique
Governance
Structures
Multiple
Objectives
Accountability
Public
Resources
Non-exchange
Transactions
Proposed Conceptual Framework
Identifiable
Reporting
Entity
Control
Service
Capacity
Unit of
Measure
Basis of
Accounting
Chapter 5: Financial Statement
Foundations
Chapter 6: Financial Statement
Objectives
Scope
Reporting Financial
Position
Reporting Changes in
Financial Position
Reporting Actual to Budget
Comparison
Reporting Non-Compliance
with Legislative Authorities
Reporting Risks and
Uncertainties
Proposed Conceptual Framework
Benefit versus cost
Materiality
Prudence
Relevance Faithful
Representation
Verifiability
Comparability
Understandability
Timeliness Financial
Information
Chapter 7: Qualitative Characteristics
and Related Considerations
Chapter 8: Elements of Financial
Statements
Asset
Liability
Revenue
Expense
Proposed Conceptual Framework
Chapter 9: Recognition and
Measurement
• General recognition criteria
• Derecognition criteria
• Measurement attribute Inherited natural
resources Inherited Crown
lands
Purchased and inherited art and
historical treasures
All intangibles
Chapter 10: Presentation
Concepts
Exclusions from Recognition
Summary
• Building on and improving the existing conceptual framework
WHY?
Necessary to do a periodic review
Asked by stakeholders
Issues with certain standards
High-Level Summary
24 questions asked
39 letters received
– representing
103 respondents
17 questions asked
43 letters received
– representing
107 respondents
• Governments
• Auditors
• Fiscal managers
• Academics
• Government organizations
– government not for profits
• Users
• Municipal Natural
Assets Initiative
inconsistencies with CF
characteristics of PSEs
description of control
service capacity
FS objectives
definition of revenue
measurement
definition of gov’t
Feedback on Statement of Concepts:
Proposed Conceptual Framework (CF)
qualitative characteristics
definitions of assets /
liabilities / expenses
recognition criteria
de-recognition criteria
removal of recognition
exclusions
presentation definition
and objective
Proposed Reporting Model
Proposed Reporting Model
20x3 20x2
xx xx
xx xx
xx xx
xx xx
xx xx
accumulated surplus/deficit xx xx
accumulated remeasurements xx xx
accumulated other xx xx
xx xx
Net assets (net liabilities)
comprised of:
Statement of Financial Position
as at March 31
Financial assets
Non-financial assets
Total assets
Liabilities
Nature of Revenues and Expenses not
Immediately Recognized in Surplus or Deficit
Remeasurements arising from financial instruments
All remeasurements identified by PSAB
All remeasurements and endowments
All remeasurements, endowments and other revenues and expenses identified by PSAB √
Net Assets
Accumulated surplus or
deficit
Accumulated remeasure-
ments
Accumulated other
New Component of Net Assets
• Only used in rare circumstances
• Only PSAB can designate transactions
• Being illustrated to show responsiveness
• PSAB can create further components
o To differentiate items with shared characteristics
– Objective: Make F/S more understandable
• “accumulated other”
20x3 20x2
xx xx
less financial assets that are externally restricted and/or
not available to settle liabilities xx xx
xx xx
Liabilities xx xx
less liabilities that will not be settled through the use of
xx xx
xx xx
xx xx
Statement of Net Debt
as at March 31
Financial assets
financial assets
Net Debt
Proposed Reporting Model
Endowments
Unearned Revenue
(granting a right over a
period of time)
Concerns
Requiring
Guidance /
Clarification
• calculation of net debt
• disclosing actual vs
budget tangible capital
expenditures
• when to use an amended
budget
• disclosing risks and
uncertainties
Feedback on Statement of Principles:
Proposed Reporting Model (RM) Concerns
Requiring
Consideration
on How to Proceed
• removal of net debt from
statement of financial
position
• adding new component
of net assets
• removal of statement
of change in net debt
The Plan
Key Deliverables
• Exposure draft for revised conceptual framework (10 chapters) o accompanying basis for conclusions
o consequential amendments to PSA Handbook
• Exposure draft for revised reporting model (re-write of PS 1201, Financial Statement Presentation) o accompanying basis for conclusions
o consequential amendments to PSA Handbook
Next Steps
September 2020 – BOARD APPROVAL
• Exposure draft for revised conceptual framework
(10 chapters) o accompanying basis for conclusions
o consequential amendments to PSA Handbook
• Exposure draft for revised reporting model (re-write
of PS 1201, Financial Statement Presentation) o accompanying basis for conclusions
o consequential amendments to PSA Handbook
Final approval: 2022
Questions
Public Private Partnerships
Key Concepts of ED: Scope of Public Private Partnerships
• Public private partnership is a model to procure infrastructure and related services from the private sector
• Scope of standard requires private sector partner to: o Build or better infrastructure
o Finance the transaction past the point
of substantial completion
o Maintain and/or operate infrastructure
47
Principles – Scope
48
Focu
s
Key Concepts of ED: Recognition of the infrastructure
• Infrastructure is recorded as an asset only if it is controlled by the public sector
• Recognition criteria require the public sector to control: o Purpose and use of infrastructure
o Access to future economic benefits/risks
o Significant residual interest
49
Key Concepts of ED: Measuring the transaction
• If the public sector controls the infrastructure, the transaction is initially measured at fair value o Cost is equal to fair value on day one
• Corresponding liability measured at same amount as asset o Payment stream: record
a financial liability
o User-pay model: record
a performance obligation
Key Concepts of ED: Ongoing accounting for PPP transactions
• PPP assets may have prolonged useful lives because of the contractual commitment to perform ongoing maintenance and upgrades
• Operating and maintenance expenses (including lifecycle costs) accounted for smoothly over the service contract
Next Steps
• PSAB approved Exposure Draft at September 2019 meeting
• ED will be open for comment November 2019 – February 2020
• PSAB staff will perform outreach during this same period
• WEBINAR FEBRUARY 4, 2020
Questions
Employment Benefits Project
Update
Employment Benefits Project
• Project objective
• Project scope
• Key issues
• Timeline
Response Letters Received to ITC’s
ITC 1 ITC 2 ITC 3
Controllers General 9 10 9
Auditors General 7 5 5
Municipal Sector 5 3 9
Government Not-for-Profit Organizations 6 2 3
Accounting Firms 4 4 4
Actuaries /Consultants 4 5 5
Pension Plans 0 9 7
Unions 0 6 3
Other 2 2 2
Total 37 46 47
ITC 1 on Deferral Provisions
• Options for recognizing actuarial gains/losses in annual surplus/deficit o Immediate recognition
o No recognition
o Deferred recognition
– EARSL (status quo)
– Other
• Valuation options for plan assets o Market value only
o Market-related value (status quo)
Key ITC 1 Issues/Questions
• Continue to value plan assets at market-related value?
• Continue to amortize actuarial gains and losses in benefit expense?
• Continue to leave deferral in the net benefit liability/asset?
ITC 2 on Discount Rate
• Alternative discount rate bases o Expected return on plan assets (current practice)
o Expected return of an effective hedge portfolio
o Market yields of high-quality debt instruments
o Market yields of risk-free debt instruments
o Entity’s cost of borrowing (current practice)
o Effective settlement rate
• Alternative discount rate views o Current rate view
o Average rate view
o Projected rate view (current practice)
Key ITC 2 Issues/Questions & TFP
• Should different discount rates be used based on whether the plan is funded with assets?
• What discount rate should be used to determine accrued benefit obligation?
?
Discussions on Non-traditional Plans
• Principles-based approach
• Task Force proposed expanding ITC 3 general principle to net benefit liability/asset, with guidance on o Accrued benefit obligation (ITC 3 and ITC 2)
o Plan assets (ITC 1)
o Asset ceiling on net benefit asset
o Liability ceiling on net benefit liability
Employment Benefits Project Timeline
2019 Deliberate responses to 3 ITCs & key issues
Q1-Q3 2020 Address key issues & develop Exposure Draft
Sept 2020 PSAB reviews Table of Contents of draft Exposure
Draft and draft Basis for Conclusions
Dec 2020 PSAB reviews draft Exposure Draft and draft Basis
for Conclusions
March 2021 PSAB approves Exposure Draft and Basis for
Conclusions
Q2-Q4 2021 Field testing of Exposure Draft & communications
Dec 2022 PSAB approves new Employment Benefits Standard
Government Not-for-Profit
(GNFP)
Background
GNFP Strategy 2017-2021
GNFP Consultation Paper
• GNFP Consultation Paper issued on May 8, 2019
• The purpose of the Consultation Paper is to:
o articulate the Canadian and international NFP
landscape;
o present results of the 2017-2018 GNFP consultations;
and
o seek feedback on key matters.
Canadian SUCH Sector Landscape
Results of the GNFP Consultations
• Diversity in financial reporting
• Presentation of Financial Statements:
o Net debt
o Fund accounting
• Impact on the balanced budget requirement
• Endowments
Matters for feedback
Future trends
Financial reporting issues
Uniform accounting and presentation
Consistency within the GNFP sector
Comparability within a subsector
NFP Research
• Research initiative
– NFPOs in public and private sector
– To assess nature, significance and
trends in NFP reporting
• Useful to PSAB and Accounting
Standards Board
– In setting priorities and setting
standards
Questions
Public Sector Accounting Discussion Group (PSADG)
Public Sector Accounting Discussion Group (PSADG)
• NOVEMBER 15th, 2019
• Join via LIVESTREAM
www.francanada.ca
Shaping the Future
• Projects will define the future of
Public Sector Accounting
• Stakeholder Involvement and
Participation:
o Documents for Comment
o Public Sector Discussion Group
o Task Force/Advisory Group
o Outreach Opportunities
September 12, 2018 74
Questions and/or Comments
September 12, 2018 75
Questions
For more information, visit www.frascanada.ca
Contact
Michael A. Puskaric
Director, Public Sector Accounting Board
Phone: +1 (416) 204-3451
Email: [email protected]