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Public Sector Accounting Board(PSAB) – 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.
Michael A. Puskaric, DirectorNovember 21, 2018
Standard-Setting in Canada
AcSOC
AcSBAcSB Staff
PSABPSAB Staff
VP Standards
CPA Canada
OversightSupport & LiaisonResources
Oversight
Standard-setting
AASBAASB Staff
AASOC
November 21, 2018
PSAB’s Mission
• Public Sector Accounting Board (PSAB)• Serves the public interest by establishing
standards and other guidance for financial reporting by all Canadian entities in the public sector
• Supporting informed decision making and accountability for Canadian public sector entities
November 21, 2018
PSAB Membership
• PSAB members are appointed by AcSOC on an annual basis
• Diverse membership ensures appropriate balance of competencies and experience
November 21, 2018
PSAB Membership• Charles-Antoine St-Jean (Chair), Former Partner EY• Andrew Newman (Vice-Chair), Partner, KPMG• Scott Monroe, Director, Standards and Certification, First Nations Financial
Management Board • Bill Cox, Partner, BDO Canada• Jean-Luc Ostiguy, Partner, Deloitte (Retired)• Guylaine Leclerc, Auditor General of Quebec• Joyce Bateman, Former Member of Parliament, Winnipeg South Centre• Clyde MacLellan, Assistant Auditor General of Canada• Kim MacPherson, Auditor General of New Brunswick• Bill Matthews, Senior Associate Deputy Minister National Defense• Ann Marie Miller, Comptroller General of Finance, Newfoundland & Labrador• Geoffrey Gatien, Associate Deputy Minister and Controller, Department of
Finance & Treasury, Government of Nova Scotia• Mike Ruta, CFO, City of Winnipeg
November 21, 2018
PSAB Committees
November 21, 2018
PSAB’s Due Process
• Key due process principles:– Stakeholder consultation– Accountability – Transparency
• AcSOC oversees our activities and ensures we follow our rigorous due process
November 21, 2018
PSAB’s Due Process
November 21, 2018
PSA Overview - Roadmap
• Gov’t and components
GBEs
OGOs and Partnerships
GNFPs*
PSA Handbook
IFRS
IFRS
PSA Handbook
PSA Handbook +/-* NFPs in the public sector
November 21, 2018
2017-2020 Strategic plan
InternationalStrategy
NFP Strategy
Conceptual Framework
StakeholderAcceptance
Public Interest
November 21, 2018
Interrelated Strategies
November 21, 2018
Effective datesDate 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
November 21, 2018
2018-19 Annual PlanDocuments Project
Final Standard (FS) • Asset Retirement Obligations• Revenue
ExposureDraft (ED)
• Financial Instruments (Narrow Scope)• Annual Improvements• Public private partnerships
Statement ofPrinciples (SOP)
• Conceptual framework & Reporting Model
Invitation to Comment (ITC)
• Employment benefits (Pensions)
ConsultationPaper (CP)
• Review of International Strategy – CP #1 & 2• Government Not-For-Profit
November 21, 2018
Review of International Strategy
2017-2020 Strategic Plan
Review our approach to International Public Sector Accounting Standards
• Conduct research on the differences between Canadian Public Sector Accounting Standards and International Public Sector Accounting Standards
• Learn about experiences of other jurisdictions that have elected to follow International Public Sector Accounting Standards
• Issue a public consultation paper to get the opinion of stakeholders
• Develop options for our international strategy
November 21, 2018
Timelines
November 21, 2018
Consultation Paper 1 IssuedComment Period & Outreach ActivitiesReview of CommentsConsultation Paper 2 IssuedComment Period & Outreach ActivitiesReview of CommentsDecision on International StrategyStakeholder Viewpoint Analysis and Board Decision Summary Issued
June Sept Dec Mar June Sept Dec Mar June2018 2019 2020
Current Approach to IPSASB
• Maintain a Canadian standard-setting capability while contributing to and influencing the work of the IPSASBo contribute to the development of standards by:
– briefing the Canadian members of IPSASB– responding to IPSASB documents for
commento encouraging Canadian public sector entities to
respond to IPSASB’s documents for comment
November 21, 2018
International Strategy – Why Now?
• International Standards have maturedo Conceptual Framework, robust due process
and a comprehensive set of Accounting Standards
• International adoption momentum• Canada’s role in influencing
International Standards• Time & resources spent on developing
Canadian public sector standards
November 21, 2018
Consultation Paper # 1
• Neutral Approach o PSAB has not decided which option to pursue
• Introduce decision making model
• Not seeking opinions on which option PSAB should adopt o Discuss criteria that will be used to evaluate these
options
November 21, 2018
Consultation Paper # 1
• Resources and timeframes for implementation are not in scope
• Responses received from CP #1 will be incorporated into CP #2
• PSAB to be in a position to make a decision by March 2020
November 21, 2018
Consultation Paper # 1
• Asking stakeholders to comment on:
o Are there additional criteria the Board should include in its business cases when evaluating the options?
o Should any criteria take precedence over others?
o Are there other significant facts that should be taken into consideration?
November 21, 2018
Consultation Paper # 1
Asking stakeholders to comment on:
oAre there additional options for PSAB to consider and for which it should develop a business case?
oAre there any other matters that should be brought to the Board’s attention for consideration?
November 21, 2018
Decision Making Criteria
November 21, 2018
International Strategy – Options
Business Case Approach
Status QuoAdapt IPSAS
principlesAdapt
IPSASsAdopt
IPSASs
November 21, 2018
Option # 1 – Status Quo
Status quo is defined as continuing the existing standard-setting process. This option maintains PSAB’s role in establishing PSA standards independently from other standard setters.
Status QuoAdapt IPSAS
principlesAdapt
IPSASsAdopt
IPSASs
November 21, 2018
Option # 2 – Adapt IPSAS Principles
Status QuoAdapt IPSAS
principlesAdapt
IPSASsAdopt
IPSASs
This option involves PSAB continuing to develop standards for Canada. However, future standards would be based on existing IPSASs. The Board would establish a process detailing when departures from IPSASs are warranted.
November 21, 2018
Option # 3 – Adapt IPSASs
This option involves applying IPSASs in Canada, except in circumstances where a departure is warranted. PSAB moves away from developing standards for Canada except when a Canadian issue is identified.
Status QuoAdapt IPSAS
principlesAdapt
IPSASsAdopt
IPSASs
November 21, 2018
Option # 4 – Adopt IPSASs
Status QuoAdapt IPSAS
principlesAdapt
IPSASsAdopt
IPSASs
This option involves PSAB adopting IPSASs as issued by the IPSASB.
November 21, 2018
PSAS / IPSAS Comparison
19 Standards (50%)
11 Standards (29%)
8 Standards (21%)
Consistency of PSAS with IPSAS
Consistent
Difference
Significant difference
November 21, 2018
Responses to Consultation Paper #1
Controller
Federal & Provincial Auditor
Local Auditor Local Gov’t
SUCH Org
Actgfirms Others Total
International 1 1
Canada 1
1*
4 1 7
BC 1 2 1 4
AB 1 1
SK 1 1 2
MB 1 1
ON 1 1 2 4
QC 1 1 1 3
NB 1 1
NS 1 1
PEI 1 1
NFLD 1 1 2
Bermuda
Total 10 1 1 4 3 5 4 28
*Note: 1 joint response was received from 12 Auditor Generals November 21, 2018
Preliminary Stakeholder Feedback
November 21, 2018
• Defining existing criteria and addition of new criteria
• Ranking of criteria
• Risk analysis/cost-benefit of options
• Impact to government not-for-profits and smaller public sector entities
• Need to understand the experiences of other jurisdictions
Consultation Paper # 2
November 21, 2018
• Communicate feedback on Consultation Paper #1
• IPSASB and PSAB comparison
• Share the experiences of other jurisdictions
• Define and finalize the criteria and options
• Currently determining whether PSAB will take a position on the future of international strategy
Resources
“In Brief” Plain and Simple Overview of the Consultation paper
Video “Reviewing our International Strategy”
www.frascanada.ca
November 21, 2018
Questions and/or Comments
November 21, 2018
Concepts UnderlyingFinancial Performance
The North Star
November 21, 2018
Task Force Members• Clyde MacLellan (Chair),
OAG Canada
• Tim Beauchamp, Retired, Director PSA Standards
• Pete DeVries, Retired, Dept. of Finance, Canada
• Paula Jesty, Partner, Deloitte
• Brad Klaiber, Director, University of Calgary
• Merwan Saher, Retired, AG Alberta
• Cindy Veinot, Former Comptroller General, Ontario
• Cheryl Wenezenki-Yolland, Retired in mid-2017 (former Associate DM Finance, British Columbia)
• Nickie Young, Professor Emeritus, St. Mary’s University, Nova Scotia
November 21, 2018
May 2018 – Release of Proposals for a Revised Conceptual Framework and Reporting Model
November 21, 2018
Why: Working in the Public Interest
November 21, 2018
How: The Journey to the Proposals
Consultation Paper 1
• August 2011
Consultation Paper 2
• October 2012
Consultation Paper 3
• March 2015
November 21, 2018
Purpose of Project (1)
Existing Conceptual Framework
• Section PS 1000, Financial Statement Concepts• Section PS 1100, Financial Statement Objectives
Proposed Conceptual Framework
• Chapter 1: Introduction to the ConceptualFramework
• Chapter 2: Characteristics of Public SectorEntities
• 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
November 21, 2018
Purpose of Project (2)
Section PS 1201, Financial Statement
Presentation
Section PS 1202, Financial Statement
Presentation
November 21, 2018
Proposed Conceptual Framework –At a Glance• What’s new?
– Definition of conceptual framework
– Better articulation of financial statement foundations
– Understandability focus
– Derecognition– Presentation concepts
• What’s different?– Characteristics of
PSEs– Qualitative
characteristics– Considerations– Recognition
prohibitions relocated
November 21, 2018
Elements of Financial Statements
• Asset• Liability• Revenue• Expense
November 21, 2018
Exclusions from Recognition
inherited natural resources
inherited Crown lands
purchased and inherited art and
historical treasures
all intangibles
November 21, 2018
Your Feedback Matters
November 21, 2018
Questions and/or Comments
November 21, 2018
Reporting Model
November 21, 2018
The Way Forward…
…considers all Public Sector
Entities
November 21, 2018
Proposed Financial Statement Package
• statement of financial position• statement of surplus or deficit• statement of changes in net assets• statement of cash flow• statement of net debt• notes and schedules
November 21, 2018
Statement of Surplus or Deficit
Budget 20x3 20x2xx xx xxxx xx xxxx xx xx
Statement of Surplus or Deficitfor the period ended March 31
RevenueExpenseSurplus / (Deficit)
November 21, 2018
Statement of Financial Position
20x3 20x2xx xxxx xxxx xx
xx xx
xx xx
accumulated surplus/deficit xx xxaccumulated remeasurements xx xxaccumulated other xx xx
xx xx
Net assets (net liabilities) comprised of:
Statement of Financial Positionas at March 31
Financial assetsNon-financial assetsTotal assets
Liabilities
November 21, 2018
Multiple Components of Net Assets
Net Assets
Accumulated surplus or deficit
Accumulated remeasurements Accumulated other
November 21, 2018
Why direct recognition in net assets?
• Understandability for users– Only assets and liabilities in financial
position
• Most relevant for users:– No deferrals or other accounting
creations– One bottom line representing
surplus/deficitNovember 21, 2018
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”
November 21, 2018
New Statement of Net Debt
• Separate reporting of net debt on its own statement
• Ability to refine the net debt calculation to restore its original meaning
• Ability to highlight and explain volatility in net debt related to financial instruments recognized at fair value on this statement
• Potential to not require it for some entities
November 21, 2018
Net Debt Calculation
Financial Assets-
Liabilities =
Net Debt or Net Financial Assets
Endowments??
Unearned Revenue related to performance obligations??
November 21, 2018
20x3 20x2xx 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 xxxx xx
xx xx
Statement of Net Debtas at March 31
Financial assets
financial assets
Net Debt
Statement of Net Debt
Endowments
Unearned Revenue (granting a right over a
period of time)November 21, 2018
Budget Proposals
Ideally, the budget will use the same:• basis of accounting, • accounting principles, • scope of activities, and • classifications as the actuals in the financial statements.
November 21, 2018
Use of Amended Budget
• FOR GOVERNMENT – when there is an election and new budget is approved
• FOR GOVERNMENT ORGANIZATION –when governing body is elected or appointed and new budget is approved
November 21, 2018
We Want Your Feedback
Comment deadline: November 28, 2018
• Foster understanding of proposals– Webinars – October 15 and
17 (English), November 5 and 7 (French)
– articles– videos
• Develop exposure draft
Questions and/or Comments
November 21, 2018
Government Not-For Profit Organizations (GNFPO)
Background
• Assess the specific needs of GNFP stakeholders
• Understand if some of our standards should apply differently to GNFPOs
• Implement a GNFP strategy that meets the public interest
• Enhance engagement with the users of GNFPO organization’s general-purpose financial statements
November 21, 2018
Background
• Staff consulted with over 100 GNFP stakeholders
• The objective of the consultations was to:
○ understand the fiscal and regulatory environment in which GNFPOs operate in;
○ identify their financial reporting needs; and
○ understand their financial reporting perspectives.
November 21, 2018
Summary of findings
• Diversity in financial reporting framework
• Presentation:o Net debto Fund accounting
• Impact on balanced budget requirement
• Endowments: o Accountingo Presentation
November 21, 2018
Next Steps
• Present a consultation paper for approval at the December 2018 meeting
• The consultation paper will articulate:o Canadian and International NFP financial reporting
landscape;o results of the 2017/2018 GNFP consultations; ando seek stakeholder input to develop strategy.
November 21, 2018
Next Steps
• Webinar October 29, 2018o Discuss results of the consultationso Consultation paper
• “In Brief” document in November 2018
November 21, 2018
Questions and/or Comments
November 21, 2018
Public Sector AccountingDiscussion Group• Meeting November 19, 2018 • Live Stream www.frascanda.ca• Agenda:o Green infrastructureo Accounting for Indigenous Government
Business Enterpriseso Reporting Model o Contractual Rights
November 21, 2018
Shaping the Future
• Projects will define the future of Public Sector Accounting
• Stakeholder Involvement and Participation: o Documents for Commento Public Sector Discussion Groupo Task Force/Advisory Group
• Outreach Opportunities
November 21, 2018
For more information, visit www.frascanada.ca
Contact:Michael A. Puskaric
Director, Public Sector Accounting BoardPhone: +1 (416) 204-3451
Email: [email protected]