public sector accounting board (psab) annual update · 2019-10-09 · public sector accounting...

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







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


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







due process.







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


26

• Which option do you believe best meets the Canadian Public Interest?

• Comments Due September 30, 2019


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


Chapter 1: Introduction to the


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


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


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


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


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


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


Next Steps

September 2020 – BOARD APPROVAL

• Exposure draft for revised conceptual framework

(10 chapters) o accompanying basis for conclusions


• Exposure draft for revised reporting model (re-write

of PS 1201, Financial Statement Presentation) o accompanying basis for conclusions


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

http://www.francanada.ca/

http://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


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]

http://www.frascanada.ca/

mailto:[email protected]