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Chartered Accountants of Canada Public Sector Accounting Board - Conseil sur la comptabilité dans le secteur public

About PSAB

What Are Accounting Standards?
What are Statements of Recommended Practice?
The Public Sector Accounting Board (PSAB)
PSAB's Major Stakeholders
Relationship to Other Committees
Structure and Members of PSAB and Task Forces
How Do Topics Get on PSAB's Agenda?
The Due Process for Standards Development
International Activities
Enquiries About Projects

Annual Report

What Are Accounting Standards? 
Accounting standards are authoritative standards for financial accounting and reporting developed through an organized standard-setting process and issued by a recognized standard setting body (the Public Sector Accounting Board (PSAB)). Accounting standards specify how transactions and other events are to be recognized, measured, presented and disclosed in government financial statements. The objective of such standards is to meet the needs of users of financial statements by providing the information needed for accountability and decision making.

Accounting standards are the primary source of generally accepted accounting principles (GAAP). The CICA Public Sector Accounting (PSA) Handbook contains accounting standards applicable to federal, provincial, territorial and local governments. It also requires that certain public sector organizations follow the CICA Handbook – Accounting unless otherwise directed to specific accounting standards of the PSA Handbook. The Appendices to the  Introduction to Public Sector Accounting Standards in the PSA Handbook describe which standards apply to public sector organizations.

The CICA Handbook – Accounting contains accounting standards applicable to all types of profit-oriented enterprises and not-for-profit organizations (see Accounting).

What Are Statements of Recommended Practice?

Statements of Recommended Practice (SORPs) address specific aspects of reporting on financial condition and financial and non-financial performance. PSAB issues SORPs to enhance decision- making and accountability by improving the understandability of reports issued in the public sector.

SORPs do not form part of GAAP. They are not prescriptive, but offer general guidance to encourage and assist public sector entities in effectively reporting relevant information that is useful in evaluating the entity’s financial condition at the financial statement date and its financial and non-financial performance during the reporting period.

The Public Sector Accounting Board (PSAB)

PSAB is an independent body with the authority to set accounting standards for the public sector. The responsibilities of PSAB are set out in its Terms of Reference — Decision Making.

The mission of PSAB is stated as follows:

The mission of the Public Sector Accounting Board (PSAB) is to serve the public interest by setting standards and providing guidance for financial and other performance information reported by the public sector. PSAB shall do this by establishing independent, conceptually-based standards and other guidance through consultation and communication and contributing to the development of internationally accepted standards.

The vision of PSAB is stated as follows:

The public understands and has confidence in public sector reporting.

The expected outcomes of PSAB are:

To produce decision-useful, multi-dimensional accountability reports based on its standards and guidance. To meet this expectation, PSAB needs to ensure its standards, guidance and communication activities accomplish a series of interdependent outcomes:
  • the public sector produces comprehensive, high-quality financial statements;
  • the public sector produces comprehensive, high-quality financial and non-financial performance data; and
  • stakeholders accept the Public Sector Accounting Handbook as the primary source for public sector reporting guidance in Canada.
In achieving these outcomes, PSAB shall:
  • be committed to serve the public interest;
  • respect and encourage input from all its stakeholders;
  • bring objectivity to the consideration of issue;
  • respect the ability of its stakeholders to exercise professional judgment; and
  • be committed to timeliness in its responses to stakeholder needs.

PSAB normally meets four times a year for full Board meetings. PSAB also meets, if necessary, by way of conference calls.

Relationship to Other Committees

The Accounting Standards Oversight Council (AcSOC) oversees the activities of PSAB. The AcSOC appoints the members of PSAB and provides input to PSAB, primarily in terms of its strategic direction and priorities. After obtaining feedback from AcSOC, PSAB discusses and considers the views of AcSOC with respect to PSAB's strategic direction.

PSAB's Major Stakeholders

The following diagram depicts PSAB's major stakeholders, defined as those who significantly affect, and/or are significantly affected by PSAB's activities.

 


 

Structure and Members of PSAB and Task Forces

PSAB consists of a maximum of 12 members and a Chair — current members are listed here. The Vice-President, Standards, and the Director, Public Sector Accounting are non-voting members of the Board.  Task force members are listed here.

PSAB's standards are developed by the people who prepare, audit and use government financial statements and reports — i.e., those who will be governed by the standards.

Under its terms of reference, two-thirds of PSAB Board members will normally be people responsible for government financial reporting and auditing.  That is key to ensuring that the standards are appropriate for governments.

Members of PSAB and its task forces are not appointed by other organizations. PSAB recruits individuals, and all PSAB Board and task force volunteers serve as individuals and not as representatives of their governments or organizations. This policy allows for a full and open debate on issues.

Members are recruited based on the following criteria: 
  • commitment to PSAB objectives;
  • technical knowledge;
  • ability to consider the practical aspects of issues being considered; and
  • ability to influence the adoption of standards and the building of consensus on the Board's positions.
Board and task force members are drawn primarily from the ranks of:
  • senior government people, including:
    —deputy and assistant deputy ministers of finance and municipal affairs;
    —comptrollers;
    —legislative auditors;
    —budget directors; and
  • municipal treasurers and auditors;
  • academics;
  • bond-raters; and
  • other experts in government accounting and auditing.

PSAB is supported by a staff consisting of the Director, Public Sector Accounting, six Principals and administrative support.

How Do Topics Get on PSAB's Agenda?

Topics are added to PSAB's agenda in a variety of ways:
  • Staff may become aware of a particular accounting issue and draw it to the attention of PSAB. Staff is usually alerted to an issue through research, monitoring of domestic and international developments and ongoing discussions with the government community.
  • Members of PSAB, with their varied backgrounds, provide valuable insight in identifying accounting issues for the Board to consider.
  • The Accounting Standards Oversight Council (AcSOC)  may also provide input by informing PSAB of the concerns of the diverse groups represented on AcSOC who have an interest in accounting standards.
  • Periodic surveys of project priorities are sent to PSAB's associates for their input in identifying the critical issues that deserve the attention of PSAB's limited resources.

PSAB reviews its agenda regularly to assess the status of ongoing projects, and potential projects, and to identify priority projects. If PSAB identifies an area that it believes is a potential project, this leads to the development of a project proposal by staff. 

PSAB votes to approve each project proposal following extensive review and discussion. Two-thirds of all members of PSAB must vote in favour of proceeding with the proposal as specified in the project proposal. Each member of PSAB has one vote (and members are instructed to vote as individual professionals and not as the official representatives of the government, firm or organization with which they are associated).

The Due Process for Standards Development

PSAB follows a rigorous consultative procedure in the development and issuance of accounting standards and Statements of Recommended Practices. The emphasis on "due process" is critical in maintaining the objectivity of the standard-setting process.

Many people associate due process with the Board's request for and consideration of comments on proposed standards. However, due process actually starts when a project is being considered for addition to PSAB's technical agenda.

Project Survey

PSAB regularly surveys its constituents, asking them to identify the priority issues that PSAB should address. To the extent possible within the limited resources PSAB has to work with, these priorities are considered and the technical agenda adjusted when appropriate.

Research

Once a project has formally been added to the technical agenda, staff are assigned and their basic research begins. The initial research often includes surveys that are completed by those affected by the project.

Task Force 

Shortly after a major project is started, a task force is normally appointed by the Director, Public Sector Accounting, with input from the PSAB Chair, other Board members, and staff. The Director takes special care to ensure that every task force has both constituent and geographical balance, to the extent possible for a small group. The number of members on a given task force ranges from six to eight, depending on the complexity of the project. Task force members receive copies of all Board materials related to the project, and are asked to provide feedback as staff develop position papers.

Some projects will not involve a task force but will be strictly staff projects that bring research and material for consideration directly to the Board. This approach is normally taken for straightforward application or guidance projects. In such circumstances, the Board acts as a task force for the topic. In other instances, an advisory group from affected constituents will provide input to staff prior to material being considered by PSAB.

Statement of Principles

As a project progresses, a decision is made about what form of due process document should be used to expose alternatives or proposals. For most projects, the first document is a statement of principles. This document is intended to present various accounting or financial reporting alternatives in a neutral fashion for each identified issue and propose principles for addressing the issue. A statement of principles is normally developed by the task force and requires the approval of the Board.

Like all due process documents that could ultimately lead to a final Section of the CICA Public Sector Accounting (PSA) Handbook, statements of principles are distributed to all PSAB associates and made publicly available on PSAB’s website. Ongoing project updates are provided on the PSAB website.

Exposure Draft 

The penultimate stage of due process is the public exposure draft — this is a mandatory step. For some projects, this document could be the first formal exposure of a Board proposal to the public. As the last step before a final standard, an exposure draft reflects consideration of the research conducted by the staff and outside consultants, input from the Board and the task force, and any previous due process feedback. The Board does its best to consider all viable alternatives for an issue when making a proposal in an exposure draft. Exposure draft proposals will usually make it into the final standard unless compelling arguments are made in the exposure period, which highlights the need for constituents to actively participate in the process.

Re-exposure Draft

If PSAB decides that the exposure draft should be amended to reflect the concerns of respondents, PSAB determines whether this would represent a "significant change" from the exposure draft, requiring re-exposure. Re-exposure involves the same process of issuing a revised exposure draft, followed by a comment period. PSAB can also decide not to re-expose if two-thirds of all members so vote.

Final Standard

Final approval and issuance of the final standard requires the votes of two-thirds of all members in writing. New material is published in the electronic version of the PSA Handbook as soon as possible. The paper version is issued quarterly, and includes any material released in the electronic version in the previous three months. PSAB sets effective dates for new accounting standards for periods sufficiently advanced that those using the paper version should not be affected.

Public Sector Accounting Guidelines

The development of Public Sector Accounting Guidelines generally follows the same procedures described above though fast-tracked to enable more timely issuance.

Public File

A public file on each completed PSA Handbook project is available to anyone who requests a copy. The file includes the:
  • approved project proposal;
  • statement of principles;
  • exposure draft;
  • responses, except those requesting confidentiality; and
  • final material.
It may also include the following items, if issued:
  • issues paper;
  • re-exposure draft; and
  • any relevant CAmagazine articles.

Keeping Informed

PSAB is very aware of the need to develop and issue standards in a timely fashion, while at the same time giving all who wish to do so an adequate opportunity to respond. A record of documents issued for comment is included in CAmagazine, and documents for comment are posted on the PSAB website (see Documents for Comment). Those interested in notification of the issue of all exposure drafts are urged to subscribe (free of charge) to the automatic notification of new postings on the PSAB website. Subscribers will automatically receive an electronic message informing them of the posting of an exposure draft.

Responses

Responses on all due process documents are usually requested for 30 to 60 days after the release of the document and may be submitted either by regular mail or e-mail. The length of the exposure period is often dictated by the complexity of, or controversy surrounding, the project.

When a comment letter is submitted, the task force, Board members and appropriate staff receive copies. Comment letters on Exposure Drafts are also posted on the PSAB website ten days after the comment period ends unless confidentiality is requested. Representative comments are incorporated into staff papers presenting the pros and cons raised during due process on specific subjects. Therefore, every comment received is presented to the Board as subjects are being deliberated. This process is repeated for each stage of due process.

The Board does not know your position on a given issue unless you provide feedback. Comment letters can result in substantial changes to the final standard. Often, what motivates someone to write to PSAB is concern about a proposal; however, feedback should not be limited to concerns. It is equally important for the Board to know when you support a proposal. Even though due process is not a popular vote, comments that express either support or concern can assist the Board in developing its final conclusions. One compelling comment can make a difference.

The Board relies on the comments of those who prepare or audit government financial statements, as well as government budget officers and others with expertise in government financial affairs, for feedback on the conceptual soundness, technical accuracy, practicality and appropriateness of its proposals. Comment letters can also indicate to the Board whether the information provided by the proposals will be useful to users for decision making and relevant for accountability.

It is important for your response to indicate your position on the issues in question as well as the reasons for your position, regardless of whether you support or disagree with the proposals. It is the arguments supporting your position that allow the Board to understand the issues as you see them and to fully consider your point of view. The substance of the comments is more important to the due process than the number of responses received. The Board's request for comments is not an opinion poll, and the Board's ultimate decisions are not necessarily those with the most popular support. In addition to input from the government community, the Board must also consider generally accepted accounting theory, the standards followed by others for analogous situations, and the internal consistency of the standards of the CICA Public Sector Accounting Handbook.

The Board recognizes that respondents have different backgrounds and experience from which valuable feedback can be obtained, and that not all respondents will have comments on every issue addressed in a document. In general, the more comprehensive your response, the more assistance it provides to the Board, but all input, general or specific, comprehensive or targeted, is appreciated by the Board.

To all of those who have provided PSAB with their input in the past: thank you very much. We hope that we can count on your continued support. To those who have not responded in the past: please do so — your input is welcome.

International Activities

International activities have become increasingly important and are reflected in PSAB's mission.  PSAB has no official policy of harmonization/convergence.  In the absence of clearly demonstrated unique Canadian public sector circumstances, PSAB will endeavour to adopt a new accounting standard in Canada that reflects that of its international colleagues.  Consequently, the activities of international groups such as the International Public Sector Accounting Standards Board (IPSASB) can affect Canadian public sector standard setting.

In addition, PSAB provides in-depth technical support to Canada's members of the IPSASB - Ron Salole, Vice-President, Standards of the CICA and Sheila Fraser, the Auditor General of Canada, representing the Professional Standards Committee on behalf of the International Organization of Supreme Audit Institutions (INTOSAI).

Enquiries about Projects

Members and students frequently have questions concerning specific projects undertaken by PSAB. The Projects section of the PSAB website contains summaries of the status of PSAB's current projects and may provide links to relevant background documents such as exposure drafts. Other sources of useful information include any related CAmagazine articles or PSAB Matters newsletters, which provide an overview of the work of PSAB and additional information about current projects.

PSAB staff do not have a mandate to answer technical enquiries that pertain to specific situations. PSAB staff will provide assistance of a general nature, including facts or perspectives that users of the CICA Public Sector Accounting Handbook may wish to take into consideration, or literature they may wish to review, before drawing conclusions. However, such information is only provided orally, and does not represent the official views of PSAB. Those with enquiries about specific situations are encouraged to contact their accounting firm or the practice advisors at the Provincial Institutes of Chartered Accountants.

PSAB staff resources do not enable it to respond to requests for help from students with their studies.