Public Sector Accounting Board
Decision Summary
September 23-24, 2010

PSAB 2011-2012 Work Plan

PSAB approved a draft work plan for 2011-2012, including projects, international activities and a targeted communications plan.  The Board agreed that the mix of activities and the allocation of resources are appropriate.   The plan will be submitted to the Accounting Standards Oversight Council (AcSOC) for their consideration and input.  

In accordance with its strategic plan, the Board agreed to begin considering the issue of school boards and First Nations adopting the Public Sector Accounting (PSA) Handbook. PSAB also agreed to modify the communications plan to include a focus on government organizations using not-for-profit standards given the decision to include them in the PSA Handbook (see below).

Amendment to Section PS 2100

PSAB approved an amendment to Section PS 2100, Disclosure of Accounting Policies, to deal with recent changes to the source of accounting standards applied by various types of organizations in Canada.  The amendment is to paragraph PS 2100.07 and it will require disclosure of the source of the basis of accounting used in accordance with the direction set out in the Introduction to Public Sector Accounting Standards.  The disclosure would state the basis of accounting (i.e., that the financial statements have been prepared in accordance with Canadian public sector accounting standards).

The Board agreed that this amendment did not need to be exposed for comment as the changes to the accounting standards followed by government organizations had already been considered by constituents when the revisions to the Introduction were exposed for comment and when the proposals for financial reporting by government not-for-profit organizations were exposed (see below).  The change in wording in Section PS 2100 is merely an editorial amendment.

Financial Instruments/Foreign Currency

PSAB approved an exposure draft (ED) that proposes changes to Section PS 1200, Financial Statement Presentation.  The presentation changes would exclude specific remeasurement gains and losses arising on items in the fair value category and items denominated in a foreign currency from the statement of operations.  These amounts would be reported in a statement of remeasurement gains and losses until realized.  Together, the statement of operations and the statement of remeasurement gains and losses would account for all changes in assets and liabilities.  

Following a review of responses to the 2009 Exposure Drafts, “Financial Instruments” and “Foreign Currency,” there was support for their technical aspects. However, PSAB determined that financial statement presentation changes are warranted to respond to comments received.  The concern of some respondents was that a statement of operations with two components could lead to conflicting assertions as to financial performance.  Having considered the responses, PSAB reconfirmed its support for the technical aspects of the 2009 Exposure Drafts.

The proposed presentation approach is based on the view that certain market-based adjustments may not be predictive of a final settlement value and, thus, should be reported in a separate statement.  A budget-to-actual comparison will not be required on the statement of remeasurement gains and losses.

The ED is expected to be issued for comment in late October 2010. At the same time, PSAB will also publish a mark-up of the 2009 Exposure Drafts to reflect changes arising from the deliberation of responses and the new presentation approach being proposed. The ED will be accompanied by an Issues Analysis Paper and a one-page overview in plain language.

Financial Reporting by Government Not-for-Profit Organizations

In a landmark decision, PSAB approved the inclusion of the 4400 series of standards from the CICA Handbook – Accounting into the PSA Handbook for use by government organizations applying the standards for not-for-profit organizations.  The standards will be renumbered Sections PS 4200 to PS 4270.  

PSAB also approved changes to the Introduction to Public Sector Accounting Standards giving these organizations a choice to apply either:

The basis of accounting chosen would have to be applied in its entirety, disclosed and consistently applied.  These organizations will be required to adopt the standards for fiscal periods beginning on or after January 1, 2012.

Related Party Transactions (and Appropriations)

A project proposal was approved by PSAB that will address related party transactions and appropriations.  At its June 2010 meeting, PSAB deferred approving this project proposal due to a lack of staff resources.  Since then, resources have become available.  These two topics were formerly included in the “Entity Level Financial Statements,” project; however PSAB has decided that the issues should be dealt with in the broader context of reporting by all public sector entities.

Concepts Underlying Financial Performance

PSAB agreed that dealing with aspects of the conceptual framework was its most important project in terms of significance and potential effect, the extent of resources allocated to it, and the time PSAB anticipates to devote to research, discussion and analysis.

PSAB reviewed a project proposal developed by staff after consultation with various stakeholders.

After significant discussion and debate, PSAB concluded that the issues that were being proposed for reconsideration revolve around one key question — how should accounting standards measure the financial performance of a government? Answering this question would involve a review of the fundamental concepts underlying the measurement of financial performance.  By placing the focus of its efforts explicitly on the broader context of financial performance, the Board expects its conclusions will facilitate discussion of the matters identified by the senior government finance community through the Joint Working Group process.

PSAB noted that there appear to be two main questions related to financial performance, the project could usefully address:

PSAB also agreed that working on this project will be given the highest priority. Nevertheless, work on standards will continue to fulfill commitments detailed in its strategy and work plans submitted to the Accounting Standards Oversight Council.  

PSAB also recognized that undertaking such a significant effort may have an effect on the timelines of the project as presented in the project proposal. PSAB directed staff to present a revised project proposal identifying the major concepts and issues that will need to be addressed, a revised expected timeline and milestone dates for the project at its December 2010 meeting. Recruitment of task force members is currently underway.