Exposure Draft – Employment Benefits
A project on employee benefits was identified as a top priority in PSAB’s 2014 Project Priority Survey. The project was needed as new types of pension plans have been introduced and there have been changes in the related accounting concepts since existing Sections PS 3250, Retirement Benefits, and Section PS 3255,
Post-employment Benefits, Compensated Absences and Termination Benefits, were issued many years ago. The plan is to issue new Section PS 3251, Employee Benefits to replace the two existing sections.
The Board issued an Exposure Draft in July 2021 highlighting the new Section PS 3251. The Board created the Exposure Draft using principles taken from IPSAS 39, Employee Benefits as the starting point. The principles were amended if they were contrary to PSAB’s conceptual framework or not appropriate for application in Canada based on the Canadian public interest. The key proposed changes include:
- For Deferral Provisions
- For actuarial gains and losses, the deferral and amortization approach would no longer be used.
- Revaluations of the net defined benefit liability (asset) which, include actuarial gains and losses are recognized immediately on the statement of financial position within the accumulated other component of net assets.
- These revaluations would not be reclassified to surplus or deficit in a subsequent period.
- Plan assets would be measured at market value.
- The Discount Rate
- The discount rate used would depend on the funding status of the plan.
- For a fully funded plan where the projected balance of plan assets exceeds projected benefit payment obligations for all project periods, the discount rate used would be the expected market-based return on plan assets.
- For an unfunded plan where the projected balance of plan assets does not exceed projected benefit payment obligations for any projected period, the discount rate used would be the provincial governments bond rates.
- Lastly, for partially funded plans where the projected balance of plan assets exceeds projected benefit periods for fewer than all projected periods, the discount rate would be a single discount rate that reflects the fully funded rate for periods where the balance of plan assets is projected to be greater than or equal to projected benefit payments and the unfunded rate for all other periods.
- Additional proposed changes include
- The net interest on the net defined benefit liability (asset) would be determined by multiplying the net defined benefit liability (asset) by the rate used to discount the post employment benefit obligation.
Minor modifications to the guidance for joint defined benefit plans including changing legal terminology to accounting terminology and directing entities to use multi- employer plan guidance The new standard would have an effective date of April 1, 2026 and would require retroactive transition. The Board is seeking feedback on the proposal and stakeholders are encouraged to respond to the Exposure Draft, which can be accessed here, by November 25, 2021. The Board will review all feedback received by the deadline and determine next steps.
Exposure Draft – The Conceptual Framework for Financial Reporting in the Public Sector
In 2010, the Board decided to undertake a project to review the conceptual framework for the PSA Handbook to ensure it is still relevant and that it properly reflects and is grounded in the public sector environment. The Board issued three Consultation Papers from 2011 to 2015 and a Statement of Concepts in May 2018. The Board used the feedback from those to develop an Exposure Draft in January 2021 on a revised conceptual framework. The Exposure Draft proposes replacing the existing conceptual framework, which consists of Section PS 1000, Financial Statement Concepts, and Section PS 1100,
Financial Statement Objectives, with a revised conceptual framework that would include 10 chapters:
- Introduction to the Conceptual Framework – this chapter will define the conceptual framework and outline the needs and objectives.
- Characteristics of Public Sector Entities – This chapter will build upon and replace Appendix A, Unique Characteristics of Government. Identifying the characteristics of public sector entities will result in concepts and standards appropriate to the public sector.
- Financial Reporting Objective – This chapter will identify the primary users as the public and its elected or appointed representatives. It will also identify the financial reporting
objectives as the need to provide information for accountability purposes and the broad financial reporting accountabilities.
- Role of Financial Statements – This chapter will create a link between financial reporting and financial reporting in financial statements.
- Financial Statement Foundations – This chapter will clearly identify the foundations that currently underlie the existing conceptual framework.
- Financial Statement Objectives – This chapter will build upon and revise the objectives of Section PS 1100.
- Financial Statement Information – Qualitative Characteristics and Related Considerations – This chapter will establish
the qualitative characteristics of financial information and considerations for including this information in the financial statements.
- Elements of Financial Statements – This chapter will define the four elements in the financial statements: assets, liabilities, revenues, and expenses.
Recognition and Measurement in Financial Statements – This chapter will cover the general recognition and measurement criteria, the concepts here will remain unchanged from the existing conceptual framework.
- Presentation Concepts for Financial Statements – The PSAB felt that some of the concepts in Section PS 1201 should be moved or mentioned in the conceptual framework. This chapter will include these, as well as new presentation concepts to promote the preparation of understandable financial statements.
The Exposure Draft also proposes moving the recognition exclusions related to: natural resources and crown lands that have not been purchased, developed and inherited intangibles, and works of art and historical treasures, from the conceptual framework and instead include them in the new proposed Section PS 1202 descried below. The Exposure Draft closed for comment on June 30, 2021 and the Board is currently deliberating feedback received from stakeholders that responded and will decide next steps.
Exposure Draft – Consequential Amendments Arising from the Proposed Conceptual Framework
The PSAB issued this Exposure Draft at the same time as it released the above Exposure Draft on the conceptual framework. As a result of the issuance of the proposed conceptual framework the PSAB is proposing to amend the PSA Handbook to be consistent with the conceptual framework. The main consequential amendments will impact:
- The withdrawal of the existing conceptual framework and removing any references to the existing conceptual framework from the PSA Handbook.
- Amendments to various standards for references to the term’s measurement uncertainty, service capacity, reliability, and materiality.
- Amendments to Section PS 3200, Liabilities and Section PS 3210, Assets.
- Amendments to Section PS 2100, Disclosure of Accounting Policies to consider emerging technology in the displaying of information in the notes.
- Amendments to Section PS 3400, Revenue, for refinements to the definition of revenue.
- Amendments to the Introduction to Public Sector Accounting Standards to recognize the new conceptual framework.
Many other minor amendments could be made to the PSA Handbook as a result of the proposed conceptual framework. The Exposure Draft closed for comment on June 30, 2021 and the Board is currently deliberating feedback received from stakeholders that responded and will decide on next steps.
Exposure Draft – Financial Statement Presentation Proposed Section PS 1202
The PSAB considered the relative merits of many reporting models and the inputs from stakeholders and is proposing the issuance of a new Section PS 1202 which will build upon Section PS 1201,
Financial Statement Presentation to better respond to the need for understandable financial statements. The proposed reporting model would consist of:
- A statement of financial position – Changes are being proposed to this statement to relocate the net debt indicator to its own statement (see below), and separate liabilities into financial and non-financial categories. The statement will be restructured to present total assets, then total liabilities to arrive at the net assets or net liabilities indicator and this will cause the addition of the net assets, or net liabilities component.
- A statement of net financial assets or net financial liabilities – This is a new statement that would display a revised calculation of net financial liabilities. A net financial asset position means there are financial assets to provide services in the future and to settle future financial liabilities. A net financial liability position means there is a need for additional financial assets to aid in settling past financial liabilities, it reflects the entities ability to finance activities, provide services or settler financial liabilities in the future.
- A statement of operations - There are no proposed changes to this statement form what is currently required under existing Section PS 1201.
- A statement of changes in net assets or net liabilities – This is a new statement and will show a reconciliation between the opening and closing balances of net assets or net liabilities. This statement will allow the entity to be transparent about which revenues and expenses are recognized in surplus or deficit and those that are recognized directly in a component of net assets or net liabilities.
- A statement of cash flow – The Board is proposing separating financing activities from other items on the cash flow. This will allow the statement to highlight net cash before financing activities to show whether all of an entities other activity combined resulted in the need to raise cash through financing activities.
- Accompanying notes and schedules.
The Exposure Draft is also proposing the addition of new budget requirements. These new budget requirements include presenting budget figures using the same basis of accounting and following the same accounting principles as actual figures, an acknowledgement on the face of the statements where budget information is not prepared or approved and allowing entities to present amended and approved budget figures.
The new standard would have an effective date of April 1, 2024. The Exposure Draft closed for comment on June 30, 2021. The Board will review the feedback received by the deadline and determine next steps.
Exposure Draft – Consequential Amendments Arising from Financial Statement Presentation, Proposed Section PS 1202
The Board also released an accompanying Exposure Draft to the above on New Section PS 1202 to highlight the consequential amendments that are being proposed to various sections to ensure they are consistent with the proposed reporting model. The proposed consequential amendments would include:
- The withdrawal of Section PS 1201, Financial Statement Presentation.
- Amending various standards for references to the withdrawn Section PS 1201.
- Amending references to various items throughout the PSA Handbook, including references to net debt, changes in net debt, and the statement of remeasurement gains and losses.
- Introducing the terms financial instrument assets and financial instrument liabilities.
- Recognizing financial liabilities and non-financial liabilities and acknowledging the components of net assets and net liabilities; and
- The introduction of new effective dates and transitional provisions relating to these proposed changes.
The Exposure Draft closed for comment on June 30, 2021 and the Board is currently deliberating feedback received from stakeholders that responded and will decided on next steps.
Consultation Paper – Government Not-for-Profits
While developing its 2017-2021 Strategic Plan, the Board signalled its intent to assess the specific needs of government not-for-profit organization (GNFPO) stakeholders and to assess if there is a need for some public sector accounting standards to apply differently to this particular group. The Board issued a Consultation Paper in May 2019 seeking stakeholder feedback on:
- The future trends in the GFNPO sector and their impact on financial reporting;
- Any additional significant GNFPO financial reporting concerns not already captured in the Consultation Paper;
- Whether there should be uniform accounting and financial reporting between governments and GNFPOs;
- Whether it would be beneficial for all GFNPOs to use the same financial reporting standards; and
- Whether financial statement users would benefit from having all not-for-profit organizations (NFPO), including both public sector and private sector NFPOs, within each subsector present comparable financial information.
The Board reviewed the feedback received on this first Consultation Paper and in January 2021 the Board issued a second Consultation Paper on this strategy. The main points of the Consultation Paper include:
- The Board is proposing three options for the GNFP Strategy
- Option 1: Status quo – continue with the existing set of standards allowing GNFPOs to apply PSAS with or without the PS 4200 series.
- Option 2: Incorporate the PS 4200 Series into the PSAS handbook with potential customizations – review and amend the PS 4200 series where appropriate and include it into the PSA Handbook. The existing PS 4200 series would be reviewed to determine if they should be retained and added to PSAS.
- Option 3: Apply another Source of GAAP – There are two approaches under this option, one is to direct all GFNPOs to follow CPA Canada Handbook – Accounting Part III, and the other is to direct specific identified GNFPOs to follow CPA Canada Handbook – Accounting Part III.
- The Board evaluated these options considering the users of the financials statements and their needs, the comparability and consistency of the financial information, the sustainability and the transitional considerations that would be required under each option.
- Based on these criteria the Board is recommending Option 2, where the PS 4200 series is incorporated into the PSA Handbook with potential customizations.
The consultation paper closed for comment on June 30, 2021 and the Board is currently deliberating feedback received from those stakeholders that responded and will decide next steps.