Laina Verhoef:
Hello and welcome to our 2025 Public Sector Accounting Standards update. Couple things before we get started. For our French listeners, if you can go to the right-hand side of the screen and click translations, you can access Interprefy for the duration of the webinar. If you have questions during the webinar, please post them in the chat and we will try to address as many as possible as we have time at the end of our webinar. If you'd like to follow along under the documents, you can download the documents and follow along as you see fit. My name is Laina Verhoef. I'm a senior manager here at National Accounting Standards, and I'm joined by three of my colleagues today who will be leading you through various topics over the next hour.
Mario Piroddi is a partner in our Kamloops office in BC with more than 20 years of experience in accounting, audit and information systems audits. He's the leader of the local government group in BC with a focus on public sector. Mario is also heavily involved in various industry groups that support the public sector, including the Government Finance Officers Association in BC.
Marcus Sconci is a partner in our Oakville office with more than 20 years of experience in accounting, assurance, tax and advisory services with a specialization in not-for-profit and public sector organizations. Marcus is BDO Canada's education sub-sector leader with a focus on colleges, universities, and school boards.
And finally, Craig Marchand, Vice President of Innovation at BDO Canada's Exponential Labs, designing and delivering I literacy and adoption programs that help leaders and teams modernize services and workflows.
For our agenda. We're going to kick it off talking a little bit about recent standards. Then we're going to move into the Revised Conceptual Framework and the new reporting model and round that out with some discussion around projects that PSAB has on the go. And then we're going move into where Craig's going to talk to us about some AI topics. And finally we'll end with some discussions around resources and Q&A. Marcus, I'll hand it over to you and you can get our content started.
Marcus Sconci:
Thank you, Laina. So I'm going to start us off today by walking through some practical applications relative to some of the new standards that we've implemented within the public sector handbook in recent years. As we can see here on this slide, there have been a number of fairly significant new standards that have been implemented in recent years with a number of new standards upcoming. So just to refresh our memories for our April 1st, 2022 implementation, that would be our March 2023 year-ends, we adopted PS 3450, the financial instruments standard, as well as PS 3280, the ARO standard. The following year, our April 1st, 2023 application date or our March 31st, 2024 year-ends, we adopted PS 3160, the P3 standard, as well as PS 3400, the revenue standard. And in addition to that, a new guideline on purchasing tangibles, PSG-8 came into effect.
Additionally, we have some new standards on the horizon. As mentioned in the opening, the Revised Conceptual Framework as well as the new reporting model will be effective for March 31st, 2027 and subsequent year-ends. And then PS 3150, the amended tangible capital assets section, will be implemented for the March 31st, 2031 year-end. So that's a little bit down the road. That's actually the first project that has come out of the GNFPO strategy that the board undertook a number of years ago.
So you can see the pace of change has been quite significant and it's not slowing down any time soon. As a result, we wanted to talk through practical application of some of the standards that have been implemented in recent years, and specifically we wanted to cover off the ARO standard. Sometimes when we're focused going forward on all of the new standards that we have to work to towards implementing, we lose focus for the rear view mirror and upkeep of the standards that we have already implemented. And the main point we want to get across about the ARO standard is that PS 3280 is not a set it and forget it standard. It's not simply taking your amortization schedule, booking your amortization and accretion expense each year and then forgetting about it for another 12 months. The standard requires you to reassess all of your inputs at each reporting date, and the further we get from that implementation date of March, 2023, the more likely that some of those inputs may be out of date.
So what are some of those items you need to be made aware of? First of all, changes in estimates. Your estimated ARO liability has a number of inputs that go into that calculation. The most fundamental would be the discount and inflation rates that have been applied to your future remediation costs in order to present-value those costs back to your balance sheet date. We are in an environment right now in the Canadian economy where inflation and interest rates have been anything but static and they do continue to change. So you need to consider at each year-end date whether or not those rates remain current and appropriate.
You may also have changes in timing of your remediation. So remembering that we also estimate when we are going to remediate each of our ARO, and then that determines the timeframe where we present-value those back to the current date over. Well, if plans have changed since implementation and you now have revised remediation dates, it's important to reassess your liability to take into account those revised remediation dates.
You may also have changes in the estimated costs. So remember most of us would've gone and hired an environmental engineer to help us estimate the future costs associated with remediation. The question becomes do those cost estimates remain accurate three years down the road and at what point is it prudent to go and update that engineer's report? So that's something to consider each year-end as well. And then any other circumstances that might've come into focus since your last estimate to determine whether or not you may need to adjust those costs up or down in your financial statements.
Additionally, disposal is an area that can impact your ARO. You may dispose an asset prior to the planned remediation date, in which case you need to remove that ARO from your financial statements and figure out your accounting for the overage or underage relative to the estimate that you had initially accrued for that ARO. Another thing to consider if you sell an asset to a third party, whether or not you retain that legal ARO or you transfer that to the buyer, it's important to pay attention to that in your contracts when you sell assets and to ensure that you are accounting for your ARO appropriately based on where the legal obligation lies subsequent to disposal.
You may also have early retirements that can be full or partial. Where it's partial, it can create complexities in terms of determining what portion of that ARO to remove and what portion to retain going forward. And then of course, going back to the estimate portion, you need to then consider the cost that you abated in that early retirement data and whether or not that is an indication that the estimate for the remaining ARO for that partial remediation remains appropriate.
Then in terms of other items you need to consider, new legislation that could give rise to either additional ARO or potentially even removing an ARO if legislation changes in that regard. And then finally changes to your contracts or new asset purchases that could result in changes to your ARO obligation. So there are a number of factors here regarding the standard that you're required to revisit at each reporting date to ensure that your ARO remains up to date in your annual financial statements.
A couple of other standards that I just wanted to talk about upkeep on, this is a much more high level than the ARO conversation. Financial instruments, first of all, financial instruments, we're seeing much more complex financial instruments, things like embedded derivatives, interest rate swaps, and other derivative instruments. Please be aware that as you enter into these new financial instrument arrangements, there could be both measurement and disclosure implications of them, and do please speak to your auditor about those if you're entering into those types of arrangements so that you can have an understanding of the impact that will have on your financial statements. And additionally, the disclosures, those risk disclosures in your financial instruments disclosures note, which in some cases are quite lengthy, just a reminder that those are something you need to consider at each reporting date and update them for your current circumstances. As your risks change and as your financial instruments change, so should the related disclosures.
And then onto the public-private partnership standards. So PS 3160, keep that in mind as you enter into new contracts for infrastructure. Important to keep in mind as well that PS 3160 is a very narrow scope standard. In other words, to have a P3 within the scope of that standard, you have to meet some very specific criteria. But keep in mind there's a decision tree at the beginning of that standard that walks you through situations where you may meet some but not all of the criteria to be within scope, but where you meet some criteria, you likely do still have an asset and liability to record, it just would not be within the PS 3160 standard. So please, as you enter into new infrastructure contracts, keep that in mind.
And as with any new standard, BDO does have a number of publications that we produce to assist our clients with adoption of the new standards. First of all, we have our annual PSAS update, which should be coming out any day now. That typically comes out right around this time, we're just working through finalization of that document. We also have essential guides and At a Glance publications that help walk our clients through the implementation of new PSAS standards. At a Glance provides you with a Coles Notes version of a more digestible and manageable way to understand the implications of a new standard. And the essential guide helps you walk through the implementation and specifically understand those standards with respect to your organization. And we do have those documents for the P3, the ARO and the revenue standards that I just went through.
Okay, so now we're going to get to the first of the new items, and that is the revised conceptual framework and the new reporting model that will be implemented a year from now in the public sector handbook. Now before getting into the details of these standards, I want to first frame the applicability. It's important to understand the conceptual framework applies to all entities within the PSAS handbook, including those that follow the 4200 series. Whereas the new reporting model initially will not apply to those entities that are following the 4200 series. It will eventually apply to you, but it won't be at that initial 2027 implementation date. And the reason for that is that if you are within the 4200 series, you currently follow PS 4200 for financial statement presentation. That standard has not been fully reviewed with respect to PSAB's GNFPO strategy. Once they've gone through that process, then they will remove 4200 from the handbook as they have been withdrawing these standards during this process. And then you'll be directed to follow the new reporting model in PS 1202.
So onto the conceptual framework, what is a conceptual framework? So a conceptual framework in a general sense is a foundational document that contains principles that guide the board's development of new accounting standards. In addition, for any entity following the PSAS handbook, it helps you guide the development of your own accounting standards in a situation where there is not a specific standard to address a transaction or scenario that your organization has undertook.
Currently, PS 1000 and PS 1100 are the conceptual framework in the handbook. 1000 is financial statement concepts, 1100 is financial statement objectives. Those will be replaced with the new conceptual framework. The new conceptual framework consists of 10 chapters. It essentially takes the existing framework and builds on it, making it more robust and adding additional elements to help you understand the concepts within the conceptual framework. Again, to help you in situations where you need to go back to that framework to assist you with your accounting policies. This standard is applicable for your March 31st, 2027 year-ends and subsequent, and prospective application is the only choice. So most standards allow you retrospective, in this case prospective application is the only allowable transitional provision when you are adopting the new conceptual framework.
Just a few things to keep in mind. I already spoke to the conceptual framework assisting you in developing your accounting policies. In addition, there is a link between PS 1202, which is the new reporting model, and the conceptual framework. It was necessary to revise them both together to ensure that there were not inconsistencies between the two. And there's also some recognition exclusions that exist in the current conceptual framework that the board has moved into PS 1202 going forward, and that will allow them to potentially work those into new accounting standards going forward rather than having them part of the fundamental reporting model and making that process more difficult.
Lastly, before I pass it over to Mario to walk through the new reporting model, just a couple of things to touch upon here. I've already covered most of the content on this slide, but I talked about those recognition exclusions. You may be wondering what those are. They relate to purchase natural resources, intangible assets, works of art and historical treasures. Those are what has been removed from the current conceptual framework and moved over to PS 1202 in the new reporting model. So with that, I'll pass it over to Mario who's going to talk through the details of the new reporting model.
Mario Piroddi:
Okay, perfect. Thanks Marcus. With all these changes that have been happening over the past number of years with PSAS and we're dealing with all these specific standards, now we're finally getting into a place where we're actually starting to look at the financial statements themselves. And I'm really excited about this change because I've been noticing over the past number of years as boards, as councils have been getting more and more involved in the finances and we're seeing funding crunches happening across the country given the current economic situation, we're having people who may not have the financial acumen that most of you on this call have try and dig into the statements and they're really not understanding. And so when we look at a lot of the changes, we're going to see that the statements are going to become a lot more understandable for them, and in particular useful, it's going to be giving us better indicators to deal with the solvency that's happening.
And so that's why I'm really happy about it. And as we give some examples, I hope that you can see where you can change your narratives on your statements to help your boards and councils better understand where you're at. And so these significant updates are going to be meaningful and you want to get going early on it if you can in terms of the changes. And as a reminder, it's effective for year-ends beginning on or after April 1st, 2026, which means it's hitting for the 2027 year-end, but you are going to be restating your comparatives as well. So we'll want to start thinking about it now in terms of what needs to change.
And so at a glance, and we're going to go through all of these points in the next few slides, we're going to see that the statement of financial position is going to be completely restructured and it's going to be something that's actually going to be a lot more useful for a number of reasons. Statement of net financial assets and liabilities is going to be a new statement and it's going to replace the statement of changes in net debt. The statement of changes in net assets, net liabilities, this is your surplus. We're bringing this statement back and it's going to be fairly consistent with what we see in the other standards. Statement of cash flow is going to be restructured. We'll get into that. It's not a wholesale change, but a quite consequential one in terms of the understandability. And there is going to be some changes with the budget and how the budget's presented as well.
So if we start with the statement of financial position, the biggest thing that we're going to see and on the left is we have our existing statement of financial position, and on the right is what we're going to... We're going back to total assets and total liabilities. And so by doing that, that means that net assets comes back to the balance sheet and we go back to a balance sheet that balances. And so this is, again, it gives that familiarity and that easier to understand when we're looking at something and how our assets and liabilities are two separate measures instead of co-mingling them by having financial assets at the top and then our non-financial assets at the bottom with our liabilities in between.
The other thing that we're going to see is that the financial liabilities are split with non-financial liabilities. And this was really a big part of the confusion that these statements were creating because we're coming to this net debt number and there's times where we'd look at an organization and go, well, it looks like you're insolvent because you have this massive net debt, but you weren't really there. We'll show you how that will apply in a couple slides.
And then the other item is that you'll notice that there's this accumulated other in our net asset section. This is a new component that's going to be there and really it's going to be fairly rare when it's used. I've yet to go and see some practical examples of it. So just keep in mind if we have a strange transaction that results in a surplus, you may want to be considering this going forward.
So now we're going to take a look at the new reporting model in terms of the statement of net financial assets and liabilities. And this replaces the net debt indicator. And to me, this is one of the best changes that was made because now we're going and we're measuring our financial assets against our financial liabilities. And I'll give an example from where I sit in British Columbia where we report under entities that roll up into the province of BC, report under Section 23.1 of the Budget and Transparency and Accountability Act. And what that requires is that we're back to deferred capital contribution accounting. And so if the province provides a school district funding to build a school, say it's $80 million, that gets deferred and amortized over the life of the asset. This creates a massive liability seen there. So if you build a new school, you could end up in a position where under the net debt indicator you're showing a $50 million deficit in your net debt.
But the other part of that is that it's not really that you're in debt because you're not going to repay this money. So by removing the non-financial liabilities from the net financial asset liability calculation, we're getting to a solvency ratio where we can see what resources we have to settle our liability and how we're doing against that. Now we still don't go back to having current versus long-term. So if you're an organization that has a lot of debt financing because of your capital projects, you still have to do that mental math, but at least for comparing cash we have or cash that's coming in against our obligations that we're going to have to expend money on. And so now we can really have a measure on what is our true financial position.
Now this statement here just shows the total of financial assets, financial liabilities and our net position. You can choose to show information on the changes that happened in the year, similar to what the statement of changes in net debt does right now, but it's a choice. However, if you don't choose to show the changes in here, you are required to go in and disclose in the notes what your budgeted capital expenditures were versus your actuals. And again, if we go back to that useful information, your capital expenditures is typically your largest expenses that you're going to be spending on for a lot of public sector organizations. So showing that accountability against what we planned versus what we did, very, very important, and I'm glad to see that that's in here.
And I just see a quick question here with the school example. It's not the same as long-term debt. And so when I talked about the deferred capital capital exercise. In BC, the schools aren't borrowing, they're getting the funding for the province, the province is the one who can borrow, individual districts can't. But if you have in a scenario where your school district that can borrow in your jurisdiction, then you'd have your debt would actually be a financial liability, not a non-financial liability.
So we now go on to the statement of changes in net assets. And so it's basically going back to showing the changes in our surplus. And so it has a familiar look and feel to what we see in the other handbooks and what we used to have under the public sector handbook. And so what the goal of this is to create transparency in movements and some consistency in how we get from that opening net asset position to our closing net asset position, so it can tie in to our statement of financial position better.
A couple of things though to note here is that while have the three components of the net assets and net liabilities here in the statement of changes, if you don't have any accumulated remeasurements or you don't have any accumulated other, you can elect to put this on the statement of change or the statement of operations and just have your accumulated surplus there. Excuse me. And so you can choose to do that.
The other thing that you can do is that if you have a lot of remeasurements and you have a lot of complex remeasurements, you don't have to show the accumulated remeasurement changes on this one statement. You can have it on its own, just so that it gets rid of some of the noise that you have. So there's some choices there, but ultimately those movements that are happening below the line are now being shown. The other thing that is something that I feel is very important that isn't incorporated here is your reserve funds, and the reserve funds live under your general accumulated surplus deficit. Remember, this does not address the need to have those reserve funds detailed in your notes because it's a very important measure, especially with organizations that have significant reserve funds.
Moving on to the statement of cash flows. There's really one consequential change, and I like this because again, getting back to helping those that are reading the financial statements understand what you did in the year, this change makes a lot of sense. And quite simply what you're going to do is you're separating your financing transactions from the rest of the movements on your statement of cash flows. You're going to have your operating transactions, your capital transactions, your investment transactions, and then you're going to come to a subtotal of net change in cash before your financing transactions. You show your financing transaction section and then you get to the cash end of the year.
And why I like this is that when you're going through, and especially I see this in the municipal sector, quite often we'll be taxing, we have an asset management plan, we're going to be adding some asset management to the taxation revenue every year to build up our reserves and then we're going to go and spend and it's going to be on capital and it's going to be a mix of money from our reserves and money from borrowing.
And so this allows the users to understand how much we're actually using from our savings and how much from the operating revenue that we've generated versus what we had to go out to the market and borrow for. So again, really enhances that understandability when you're going through and reading the statement of cash flows in terms of what the real story was.
Now when you do have the materials, and I know that there's been some questions about the materials on here, we're trying to that resolved, but the presentation will be available after and also be recorded. There are additional resources on the Financial Reporting and Canada website, and the link is in the PDF that you have. In terms of other considerations, Statement of operation is going to remain substantially unchanged and your financial statements are going to still have to have your notes and schedules. All of that is going to be similar to what we had before.
Now there is a change in terms of the budgets and I know there was a lot of excitement in terms of having that change here, but it's not really that significant. What is happening is that if you have an original budget that's been approved and then you have a wholesale change of your board or your council and they approve an amended budget, in that circumstance, you are allowed to show the amended budget because you now have a new governing body that has gone and given you a new mandate in terms of a spend. So that's one circumstance where we're able to go in and use the amended budget as opposed to the original. And then the other change is that if you can't do a budget actual comparison in case where there wasn't a budget prepared, you have to acknowledge that fact on the face of the financial statements.
So in terms of what should I be doing and what should I be looking at now. Before I get into this slide, when I've been talking to my clients or talking with organizations that we're going to start working with and we talk about who prepares the financial statements, because in some instances your auditor will prepare them on your behalf and then in other circumstances you're preparing them. If you're contemplating a change where you're going to start to have your auditor prepare it or vice versa, you want to take them back in-house, I suggest that you use this as the event to plan it around because you're going to have to rework the financial statements anyways. So that's a good transition point for you to do that. So talk to your auditor if you're thinking about doing that and kind of use this as the jumping off point because it's a natural transition for you.
Now in terms of things to be looking for and what you want to be doing. Now, the first is looking at your software and on the surface, your account numbers aren't necessarily going to change, but the mapping in your reporting might change. And does your software have the ability to change the mapping? In particular, if you've been using custom reports to generate internal financial statements, which might've been looking like, look and feel like what the current standard is, or you use the reports to generate your financial statements, you want to be looking at that now to see does your software allow for that change or is it a lot of work and we got to get going on it now.
Liability classification, that's split between financial and non-financial. Really important, time to start looking at going, do I have non-financial or is everything financial in terms of what I have on my statement of financial position? And on the surface it seems like it would be straightforward, but if you're in the world where you've got P3 arrangements and there's a range of outcomes, you may end up with some non-financial assets that you didn't think about. It might not be as clear-cut as deferred revenue or deferred capital is non-financial. It might be that you have to dig a little bit deeper. So you want to start thinking about that piece.
Now, you are going to be required to restate your comparative. So again, steps one and two in terms of getting through your software and liability classification, looking at that now makes it more important because of that. The budget requirements that I talked about, if you have an election that's going to be coming in or your board's going to be reappointed at some point mid-year, you want to think about are they going to be doing an amended budget and that sort of thing.
And then also, while we're spending the bulk of the time today talking about the reporting model and the change on the financial statements, you really want to make sure that you understand what some of the other consequential changes are. As an example, in the government reporting entity standard 1300, you are now going to be required to identify major changes to the reporting entity. So if somebody goes from being a government business enterprise to another government organization because they're no longer self-sustaining or for whatever reason, there's additional disclosures that are going to be required there as well.
And of course, as you're looking at it, if you're struggling in terms of where to go and don't know what to do, reach out to our team. We have dedicated people in the accounting advisory space that can help you with these transitions. Also, keep an eye on our website as we are going to be having publications coming out similar to what we've done in the past. We'll have the practical approach series coming out with the new conceptual framework and reporting model, so stay tuned for that.
And now as Marcus alluded to, things aren't slowing down when it comes to the public sector accounting standards and what's going to be changing going forward. And so we alluded to the government not-for-profit strategy, and this came out when PSAB was looking at their 2017 to 2027 strategic plan and they wanted to assess the specific needs of government not-for-profits and in terms of how they're going to be able to show up and do we need a complete set of standards.
And where we're going to land is that the 4200 series is going to just be part of the regular public sector handbook going forward. And so it's going to happen over time, but a couple of the big changes that are coming now are going to be first tangible capital assets, section 4230 and 4240 are going to be withdrawn and brought into the amended tangible capital asset standards. And there's going to be some changes in there. Probably the most consequential one is going to be clarification for the accounting of tangible capital assets that are purchased below fair value and where you have contributed materials and labor and asset construction.
The next phase though that it's going to go to is going to be contributions and financial statement presentation. And so we've got the list here of the various standards related to revenue and then also financial statement presentations. Those are all going to be looked at and see if other amendments are going to be needed to those, and then they'll be incorporated into the regular handbook. But the one thing that is going to be coming is that there's going to also be enhanced guidance for endowments because they see that as a bit of an area where there's a gap in terms of what the users need and how it's being presented.
Now, the employee benefits standard, and when I first started talking about this, if you would've told me that in 2025 that I'd still be talking about it, I wouldn't have believed you at the time, but we're still going. And the original concept and purpose of this project when it first kicked off was that they wanted to address the fact that there's new pension plan types that are being introduced as, again, trying to address some of the solvency ratios that were seen in the pension plans and making sure that they're adequately funded. And so the standards need to be updated to reflect that fact.
So in 2021, the exposure draft came out and proposed to replace the two existing sections with 3251. The problem that we saw though with that exposure draft, and there was a lot of feedback, is that it became very onerous. And what had happened was that in terms of how you measured the plan, there was a number of funding status categories, and then depending on what your funding status category, which was hard to get to, then you'd also be looking at the discount rates, which were also very hard to come to.
And so the biggest change in the standard is now that... And everything else is substantially unchanged, is that we only have two funded statuses. It's fully funded and not fully funded status. And the discount rates are fairly simple. If you're fully funded, your discount rate is based on the return on your plan assets. Makes sense. If you're not fully funded or you're underfunded, then it's based on the typical market yields on government bonds, high rate corporate bonds, et cetera, et cetera, et cetera. What we see consistent in the rest of the handbook.
The other piece is that in terms of determining if you're funded or not is a lot simpler. There's primary indicators and secondary indicators. The primary indicator is, is there a regulatory requirement that tells you here is whether you're funded or not? Makes sense. And then you have, you then look at what the actual result is from your most recent valuation and actuarial evaluation, and that tells you whether you're funded or not as well.
And if you don't have those, if you don't solve it based on that, then you can go to secondary indicators on, okay, we seem to be underfunded, but we've taken corrective actions and we should be back next year. Then you look at how accurate have we been in the past in terms of historical fluctuations? And so those are the big changes there, but again, makes it a lot simpler for it to get to. The other interesting thing though, to keep in mind with the standard that didn't change from before, but that remeasurements of the defined benefit liability or asset are going to be recognized in accumulated remeasurement gains and losses and not direct into your surplus. So that's going to be a change. All the other components will be recognized through the statement of operations going forward.
Then we move on to a couple of other projects that we have on the go. Intangible assets, they're looking to replace the interim guidance of PSG-8 for purchased intangibles. Again, PSG-8, it's a useful stopgap, but we really want to make sure that we are going forward and making that we have a full standard on it. It's going to follow the International Public Sector Accounting Standards 31, but will be amended as needed for the Canadian circumstances. The other project that is coming, especially as we see more and more cloud computing arrangements, is that there will be a standard on that. A survey was issued, and right now PSAB is looking at the results of the survey.
Now the last topic before I turn it over to Craig is just sustainability. And there really hasn't been a lot of movement in terms of in the Canadian side of thing, the International Public Sector Sustainability Board is looking, considering comments that are happening on the two exposure drafts that are out there, but not much has happened. But we are seeing out there that there's a lot of large and medium-sized municipalities that are voluntary or voluntarily starting to report on this. And we are also hearing that stakeholders, they want to hear this. So keep an eye on this. It is going to be very consequential when it comes in and you want to make sure that you're ready for it. And especially as we start to see what types of disclosures you need, that's what you want to keep an eye on because then you can start to think about are we tracking this for when it does come in. With that, I'm going to stop and we'll be turning it over to Craig now to talk about AI.
Craig Marchand:
Hello, good day. Bonjour, everyone from across the country. It's a real pleasure to be here with you today. I'm not entirely sure that Mario and Marcus realized that I would be turning up with this delightful new 2025 spec Movember mustache in front of a fantastic public audience, but I appreciate them nonetheless for inviting me. And what a time it is to be alive indeed, generating some awareness about men's health and generating some awareness about AI and the future of work in public sector accounting. So just taking a bit of a step back, recognizing of course that there are a number of changes taking place in public sector accounting standards, as Marcus and Mario have just eloquently spoken through.
There are an abundance of change taking place in the world at large as well. We like to call this the exponential age where we are seeing artificial intelligence certainly emerging with a number of other general purpose technologies where the performance of these technologies is really advancing at an exponential rate to improving in performance, as well the access to these technologies like AI, like blockchain, like biotechnology for example, the access is really becoming far more accessible and consumable and cheaper to access than ever before. We used to joke about having supercomputers in our pockets, but to quote Dario Amodei, one of the CEOs of the major labs Anthropic, we are now not only having a supercomputer in our pockets, but we're having access for $20 a month to what he calls data centers full of PhDs, right in our pockets.
So artificial intelligence on its own is certainly reshaping the way that we learn, the way that we work, the way that we imagine the value that we bring to our roles every single day, and it's allowing us to think with a customized or personalized collaborator and thought partner. So obviously there are a number of challenges and a number of opportunities emerging across the board when it comes to artificial intelligence and this kind of technology. But we like to try to help our clients to be purposeful, to be intentional, to lead and shape the way that this technology influences work in their organization, rather than simply being reactive to this technology and having to consider about how to protect our information, protect the way that we do business and our accounting standards. And now is the opportunity for organizations just like yours to consider how you will shape and lead the future of work in accounting with artificial intelligence.
So in terms of AI, there are likely, you guys have likely seen many organizations, perhaps many technology companies trying to talk to you about what are the use cases, what's the use case, what's the killer app for AI in public sector accounting? Well, something that I would like to suggest for all of you is that it is very much a partnership. I like to call it human-machine collaboration and the future of work. And I like to talk about it in the context of you are the use case. You, your brilliant staff and your stakeholders at large are the real use case for this amazing technology.
We at BDO internally as well as in the way that we help our clients, we like to think of this partnership as a really important one. It provides that opportunity to lead and shape the way that the technology is used, and it also helps us to make sure that our authentic human values are incorporated in everything that we do.
So if we look at kind of the two sides of this collaboration, there are things that humans are uniquely capable of and really good at, and there are some very unique and amazing capabilities available to us using artificial intelligence. So for example, for humans, our sensitivity, our empathy, the relationships that we create, our unique wisdom, cultural knowledge and understanding of the way that our organizations and our systems work and the detailed and purposeful articulation of our values and the way that we act in a professional sense in a way that is ethical and responsible as a matter of our professional roles.
Those things are not likely to go away anytime soon. And so putting those into a relationship, a partnership relationship with AI that has some amazing capabilities as well, is what we think is the future of work. So AI, for example, its amazing capabilities, its pattern recognition, anomaly detection, processing, different types of analysis and analytical tasks, and of course doing this on a speed and scale at is far beyond anything that either a normal human being or even some of our traditional computing mechanisms can do. Important to be able to avail ourselves of these opportunities whilst at the same time making sure that we are ethical, we are responsible, we are not only just human in the loop, but a human steering and guiding the way that we leverage AI and the future of work we think will deliver the very best results for organizations like yours.
So this is really at the forefront of many of our clients' minds at the moment is what is the best way and how might we continue to shape and lead the way that we leverage computing power and artificial intelligence in the way that we work? So I encourage you to think about that perspective of human-machine collaboration and how it is really that human value that should drive the way that you incorporate artificial intelligence into the work that you do.
So I wanted to share with you an anecdote of one of my most amazing discoveries over the course of the last couple of months or so. In the middle of the summer or thereabouts, most of the AI labs released a feature called advanced memory. I'm talking about things like ChatGPT for example, or Google Gemini, which most of you have likely either heard of or even made use of already. There's this amazing dual learning curve that is taking place right across the industry and people who use AI.
So first of all, humans are obviously learning how to work better with ai. They're learning new prompting techniques, they're learning how to be critical about some of the outputs of AI, and they're learning how to use it in a way where they can create and draft great communication materials, for example, or other types of work products in a way that is tailored to them and that works best for them. At the same time, what's happening since this advanced memory feature has dropped is that most of the advanced AI models now have an advanced memory. So they remember all of the chats that you've ever had with the machine and they actually get better and improve at working with you or with the human over time. So they are more in tune with your preferences, the formats that you like, the thought patterns that you have and the way that you like to work.
So there's this self-reinforcing feedback loop of accelerated learning taking place across all industries. And we think, for example, this is a key opportunity for impact right across public sector organizations. The faster that people learn together with the machine, the more capable they will be in creating new and novel impacts, and of course in taking opportunities to enhance productivity right across the accounting workflow. Bottom line up front, the more you use it, the smarter you both become. What a concept. Again, what a world we live in.
So I'd like to share just a few practical guardrails that we should all keep in mind as we work together with AI in the future of work. I like to think of it not only just as humans in the loop but humans at the wheel, okay? Making sure that we do leverage our unique expertise, our experience, our unique context and relationships in the world around us, and make sure that we are thinking critically about AI responses, thinking critically about what AI might be good at for us in our workflows and what should continue to be human-dominant types of tasks.
So trying to make sure that we have humans not just in the loop, but at the wheel guiding and shepherding our AI collaborators. We also want to make sure that we encourage you guys as a matter of a kind of bottom-line message that you're using enterprise-grade AI tools. If you are going to begin experimenting and building with AI, that you use either something like a ChatGPT Teams or Enterprise license, where those environments are much more secure with respect to private and sensitive information than of course a public ChatGPT account, for example.
Third, and this is really important for those of us, all of us who work in highly regulated industries, your professional accountability and judgment does not disappear. We are all always responsible for the work that we provide and deliver to our stakeholders. And this doesn't go away whether you use AI, whether you use Excel, whether you use Google or any of the systems that you currently use, at the end of the day, the buck stops with us. We are always responsible for our work. So something to make sure that we keep in mind for yourselves and your staff as we venture into this new world.
So some of you may have read recently around many large organizations, public sector organizations in particular, finding themselves in pilot purgatory. One of the things that I would like to convey to you guys today is that we can all start small with very reasonably simple AI. And you don't have to be a developer, you don't have to be a data scientist or a coder. It's a wonderful thing about artificial intelligence and generative artificial intelligence, in particular, tools like ChatGPT, tools like Google Gemini for example. They're very accessible. All we must do is use our words, be articulate. Jensen Huang, the CEO of Nvidia once said, "The future belongs to English majors." So encourage you to use your words. It is the most accessible and high-performance technology available to us, but while it is accessible, the other side of the coin is that it does not come with an instruction manual.
So taking one of these platforms, beginning very small, trying things like drafting meeting notes like many of us have already done, helping you to categorize, prioritize, or plan different types of business operations or strategies. Really nice and easy ways to get started with gen AI. And you don't need some fancy custom system or anything. You can even use ChatGPT for example, to do some pretty in-depth financial analysis using its code interpreter or advanced data analysis capabilities.
And then of course, in terms of knowledge management communication, it's a great system that I know our clients appreciate, particularly from a lot of our domestic tax lines, where we're able to translate fairly sophisticated tax strategies or plans into a language, a more easy to understand or consumable language for our clients. And AI is really great for that as well. Translating complex jargon into consumable types of communication is a fantastic use case that we've seen right across industry.
So in terms of what I'd love to share with you today, as a matter of this very short presentation, we have a vision for the future of work that I'd like to share with you too because I think it to virtually every organization, it is a future where we all must be more authentic, perhaps, than ever before. That authentic, personalized, very user-centric and stakeholder-centric approach to delivering work is going to be actually more valuable than ever, grounded in ethical principles, grounded in our professionalism, the way that we create and strengthen relationships in that very authentic and genuine manner will continue to be critical.
Second, it has been kind of like this for a while, but we must embrace these notions of continuous improvement, of systematic experimentation, and become the most adaptive team and organization that we can possibly be. The way I like to think of this is a lot of the business acumen from the industrial revolution, including things like cookie cutters and templates and things. We used to think that because that's the way that you achieve scale, standardize something and then mass produce it, things are changing a great deal from that perspective now. Anything that can be standardized can likely be automated.
So very helpful for us to maintain that authentic perspective, make sure that we are agile and able to adapt and try new things, experiment with new things, bring new capabilities to bear on our work. And then of course, finally become augmented with human-machine collaboration with access to those vast capabilities of AI and this ability to collaborate effectively with the machine and deliver far better results and impact for our communities far more than either us alone or certainly the machine alone could do by itself.
So I encourage you to think that you are the use case. I encourage you to consider that anything you can do, you collaborating with AI can do even better. And if you would like to chat a little bit more or discuss opportunities for you and your organization to excel and to really lead and shape the future of work in your organization, I'd encourage you to reach out. We love to discuss these things and I can't wait to hear of what are some of the key challenges and opportunities that you see for human collaboration, human-machine collaboration in the future of work in your organization. Once again, I appreciate the time. I'll turn it on over to Laina to bring us home.
Laina Verhoef:
Awesome. Thank you, Craig. We're almost out of time. We only have about five minutes left. So that pretty much wraps up the technical and AI content of our webinar today. I just wanted to remind everybody that we do have a lot of guidance on our bdo.ca website. If you access the bdo.ca website, you can go to our insights. If you click the tab there, you can access the PSAS Accounting Knowledge Center. There's a lot of great resources on there. And as Marcus alluded to, we also will be having our annual update publication coming out in the near future. So stay tuned for that. It hopefully should be available in the next little bit and help you get ready as you get ready for your 2025 year-ends.
We're going to go into our question period now. We've had a few questions come in over the last hour. We'll try to address a few of them and we're bringing everybody back on stage here. So we have a couple of questions here. There was one question we had about the conceptual framework that came in and about the prospect of application. I'm going to throw that to you, Marcus, if you wanted to address it, about whether or not that there is a presentation of comparative numbers, if you wanted to just chime in on that.
Marcus Sconci:
Yeah, so generally speaking, we don't expect there to be many changes to your numbers with respect to the new conceptual framework. That should be fairly rare. But in the event that there are, you would not restate comparatives, the perspective treatment has you put all of the impact of those changes through the current year's income statement, and you would then report on the revised numbers in line with the new conceptual framework at the end of the year. And then there was a related question that came in, I believe on this, but it might've been on the slide with this and the new reporting model on the applicability to GNFPOs. Just a reminder that the conceptual framework applies to everybody. The reporting model applies initially to everybody except GNFPOs, but it will eventually apply to GNFPOs, we just don't have that transition date yet.
Laina Verhoef:
Perfect. And then we had another question come in at the end in regards to ARO remediations and whether there's any guidance out there about the impact of ARO liability changes on the related capital asset, and if there's any example, good examples around partial remediations. So Mario, did you want to chime in on that?
Mario Piroddi:
It's really a tough question because when we look at it, it all depends on what's been happening and how your remediation steps in. And I'll ask Marcus in a moment if he has any examples where he's seen it done, but to me it's that classic example, we're renovating the school, we're tearing down walls, we're dealing with the asbestos, but we only did it in one week. And so now we have to go and parse what we did for that entire school and deal with what is new capital that we've done and we've disposed of the other ones, and how do we get to those numbers and breaking it up becomes a lot more challenging in that perspective. Marcus, do you have anything that you've seen out on your side?
Marcus Sconci:
That's the classic example I've seen, asbestos or other related insulated materials that exceed environmental standards where you do a partial renovation.
Laina Verhoef:
All right, well I think that brings us out of time here. Thank you everybody for attending. It was great to have everybody here and we look forward to hearing from you. If you have any other questions, please do not hesitate to reach out. Thanks everybody. Have a great rest of your day.