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Public Sector Accounting Board

(PSAB) – Annual Update

The PSA Handbook is the

primary authoritative source

of public sector GAAP.

The opinions stated in the presentation are those of the author

and do not necessarily reflect the views of PSAB. Official

positions of PSAB are established only after extensive public

due process.

Canadian Association of Government Finance Officers (CAGFO)

September 12, 2018

2017-2020 Strategic plan

International

Strategy

NFP Strategy

Conceptual Framework

Stakeholder

Acceptance

Public Interest

September 12, 2018 2

Interrelated Strategies


Review of International Strategy


Current Approach to IPSASB

• Maintain a Canadian standard-setting capability while contributing to and influencing the work of the IPSASB

o contribute to the development of standards by:

– briefing the Canadian members of IPSASB

– responding to IPSASB documents for comment

o encouraging Canadian public sector entities to

respond to IPSASB’s documents for comment


International Strategy – Why Now?

• International Standards have matured

o Conceptual Framework, robust due process and a

comprehensive set of Accounting Standards

• International adoption momentum

• Canada’s role in influencing International Standards

• Time & resources spent on developing Canadian public sector standards


International Strategy

Strategic Plan –

Review our approach

to International Public

Sector Accounting

Standards

• Conduct research on the differences between Canadian Public Sector Accounting Standards and International Public Sector Accounting Standards

• Learn about experiences of other jurisdictions that have elected to follow International Public Sector Accounting Standards

• Issue a public consultation paper to get the opinion of stakeholders

• Develop options for our international strategy


Consultation Paper # 1

• Neutral Approach

o PSAB has not decided which option to pursue

• Introduce decision making model

• Not seeking opinions on which option

PSAB should adopt

o Discuss criteria that will be used to evaluate these

options



• Resources and timeframes for

implementation are not in scope

• Responses received from CP #1 will

be incorporated into CP #2

• PSAB to be in a position to make a

decision by March 2020



• Asking stakeholders to comment on:

• Are there additional criteria the Board should include in its business

cases when evaluating the options?

• Should any criteria take precedence over others?

• Are there other significant facts that should be taken into

consideration?



• Asking stakeholders to comment on:

• Are there additional options for PSAB to consider and for which it

should develop a business case?

• Are there any other matters that should be brought to the Board’s

attention for consideration?


Timeline


Evaluation Criteria

Criterion 1: Canadian influence over the standard-setting

process

Criterion 2 : Quality of accounting standards

Criterion 3 : Transition costs

Criterion 4 : International alignment

Criterion 5 : Due process

Criterion 6 : Use of standard-setting resources


International Strategy - Options

Business Case Approach

Status Quo Adapt IPSAS

principles

Adapt IPSASs

Adopt IPSASs


Option # 1 – Status Quo

Status quo is defined as continuing the existing standard-setting process. This option maintains PSAB’s role in establishing PSA standards independently from other standard setters.


principles

Adapt IPSASs

Adopt IPSASs


Option # 2 – Adapt IPSAS Principles


principles

Adapt IPSASs

Adopt IPSASs

This option involves PSAB continuing to develop standards for Canada. However, future standards would be based on existing IPSASs. The Board would establish a process detailing when departures from IPSASs are warranted.


Option # 3 – Adapt IPSASs

This option involves applying IPSASs in Canada, except in circumstances where a departure is warranted. PSAB moves away from developing standards for Canada except when a Canadian issue is identified.


principles

Adapt IPSASs

Adopt IPSASs


Option # 4 – Adopt IPSASs


principles

Adapt IPSASs

Adopt IPSASs

This option involves PSAB adopting IPSASs as

issued by the IPSASB.


PSAS / IPSAS Comparison

[VALUE] Standards ([PERCENTAGE])



Consistency of PSAS with IPSAS

Consistent

Difference

Significant difference


Resources

• “In Brief” Plain and Simple Overview of the Consultation paper

• Video “Reviewing our International Strategy”

www.frascanada.ca

Comments Due: September 28, 2018


http://www.frascanada.ca/

Questions and/or Comments


Effective dates

Date Topic

April 1, 2021 Governments and some organizations only: - F/S Presentation PS 1201 - Foreign Currency Translation PS 2601 - Financial Instruments PS 3450 - Portfolio Investments PS 3041

April 1, 2021

Government and Government Organizations - Asset Retirement Obligations, Section PS 3280

April 1, 2022 Government and Government Organizations - Revenue, Section PS 3400

22

2018-19 Annual Plan

Documents Project

Final Standard

(FS)

Asset Retirement Obligations

Revenue

Exposure

Draft (ED)

Financial Instruments (Narrow Scope)

Annual Improvements

Statement of

Principles (SOP)

Conceptual framework

Public private partnerships

Invitation to

Comment (ITC)

Employment benefits (Pensions)

Consultation

Paper (CP)

Review of International Strategy - CP #1 & 2

Not-For-Profit


Final Revenue Standard

• Local Government Considerations:

• Building permits are in scope

– Identify performance obligations and recognize revenue when satisfied

• Development Charges are out of scope

– Section 3100 will continue to apply

• Review agreements and determine performance obligations

• Final Standard release, “In Brief” and Podcast In November

24

Final Asset Retirement Obligations

Standard

• Local Government Considerations:

• Landfills are in Scope

– Replaces solid waste landfill closure and post closure liabilities (PS

3270)

• Assets controlled by the public sector

– Includes Asbestos

– In productive use, or no longer in productive use

– Review agreements, determine whether there are unrecorded liabilities

• Final Standard released August 2018

–“In Brief” and Podcast available

25

Financial Instruments

• Extensive Consultation Process

– Consultation with Sr Governments, Auditor Generals, Local

Governments and Government Not-For-Profits across Canada

• Effective date extended to 2021

• Narrow scope amendments project targeting specific items:

– Transitional provisions

– Clarifying scope

– Bond repurchase issue

• Exposure Draft approval December 2018

• “In Brief” plain language explanation of decision

26

Government Not-For Profit

Organizations (GNFPO)


Background

• Assess the specific needs of GNFP stakeholders 2017-2020 Strategic Plan

• Understand if some of our standards should

apply differently to GNFPOs 2017-2020 Strategic Plan

• Implement a GNFP strategy that meets the

public interest

2018-2019 PSAB Annual Plan

• Enhance engagement with the users of

GNFPO organization’s general-purpose

financial statements

2017-2020 Strategic Plan


Background

• Staff consulted with over 100 GNFPOs and their

stakeholders

• The objective of the consultations was:

○ Understand the fiscal and regulatory

environment in which GNFPOs operate in;

○ Identify their financial reporting needs;

○ Understand their financial reporting concerns


Summary of findings

• Diversity in financial reporting framework

• Presentation of GPFS:

– Net debt

– Fund accounting

• Impact on balanced budget requirement

• Endowments

– Accounting

– Presentation


Next Steps

• Present a consultation paper for approval at the

December 2018 meeting

• The consultation paper will articulate:

– Evolution of PSAB and GNFP landscape

– Results of the 2017/2018 GNFP consultations

– Seek stakeholder input to develop strategy

• Webinar October 29, 2018

• “In Brief” explanation of the consultation findings in November


Employment Benefits


Project Objective

Issue a new employment benefits standard replacing:

• Section PS 3250, Retirement Benefits; and

• Section PS 3255, Post-employment Benefits, Compensated Absences and Termination Benefits


Project Task Force

• Robert Lefrancois, Lefrancois Dufour CPA Inc. (Chair)

• Terence DeJong, Assistant Auditor General, Office of the Auditor General of Canada

• Lucy Durocher, PwC Partner

• Uros Karadzic, Actuary, E & Y Partner

• Paul Martin, Comptroller, Province of New Brunswick

• Cheryl McMullin, Chief, Fiscal Policy Division, Department of Finance Canada

• Martin Raymond, Actuary, Deloitte Partner

• Suzanne Wile, Executive Director, Nova Scotia Department of Finance


Project Advisory Group

• Adam Bell, Accounting Manager, City of Fredericton

• Yvon Bouchard, Director, Quebec Ministry of Municipal Affairs

• Karen Dixon, Actuary, Dixon Actuarial Services Inc.

• Conrad Ferguson, Actuary, Morneau Shepell Partner

• Nathalie Joncas, Actuary, Confédération des syndicats nationaux

• Kim MacPherson, Auditor General, Province of New Brunswick

• Josee Patry, Actuary, Normandin Beaudry Partner

• William Robson, President & CEO, C.D. Howe Institute

• Lori Taylor, Manager, Provincial Comptroller’s Office, Saskatchewan Ministry of Finance


Due Process Documents

Invitation to Comment

Statement of Principles

Exposure Draft

New Standard


Key Issues

• Deferral provisions

• Discount rate guidance

• Non-traditional employment benefit plans


Invitation to Comment #1 - Deferrals

Contributions

Benefit payments

Administrative cost

Inve

stm

en

t

retu

rn

Changes in the value of

the accrued benefit

obligation

Current service cost

Past service cost

Interest cost on obligation

Benefit payments

Plan curtailment

Plan settlement

Plan settlement

Actuarial gains

and losses

Unexpected return

Experience adjustments

Demographic

Discount rate

Other economic Ch

an

ge

s in

actu

aria

l

assum

ption

s

Unexpected

return

Expected

return

Changes in the value of

plan assets

Realized

gains and

losses

Experience adjustments

Demographic

Discount rate

Other economic Ch

an

ge

s in

actu

aria

l

assum

ption

s Unrealized

gains and

losses


Responses to ITC on Deferrals

Controller Auditor Local Gov’t

SUCH Org

Actg firms Actuaries Others Total

Canada 1 1 4 3 1 10

BC 1 1 2 4

AB 1 1 1 3

SK 1 1 2

MB 1 1

ON 1 1 4 6

QC 1 1 2 1 1 6

NB 1 1 2

NS 1 1

NFLD 1 1 2

Total 9 7 5 6 4 4 2 37


Invitation to Comment #2 -

Discount Rates

• The role of discount rates

o Benefit obligation is often incurred years before the

payments are due – need to calculate the value of

the obligation at the reporting date

Future Benefit

Payments

Present Value of

Benefit Obligation

Discount

Rate


Responses to ITC on Discount Rates

Controller Auditor Local Gov’t

SUCH Org

Actg firm Actuary

Pension Plan Union Other Total

Canada 1 1 4 3 2 2 13

BC 1 1 2 4

AB 1 1 1 1 1 1 6

SK 1 1 2

MB 0

ON 1 1 1 4 3 10

QC 1 1 1 1 1 5

NB 1 1

NS 1 1 2

PEI 1 1

NFLD 1 1 2

Total 9 5 3 2 4 4 10 6 3 46


ITC #3 – Non-Traditional Plans

Scope

• Pension Plans only

• All pension plans

– Traditional DC

– Traditional DB

– In-between

Focus

• Reflecting risk/cost of the plan to Employer /Sponsor


Pension Evolution in the Canadian Public Sector

Sharing of risks related to pension benefits between employer and employees Employer Employees

Defined Contribution Joint defined benefit

PENSION PLANS IN SECTION PS 3250

Defined benefit Multiemployer defined benefit

Multiple-employer defined benefit

PENSION PLANS IN THE PUBLIC SECTOR

Multiemployer defined contribution

Target benefit with fixed employer contribution

Target benefit with employer contribution limit

Joint target benefit

Joint defined benefit with risk-sharing provisions

Multiemployer joint defined benefit

Multiemployer target benefit with joint trustees

Defined benefit with employees sharing surplus/deficit

Defined benefit basic pension and defined contribution indexation

Defined benefit with conditional indexation

Multiemployer defined benefit with joint trustees

Colours correspond to characteristics of:

defined contribution plans

joint defined benefit plans

multiemployer plans

defined benefit plans

target benefit plans

risk-sharing provisions


Shaping the Future

• Projects will define the future of

Public Sector Accounting

• Stakeholder Involvement and

Participation:

o Documents for Comment

o Public Sector Discussion Group

o Task Force/Advisory Group

o Outreach Opportunities


For more information, visit

www.frascanada.ca

Contact: Michael A. Puskaric

Director, Public Sector Accounting Board

Phone: +1 (416) 204-3451

Email: [email protected]

Charles-Antoine St-Jean

Chair, Public Sector Accounting Board

Phone : +1 (613) 598-4302

Email: [email protected] 47

http://www.frascanada.ca/

mailto:[email protected]


