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Camila Santos: Good morning or good afternoon, depending on where you are in the country. Welcome to today’s webinar on the Public Sector Accounting Board’s government not-for-profit Exposure Draft, “Tangible Capital Assets, Proposed Amendments to Section PS 3150.”
My name is Camila Santos. I’m a principal with the Public Sector Accounting Board, referred to as PSAB, and the moderator for today’s event.
Please note that this webinar qualifies towards fulfilling your CPD requirements.
After the webinar, you must successfully complete a post-webinar quiz. The link to the post-webinar quiz is provided on one of the slides to follow.
After completing the quiz, an email will be sent, notifying you as to whether you successfully answered the quiz questions, and a link to your certificate of completion or if you need to retry the quiz.
We have over 300 registrants for today’s session. Thank you so much for your participation.
Before we start, I’d like to mention some features of our meeting.
First, we are pleased to offer French interpretation during this webinar. To listen to the webinar in French, please locate the interpretation option in the toolbar at the bottom of your Zoom window and select French.
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This meeting will be recorded in English and in French and will be available on demand after the webinar via the same registration link found on the webinar webpage.
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Before introducing our speaker, PSAB has a commitment to diversity and inclusion. In keeping with Indigenous protocol and building respectful relationships between Indigenous and non-Indigenous people in Canada, it’s customary to acknowledge the traditional territories or ancestral lands of Indigenous peoples.
We are meeting virtually, so I would like to acknowledge that Indigenous peoples are the traditional stewards of the lands and waters where each of us attends this meeting this morning or afternoon, depending on the location for which presenters and participants are attending.
Now, on behalf of FRAS Canada, it’s my pleasure to introduce today’s speaker, Bill Cox.
Bill is an SCPA, FCA, with more than 35 years of experience in accounting and auditing and specializing in servicing public sector organizations, local governments, First Nations, and not-for-profit organizations. He’s a retired partner from BDO, former PSAB Board member, and current chair of PSAB’s government not-for-profit advisory committee.
Welcome, Bill.
Today, we are here to provide you with an overview of PSAB’s Exposure Draft, “Tangible Capital Assets Proposed Amendments to Section PS 3150.” This is the first standard-level project to implement PSAB’s GNFP Strategy.
The project proposal was approved at PSAB’s December 2022 meeting. And this project covers a review of the PS 4200 series standards related to Capital Assets Held by Not-for-Profit Organizations, Section PS 4230, and Collections Held by Not-for-Profit Organizations, Section 4240, to determine what amendments, if any, should be proposed to the Tangible Capital Assets, Section PS 3150.
As a result of proposing amendments to Section PS 3150, once they are effective, Sections PS 4230 and 4240 will no longer be applied. Sections PS 4230 and 4240 will be withdrawn from the PSA Handbook. In fact, once the complete review of the PS 4200 series has been done, there will no longer be a suite of standards specific to GNFPOs, and instead, there may be customizations within a standard specific to GNFPOs.
These proposals are applicable to public sector entities only – that is, an entity that applies the PSA Handbook. The opinions stated in this webinar are those of the presenters and do not necessarily reflect the views of the Board.
The purpose of today’s webinar is to provide you with an overview of the proposals in the Exposure Draft, “Tangible Capital Assets Proposed Amendments to Section PS 3150.” Before we discuss the proposals, we will provide you with a refresher of the GNFP project and PSAB’s GNFP strategy that is being implemented.
At the end of the session, we’ll go over some links to the FRAS Canada website and the GNFP Strategy project page so that you can stay informed about the status of the project and how to provide your input.
Here’s the agenda for today’s session. We’re starting with the background of the project, followed by an overview of the GNFP Strategy and Implementation Plan, a high-level overview of the proposals in this Exposure Draft, and we will have time at the end of the session for some questions.
Now, before we get started, we would like to hold a quick poll to understand who is listening today.
The first polling question is, what is the category of reporting entity that is most relevant to your current role?
- Indigenous government,
- federal government,
- provincial government,
- municipal government,
- government not-for-profit organization,
- legislative auditor office,
- public accounting firm, or
- other
I’ll give you a minute or so, so we can get all the answers that are coming in.
Lots of answers are coming in.
Okay, so let’s take a look at the results. Well, the majority of our attendees today are from provincial government, followed by government not-for-profit organizations, and in third place, municipal government. We thank you all very much for your attendance and participation in this webinar. Now, I’m going to hand it over to Bill so you can continue with the presentation. Over to you, Bill.
Bill Cox: Thanks, Camila. And good morning from Vancouver.
We’re going to go through the agenda as Camila highlighted, starting with the background here. So, this background just sort of reminds us of how we got to where we got. And the timeline’s helpful. So, 2011-2012, the PSAS Handbook, the introduction to the Handbook, changed, and government not-for-profit organizations were brought into PSAS for the first time. Most of them prior to that were using Part III accounting, the private sector, not-for-profit standards.
So, in 2012, they had to come across, and I think at the time PSAB recognized that there could be some unique challenges for some government not-for-profit organizations to come into full PSAS. So they gave the option of going with PSAS standalone on its own full PSAS or to use the PS 4200 series. And the PS 4200 series at the time was pretty well word for word the 4400 series from private sector not-for-profit accounting standards. Not sure why we remembered it, but anyway, at that time they were pretty well word for word the same standards.
Now, since that time – what is that, 12 years ago now – there has been some divergence between the private sector and 4200 series standards. So things were changing.
I think it was recognized at the outset that there was probably not a good long-term solution to have a 4200 series with different standards, different presentations in the long term. And I think we heard that from the community as well. So you can see from the timeline here, 2017-2018, we heard some things from the community in terms of what was important to them. We heard a lot from the provinces in terms of wanting to get everybody on exactly the same page. So, PSAB started to think about how to best come up with a strategy to deal with that.
Around that time, my committee was formed. I think it was originally called the Government Not-for-Profit Strategy Committee, and it’s now known as the Advisory Committee.
And one of the things we did near the outset in that 2019-2021 period was to issue a couple of Consultation Papers. And those were very helpful. It was sort of a combination of wanting to get a little more background in terms of what was out there in terms of government not-for-profit organizations with the size and scale. Some of them were also what some of the issues they had and what they thought was important when it came to accounting. So that was really good information that we got back.
We took that information as a committee, and we came up with a strategy that we presented to the Board to PSAB. And in 2022, PSAB approved the not-for-profit strategy that we suggested. And the implementation started at that point.
And then in 2023, at the end of the year, December, the Exposure Draft that we’re going to talk about today, “Tangible Capital Assets, Proposed Amendments to 3150,” was issued. So that’s how we got where we got.
Now, just a reminder in terms of our strategy for dealing with the 4200 series and with government not-for-profit organizations. When my group, when my committee started, we had a blank slate, and I can remember our first meeting very, very well. We just had brainstorming for really the better part of the day, thinking about what are all the options out there. And it was completely open to us. We thought about, you know, would IFRS make sense? Would it make sense to use IPSAS, the International Public Sector Accounting Standards Board standards? Should we use private sector accounting? Should we use GASB from the States? I mean, everything was on the table. And after brainstorming that, we looked at criteria for deciding what would make the most sense. And we looked at a bunch of things, including comparability, which was a very important item.
So after going through that process, we ended up here with the strategy you see here, which is the government not-for-profit organizations would follow PSAS (the sort of the full PSAS without the 4200 series that will go away as we’ll talk about later), but with potential customizations.
So we wanted to have comparability. We want to bring people in, which is why the full PSAS. But we wanted also to leave that tool of potential customizations available to PSAB if they thought there was a standard that maybe needed a little tweak for government not-for-profit organizations to treat things differently than the government might do. Now, nothing is in that customization bucket yet, and nothing in this Exposure Draft we’re talking about today will require customization. So nothing’s there yet. It's just a tool that PSAB has as it works through the not-for-profit strategy to see if there’s a time where it might be needed.
I don’t want to presuppose what might go into that category, but it could be something like, perhaps there’s a standard with a heavy degree of disclosure, and the Board may decide that government not-for-profit organizations, for whatever reason, maybe might have a lighter degree of disclosure.
I’m just making that up. That’s just an example of the kind of tool that PSAB would have if it decided that was necessary.
So we ended up there. We think there’s a bunch of good things that come out of that, having that customization available is a good thing. But overall, we’re going to really improve comparability. We won’t have the way it is now. Typically with the fact, there’s a choice in the 4200 series for different revenue recognitions. So we won’t have that choice anymore. We’ll have everybody on the full PSAS only with potential customizations. And the other good side effect of that – and we’ll see some of this today as we go through the Exposure Draft – the other good side effect of that is anything that’s in the 4200 series now that is useful and consistent with the framework, the conceptual framework, will come across into the full PSAS handbook and be available for all. So we think everybody wins by going through this process.
So once we kind of knew where we’re going and decided that the process was going to be going through the 4200 series standard by standard or group of standard by group of standard and looking at how they differed from what’s already in the PSAS standard and what good information, what good requirements might be in the 4200 series that could come across, once we decided that was the process, we had to decide where to start. And I think we all kind of surprised ourselves by ending up with Capital Assets being first on the list as you can see on the slide here.
We have been hearing a lot of talk about Contributions being important. There’s some things in Contributions in terms of revenue recognition that are top of mind for a lot of people – [Inaudible] and including things like recognizing capital funding, different capital contributions, accounting for endowments. Those are all kind of important.
But when we looked at it, we thought we should start with Capital Assets. We don’t think there’s too much difference there now in the 4200 series versus 3150 and full PSAS. (Although when we dug into, we were surprised actually that there were more differences than we thought. We’ll talk about that later.) But we thought it would be a good way to start to get our feet wet to understand the process and to frankly get some buy-in from the community, from the preparers and auditors community, that this was going to be a good process that they could rely on us to listen to feedback and everybody could buy into that.
So that’s why we ended up with Capital Assets first. I remember taking that to the PSAB Board meeting to discuss that that was our recommendation to do that first. And I think they were probably a little surprised as well first, because they had also heard lots from their constituents in terms of the importance of Contributions. But I think they understood the process. It kind of made sense to start this way to get it going. But what they did tell us quite clearly is, “Contributions is important, and we don’t want to wait around for that. So can you start that in parallel with Capital Assets?” So that will be happening. We have the Exposure Draft at the start of this year. And then we will, as we’re looking at responses to the Exposure Draft, we will also start the process of looking at the Contributions. So that will be going in parallel.
The third and fourth items, purposely we left for a little bit later – particularly the fourth one, Financial Statement Presentation – from the consultation papers when we looked at some of the issues that were important to government not-for-profit organizations. We realized that many, or at least some of those, would very likely be solved by the new conceptual framework, and new reporting model would have just recently come into the PSAS Handbook, and are not even required to be used quite yet. And we think that will solve a few of their problems. So it made sense for us to leave that to a little bit later on in the process, so we can see how some of those issues may have resolved themselves with the new reporting model. So that’s sort of how we ended up with the order that we ended up here.
So in terms of the Capital Assets Project as we talked about, that was the first project that was undertaken. And we viewed… On the right side the slide here, you can see we’ve reviewed a couple of sorts of options of working through the 4200 series. So that’s the approach. We’re going to take a look at what’s in the 4200 series, see what’s in there and then deal with it in one of the three ways on the right. So we will potentially add guidance to the 4200 series. If there’s something good in the 4200 series that’s not in PSAS right now – in this case, in 3150 Tangible Capital Assets, but this will be the same approach to all standards – if there’s something we can bring across that's good and consistent with our conceptual framework, we will do that. We have a couple of such items today that we’ll be talking about.
On the other side of the spectrum, if there’s something in there that’s not consistent or irrelevant or redundant, we’ll just completely remove it because those sections will be removed at the end.
And then in the middle, we have the option: Is there something different about a government not-for-profit organization in relation to whatever standard we’re looking at that would suggest a customization would be useful whether it’d be a tweak to a standard that would be applicable to government not-for-profit organizations. Not, nothing in the Capital Assets Project, but, as I said at the outset, that tool is available.
So that’s the way we approach, going through 4230 and 4240 and seeing what, if anything, should be brought across.
So these are the key issues that we identified as I mentioned at the outset. They’re probably a couple of more than we thought that there might be. The first is the definition of tangible capital assets. They are slightly different between 3150 and 4200 series – not drastically, but certainly one key point, which we’ll talk about in a second. In the 4200 series, there’s a recognition exemption for small government not-for-profit organizations. That’s not there in 3150. So that’s a difference that we have to look at. Works of art, historical treasures and collections really only get a sentence or two in PSAS and 3150. But in 4230 – collections and historical treasures and works of art – and 4200 series, there’s quite a bit of discussion about that. So that was a difference there. We had to think about what changes might be necessary. And then the last two are a little bit related:
- purchases of capital assets substantially below fair value, and
- inclusion of contributed materials or labour in the cost of a constructed or developed capital asset
There were some good points made in the 4200 series, whereas 3150 was pretty well silent on those. So those were the issues that we had to work through.
So, starting with the capital asset definition – as I said, not drastically different. The big difference really was that intangible properties are mentioned in the 4200 series and 4230, whereas in 3150, tangible assets aren’t really mentioned at all other than saying that computer software is treated as if it’s a tangible capital asset. But other than that, intangibles aren’t identified. So that was a difference and perhaps could have been a significant difference. However, a couple of things have happened on the full PSAS front that will impact this.
First of all, there’s a recently issued guideline for purchased intangibles that was added to the Handbook. So we now have a standard for purchase intangibles. And then last year, PSAB approved the Intangible Asset Project. So PSAB will be working through intangibles already. And from our point of view, in terms of capital assets, we don’t have to get too worried about the differences and definitions, because PSAB is going to be looking at intangibles already, and they already have a Purchased Intangibles Guideline. So that’s why we say at the bottom there, we think minimal impact from this change. Because if there is any intangible changes or differences, those will be coming from the intangible asset project. So this particular issue is not going to cause us much problem in terms of our committee.
So this gives us an opportunity to have another polling question: Do you agree that “intangible properties” should not be added to the definition of a tangible capital asset in PS 3150 and instead be addressed by PSAB’s Intangible Assets Project? So if you can just take a second or two and answer Yes, No or Not sure, that would be helpful to us.
Okay, good. We have – I was hoping this would be the case – we have an overwhelming agreement that that makes sense. So I’m glad to hear that we thought it did. There’s no sense in our view reinventing the wheel, so we’ll be looking at that, although we’ll come back and talk about how that might impact things a bit later on when we talk about implementation dates.
Okay, second issue was the recognition exemption. So there’s an exemption in 4200 series that a small government not-for-profit organizations, those with revenues less than $500,000, do not have to account for their capital assets. They still have to disclose them. So there’s still work required there. They just don’t have to account for them and amortize them and go through that process. That got into the 4200 series because it was originally in 4400 series and private sector / not-for-profit gap back when there was only one Handbook. And it’s been kicking around. And I think the reason why it was there (it’s a very old, now very old part of the standard), I think the reason it was there is at that time – 10, well, more than that, 20 years ago, maybe even more than that – at the time, not every small not-for-profit organization necessarily had a computer or had access to a computer or had access to a spreadsheet program. So the powers, that being the Accounting Standards Board at the time, thought that would be good to have an ability for small not-for-profits to not have to go through that process. Now, things, of course, have changed since then – things like Google Sheets online. As long as you have a computer, you can have a spreadsheet. So it’s much easier now to do, to account for capital assets. Also, from our Consultation Papers and other research work that staff have done, we’ve determined there really is not a lot of small government not-for-profit organizations. There wouldn’t be many that fall in this category of revenues less than $500,000, to be sure. So on the private sector side, yes, there’s lots of small ones; government side, not so many.
So we thought it would make sense to take this out and not have this exemption be here anymore. And, as you can see from the Impact at the bottom there, we don’t think there’s going to be very much impact, if any. There’s probably, I don't know, a handful at most of government not-for-profit organizations that would even fall into this category. And if you have disclosed already, it’s not that much more work to put in a spreadsheet and calculate some amortization. So, we think very minimal impact from this one.
Works of art, historical treasures and collections was probably where we spent a good deal of our time, because there is a fair difference between 3150 and 4230 and 4240. Really, in 3150, there’s only a couple of sentences that say works of art, historical treasures and collections should not be recorded. Actually, I don’t think they even use the word collection. They just say: Nope. These are not something that should be recorded. You can disclose them, certainly, and should disclose them. But we don’t record such items. Whereas 4230 and 4240 went into a lot more depth, talking about what these are, and gave options for how they might be recorded and could be recorded.
There was an option in 4230 and 4240, so we already had some differences with some government not-for-profit organizations that have historical treasures and collections, recording them; others doing disclosure only. And we had some good experience on our committee with committee members who actually sort of lived and breathed this stuff. So that was good for the rest of us to hear. So, there was already some difference there in the 4230, 4240 series and prohibition in the 30 and 3150. So we really had to spend some time and think about what made the most sense in terms of trying to bring these standards together.
And we ended up thinking what made the most sense and would have the least impact, I think, for in the big picture was to have disclosure only of these items. So these are still very important items. And it’s important that there’s disclosure in the financial statements. But we didn’t see the value in trying to come up with values to capitalize these things at, and determine how they should be showing up on the statement of financial position, and those sorts of things. So we ended up with a disclosure-only recommendation here.
The impact is, see at the bottom of the slide there. This is one where there will be impact. There are some certainly aware of some government organizations, particularly things like museums, that will be recording their collections right now. So they would, those organizations would have to be recognized, those assets. So there’d be impact to them.
There would not be that much impact to others who are already disclosing already in disclosure-only mode. So, not too much impact to them. Probably not too much impact to other government organizations that aren’t government not-for-profit organizations. Other than this would cut, this would make it clear that they should be disclosing these items – works of art, historical treasures and collections – they should be disclosing them. There may be some governments now that have historical treasures and works of art that aren’t disclosed. I would think anything material, most would probably be disclosing already. But if not, they will have to go through and determine what they have in terms of works of art, historical treasures and collections, and provide disclosure for that.
So you can see here, this is kind of three major points we wanted to get across in terms of what those disclosure requirements are for works of art, collections, historical treasures.
First, and probably most important: What is the nature and relevance of those works of art? Why are they important? Why are they important to the community? Why does the organization or the government have them so? Number one.
Number 2: Cash flows and the impact of being responsible for protecting and preserving these items. So what’s it costing us to carry these things, to look after them – all the aspects to go into that for something, for an organization like a museum. That could be quite detailed in terms of what they might have to do to look after these things. So what’s it costing to look after these things?
And third: Financial performance associated with the purchase and sale of these items. So what are we spending to add to our collections or works of art or treasures? What are we spending to add to it? And if we are selling any of these assets, what revenues did we generate from the sale of those?
So those are kind of the big picture things that will fall into the disclosure requirements.
Another polling question: Do you agree providing disclosures only for works of art, historical treasures and collections will improve comparability of the financial statements within the public sector?
Take a second and please respond to that, and we’ll see what the responses are.
Okay. This was still pretty good. We’re 52 percent agreeing; 19 percent, “No.” So we’ll be reading the Exposure Draft responses carefully to see what sort of reasons, why people might disagree with that. And a fair number of “Not sure,” which is not really surprising to me, because not every organization even has these issues to deal with. But that’s certainly good feedback.
As I mentioned, the last two are somewhat similar. The first of these last two here: capital assets purchased substantially below fair value. So there’s a difference here in that the 4200 series specifically talks about this and says: If you have a capital asset purchased below fair value, you still are going to record it at the fair value, and you’ll record the difference as a contribution. 3150 doesn’t speak to this, but it does say: If you get a contributed capital asset, you are to record that as a contribution and the offsetting tangible capital asset at fair value. So I think this is the guidance that’s in the 4200 series is consistent with 3150. It’s just a little more descriptive.
And, to be honest, it’s probably, I would think, what most organizations that were applying for PSAS already would probably have taken this approach anyway, because it’s quite similar to fully donated capital assets. But we’re going to recommend that this come across and be added into the main PSAS Handbook into 3150.
So I think if it’s not a change; we don’t expect this is going to have much impact. It’s going to have no impact to those organizations following using the 4200 series already because we’re bringing it across. And we think it’s fairly consistent with 3150 as I already mentioned. So I think this is just good clarification. And it’s not going to really change practice too much in our view.
And then the last of the issues is the inclusion of contributed materials or labour in the cost of a constructive or developed capital asset. So this is a very similar concept. So it’s a government public sector entity, government not-for-profit entity, is developing a capital asset, and they’re getting some of the materials and labour attributed to them. So this is specifically discussed in the 4200 series. And at 3150, it’s not identified at all. And it’s quite consistent with the previous slide. And I think probably what most were doing already, and that is that you would still record the asset at the full value, and you would consider the materials and labour as contribution revenue that the government organization received.
Now, in the – just one little tweak to mention here – in the 4200 series where this is discussed, where contributing materials and labour is discussed, there is an option for whether you recognize contributed materials or not. But that option only applies in an operating sense. When it’s capital, you have to. So that’s what was already in the 4200 series. And that’s what we’re recommending bringing across to 3150. If you get contributed materials or labour in the development or construction of the capital asset, you would record that as a contribution so that the tangible capital asset stays recorded at fair value at the time it’s acquired. Not expecting a lot of change from this, because it’s fairly consistent with 3150.
So, transitional provisions. And if this is the first time you’re coming to this. If you haven’t had a chance to look at the Exposure Draft yet, when you see these dates here, you might be a little surprised. So we’re recommending that the standard will come into force for years beginning on or after April 1, 2029. That sounds like a long way away. I guess now it’s 2024; sounds slightly closer. But it is a long way away. And that was purposely done. And you recall, at the outset we talked about not going into detail on the differences in regard to intangibles between the 4200 series and 3150 because of PSAB’s Intangible Project, which is under way. So we wanted to make sure that our timeline will work with the Intangible Asset Project’s timeline, and when they may have standards available. This is our estimate of one that might be because we wouldn’t want to be in a situation. The absolute worst case would be a situation where you had a government not-for-profit organization that was carrying some developed intangibles on its statement of financial position, and then it had to de-recognize that because our provisions came in, and then a year or two later, it had to re-recognize those intangibles again because of the Intangibles Project from PSAB. We didn’t want to be in that situation. We wanted to make sure that that wouldn’t happen, no organization would be forced to do that. So that’s why the late time, timeline. However, you’ll see in both cases – the organizations using the 4200 series or those organizations using full PSAS – there is an option for earlier adoption of these. So if there’s something good in there, that’s useful. You can early adopt and not have to wait for April 1, 2029. I think that is probably the best of both worlds. When you do adopt, as you see on the slide here, retroactive application with restatement of prior years’ figures is what’s going to be recommended.
So here’s the next steps for the project. The Exposure Draft was issued last month or two months ago now – it’s February – issued in December 2023. Consultation period is going to run till April 15, 2024. Immediately after the close of the consultation period, my committee of the government not-for-profit organization advisory committee will start looking at the feedback and see what comments we get from the Exposure Draft. We know there’s always going to be some good areas of disagreement and probably some tweaks that we’ll have to make to what we’re recommending. So we’ll go through that feedback. We will get our final amendments to the standard, based on the feedback that we’ve got to the Exposure Draft. We’ll get that to the PSAB Board in time so that they can approve it at their December 2024 Board meeting. And then the final amendments will be issued and available in the PSAS Handbook April or May 2025. So that implementation date – required implementation day – it’s going to be 2029. But these will be available for early adoption once that Handbook section comes in mid-2025. So that’s the expected timeline.
A couple of good resources to take a look at available on PSAB website. There’s the Exposure Draft. You can download it and read it. It’s not particularly a long one. I was going to say, it’s good reading. It’s good reading if you like reading Exposure Drafts. But I think you’ll find it okay. There’s also an In Brief document, which is something that PSAB started a few years ago. It is providing a briefer sort of summary of some of the key documents, documents that have been issued. And you’ll find that also there, which is a good way to get up to speed kind of quickly in terms of some of the issues that were there. So those are both good reading.
And we do want to hear from you. It’s very important that we get feedback. You know there’s nothing worse – I know PSAB feels – there’s nothing worse than issuing a standard and then having comments that you’ve never heard before come back after the standard had already been issued. So we really, really want to get the feedback now. We are, as a committee, are open to any changes to recommendations, based on feedback we get. I know PSAB is always open to any recommendations. So we want to hear from you. You can submit a response letter via the online form on the website. There’s also the good connect platform at frascanada.ca – very good way for connecting and providing feedback on the project. So those are both there. And also make sure you come back to the Government Not-for-Profit: Capital Assets project page on the website regularly just to see what’s changed and whether there’s any change to the timelines or anything like that. Just come back and take a look every once in a while.
Camilla, I think I’ll pass it back to you, since you’re the person named on the list there, and we’ll wrap up. It looks like we’re right on time, and then we should have time for some questions.
Camila Santos: Thank you, Bill. Thank you for such an insightful presentation. I hope that was helpful for everyone who is attending the webinar today. So if you have any further questions or wish to discuss the government not-for-profit project further, feel free to contact myself or Sandra Waterson, the other principal in charge of the GNFP Capital Assets Project. Our contact information is on the slide. We are happy to have a chat if you have any questions or happy to answer them.
Now, as I mentioned at the beginning of the webinar today, for all of you attending, you’ll see on the screen there is a link to the post-webinar quiz on this slide. So, by attending this webinar and successfully completing the quiz, this may assist you in fulfilling your annual CPD requirements. With that, I think we are ready to move forward with some questions for you, Bill, about the presentation. So, we’ve got a few questions coming in. Thank you so much for all of you who send us questions. And feel free to keep sending them as I start the Q&A session with Bill.
The first question that we have, Bill, is: What are your thoughts on entities that establish dollar thresholds for when they capitalize assets – for example, computers with a value of over $5,000 are capitalized, under $5,000 are expensed?
Bill Cox: Well, that’s an interesting question. I don’t know who has asked that, but it’s actually one of my little pet peeves. So maybe somebody who knows me. So, and I guess I should start by saying that there’s nothing in the standards and the proposed changes from this Exposure Draft that is going to change anything in regard to capitalization limits or anything like that. But I think it’s just a good reminder that capitalization limits are not GAAP. GAAP would actually require – you know, not PSAB standards – GAAP would actually require that you account for every computer and every pen and every stapler that you acquire. Now, there’s materiality involved, and materiality is in the conceptual framework. So it’s an important consideration. So it does not make sense to certainly account for every pen or stapler when you set up a $5,000 limit for computers, for example. That doesn’t mean that you can go and buy 600 new computers for $4,000 and not capitalize it because they reach individually below the expense limit. So I could probably ramble for hours on this. So just remember, I think nothing’s changed. Nothing’s going to be changing in terms of that view from what’s happening in the Exposure Draft here.
Camila Santos: Okay, great. Thank you so much, Bill. Next question is: Will sections PS 4230 and PS 4240 still be available to be applied after the amendments to section PS 3150 are finalized?
Bill Cox: No, they won’t. So they will completely disappear. They’ll be taken out of the 4200 series. The 4200 series will get that much shorter, and that will be the approach as we go through the rest of the standards as well. As soon as something comes across into full PSAS or doesn’t come across, whatever the case is, those 4200 series standards will go completely away. So 4230 and 4240 will go completely away after April 1, 2029.
Camila Santos: Another question that we have is: Do all public sector entities need to assess their works of art and historical treasures and collections to determine if the new proposed disclosure requirements impact them?
Bill Cox: I think the short answer is yes. We are considering – and I guess we’ll hear back when we get results from the Exposure Draft – but we’re considering probably such organizations. So these would be other government entities, like governments themselves, the Provinces, the Feds, Indigenous governments, municipal governments. We’re thinking that such organizations that already have works of art, historical treasures that are material are probably disclosing them already. But now this will be explicitly stated in the standards, and we would expect such all organizations, all government entities, all public sector entities to go through and make sure that they do have disclosure along the lines of disclosure requirements that would be required to set up an Exposure Draft, that they do have disclosure of all material works of art, historical treasures and collections. So there could be a little bit of work for some organizations to do. We don’t think it’s going to be a lot because we think most would already be doing it. But short answer is yes.
Camila Santos: Great! Thank you so much, Bill. And another question: Will the 4200 series section on asset retirement obligations be amended to align with PSAS as part of this first phase of the GNFPO project?
Bill Cox: I’m not sure I totally understand what the question is getting at here. But asset retirement obligations are, of course, a requirement for all entities. And I don’t see anything – I can ask you this as well, Camila – I don’t see anything in our Exposure Draft that would impact that in any way. So hopefully, the government organizations are already applying asset retirement obligations. I don’t think there’s anything that our recommendations that would change that in any way. Camila, I’m misreading that in any way? What do you think?
Camila Santos: No, I think you’re answering the question. And maybe this question is coming from where we showed up on this slide: What are the upcoming projects? Because we have capital assets now; then, we have contributions that we’re going to have. Are going to call the reporting model and related parties? So I think the question is if at some point we are going to look at the asset retirement obligations as part of the first phase of the GNFPO project. And I agree with you. At this point, it’s not on our, let’s say, pipeline project, but maybe in the future it will. But we have another three – this one plus another three – to complete before thinking about something else.
Bill Cox: Yes, I think the way it could hit our radar is if we thought our advisory committee thought that there needed to be a customization for government not-for-profit organizations for the way that they would account or deal with asset retirement obligations, we could make such a recommendation to PSAB for consideration. So that’s probably how it would arrive if it did at all. I have to say, so far, I have not heard any such commentary. But we’ll keep our ears open to see if there would need to be a customization for government not-for-profits.
Camila Santos: Yes, and I think that’s exactly what the question was, where the question was trying to get, because the attendee has just sent a clarification to say that there are important timing differences required under 4200 series versus PSAS under asset retirement obligations. So I think that’s the point. If and when the time comes, then we have to assess this as a potential customization to [inaudible] of GNFPOs.
Bill Cox: Okay. Got it. We’ll have to keep our ears open for that sort of thing and any sort of area where there is a difference. We do want to hear about it.
Camila Santos: I think maybe I’ll ask one more, and then we can wrap up for the afternoon. So the last question we have here is: Not being able to recognize works of art and historical treasures and collections will reduce comparability with private sector counterparts.
Bill Cox: Hmm. Yes, good comments ؘ– something that as a committee we really considered, and I know the Board did as well. One of our big things that we wanted to improve as much as we could was to get comparability for reporting of government not-for-profit organizations. And that word “comparability” was comparability with governments who controlled them, but also comparability with private sector counterparts was also a consideration. So on that particular one, we were sort of fighting in two directions, I suppose. One, to make everything consistent with government and also trying to consider how important is it that there’s consistency with the private sector. And we couldn’t completely square it. So we have to make a decision on which way to go. So we do recognize, yes, there will be a little bit of lack of comparability between, say, a government museum and a private sector not-for-profit museum. Their financial statements might not look exactly the same. They may, depending on what options the private sector chose, but it’s possible that they might not. So we did recognize that was an area where we couldn’t get a perfect solution that would solve everything. We felt it was better to have comparability with the government in that case. But we are completely open to seeing what feedback we get from the Exposure Draft. We may find other things that we have other thoughts we haven’t thought of already, and we’ll take that into consideration before finalizing the standard.
Camila Santos: Alright. So thank you so much, Bill, for a very informative insightful presentation. Thank you, everyone who was able to attend the webinar for your time today. We hope you’ll find this webinar helpful to understand the proposals of the amendments to the Tangible Capital Assets to Section PS 3150. We appreciate your time and your interest in our work, and have a great rest of your day. Thank you, everyone.