Concepts Underlying Financial Performance

The Board approved:

• Section PS 1202, Financial Statement Presentation;
• the consequential amendments arising from Section PS 1202 to various Sections of the PSA Handbook; and
• the accompanying Basis for Conclusions document.

The Reporting Model contained in Section PS 1202:

• is consistent with PSAB’s new Conceptual Framework;
• builds on the Reporting Model in Section PS 1201, Financial Statement Presentation; and
• provides the public with understandable information for accountability purposes.

This is a significant milestone for PSAB and the Canadian public sector. The Board thanks affected and interested parties for their input in creating a Canadian-specific Reporting Model and its Concepts Underlying Financial Performance Task Force for its dedication and hard work in creating the high-quality Financial Statement Presentation Standard.

Section PS 1202 will be effective for fiscal years beginning on or after April 1, 2026. Earlier adoption is permitted only if the Conceptual Framework is also adopted at the same time.

Major principles included in the 2021 Exposure Draft, “Financial Statement Presentation, Proposed Section PS 1202,” have been retained. Changes made were to add clarity or improve/refine principles based on feedback from interested and affected parties. Some of the notable amendments include:

• refined the going concern discussion to consider Section PS 3430, Restructuring Transactions;
• clarified that external restrictions may impact an asset’s classification as financial or non-financial;
• provided additional guidance, decision trees, and illustrative examples for liability classification, specifically in relation to unearned revenue liabilities;
• included an option to present the net financial assets/liabilities indicator at the bottom of the statement of financial position;
• removed the requirement to explain the net financial assets/liabilities indicator on the statement of net financial assets or net financial liabilities;
• provided additional guidance for certain budget requirements;
• clarified that the budget requirements relate to the budget amounts presented for comparison purposes in the financial statements;
• incorporated the principles approved through the Financial Instruments - Narrow Scope Amendments project, as the amendments were approved after the Reporting Model Exposure Draft was issued; and
• adjusted the effective date to April 1, 2026.

Section PS 1202 and the related consequential amendments will be included in the CPA Canada Public Sector Accounting (PSA) Handbook in October 2023. The Basis for Conclusions, explaining PSAB’s reasoning on key project issues, will be published in the PSA Handbook in November 2023.

A comprehensive package of plain-language documents and non-authoritative guidance will be issued to help interested and affected parties better understand Section PS 1202.

PSAB received a significant amount of feedback on the Exposure Draft “Financial Statement Presentation, Proposed Section PS 1202.” At this meeting, the Board reviewed the feedback and the Concepts Underlying Financial Performance Task Force’s recommendations related to:

• disclosing non-compliance with financial authorities;
• disclosing risks and uncertainties;
• the illustrative financial statements; and
• other miscellaneous comments.

The final version of Section PS 1202, Financial Statement Presentation, the accompanying Basis for Conclusions, and the related consequential amendments will be presented to the Board for review and approval at the March 2023 meeting.

PSAB received a significant amount of feedback on the Exposure Draft, “Financial Statement Presentation, Proposed Section PS 1202.” At this meeting, the Board reviewed the feedback related to the distinction between financial and non-financial liabilities and the Concepts Underlying Financial Performance Task Force’s proposals to respond to stakeholder input from the Exposure Draft by:

• simplifying the definitions to make them easier to understand and apply;
• emphasizing through text changes that there are only two categories of liabilities;
• developing criteria to help apply the definitions;
• adding application guidance to expand on the core text of the standard;
• adding illustrative decision trees to help navigate the financial/non-financial liability distinction; and
• adding illustrative examples to show how the guidance might be applied to various scenarios.

PSAB will continue to review an analysis of the feedback related to other aspects of the proposed standard at its February 2023 meeting.

PSAB received a significant amount of stakeholder feedback on the Exposure Draft “Financial Statement Presentation, Proposed Section PS 1202.” At this meeting, the Board reviewed the feedback related to:

• the general presentation principles, including going concern; and
• the budget requirements.

PSAB also reviewed the feedback received on the Exposure Draft “Consequential Amendments Arising from the Financial Statement Presentation Standard, Proposed Section PS 1202.”

PSAB will continue to review an analysis of the feedback related to other aspects of the proposed standard at its January 2023 meeting.

PSAB received a significant amount of stakeholder feedback on the Exposure Draft “Financial Statement Presentation, Proposed Section PS 1202.” At this meeting, the Board reviewed the feedback related to:

• the “net debt” indicator;
• the change in “net debt”
• some aspects of the statement of financial position;
• the statement of operations;
• the statement of changes in net assets or net liabilities; and
• the statement of cash flows.

PSAB also started to review aspects of the proposed final Section PS 1202, Financial Statement Presentation, standard and the accompanying Basis for Conclusions that considers the feedback from stakeholders. The Board will continue to review an analysis of the feedback related to other aspects of the proposed standard at its December 2022 meeting.

Conceptual Framework

PSAB approved the Conceptual Framework for Financial Reporting in the Public Sector.

This is a significant milestone for PSAB and the Canadian public sector. The Board thanks its stakeholders for their input in creating a Canadian-specific set of concepts and its Concepts Underlying Financial Performance Task Force for its dedication and hard work in creating the high-quality framework.

The Conceptual Framework will be effective for fiscal years beginning on or after April 1, 2026. Earlier adoption is encouraged.

Major concepts included in the 2021 Exposure Draft, “The Conceptual Framework for Financial Reporting in the Public Sector,” have been retained. Changes made were to add clarity or improve/refine concepts based on stakeholder feedback. Some of the notable amendments include:

• adding the possible interrelationships among public sector entities to fulfill the obligation to serve the public as part of the characteristics of public sector entities, in Chapter 2;
• recognizing the United Nations Declaration of the Rights of Indigenous Peoples in Chapter 3;
• ensuring consistency  between the control paragraphs in Chapter 5 and those in Section PS 1300, Government Reporting Entity;
• removing references to “legislative accounting” in Chapter 10; and
• delaying the Conceptual Framework’s effective date for users to match the date of  the financial statement presentation standard.

This Conceptual Framework and the related consequential amendments will be issued in the CPA Canada Public Sector Accounting (PSA) Handbook in December 2022. The Basis for Conclusions, explaining PSAB’s reasoning on key project issues, will be published on the project page in December 2022 then in the PSA Handbook in February 2023.

A comprehensive package of plain-language documents and non-authoritative guidance will be issued to help stakeholders implement the Conceptual Framework.

Financial Statement Presentation Standard (“Reporting Model”)

PSAB received a significant amount of stakeholder feedback on the Exposure Draft “Financial Statement Presentation, Proposed Section PS 1202.” At this meeting, the Board had its first look at some of the input received. The Board reviewed the responses related to:

• the “accumulated other” component of net assets/net liabilities;
• amended budgets; and
• the share capital component of net assets/net liabilities.

PSAB will receive an analysis of feedback related to other aspects of the proposed financial statement presentation standard at its September 2022 meeting.

PSAB appreciates the extensive feedback, and the time respondents took to review the various Exposure Drafts related to the proposed financial statement presentation standard. 

In response to extensive stakeholder feedback, PSAB reviewed and commented on proposed revisions to Chapters 6-10 of the Conceptual Framework, the accompanying Basis for Conclusions document and the consequential amendments.

Specifically, the chapters on which the PSAB reviewed the feedback were:

• Chapter 6, “Financial Statement Objectives”
• Chapter 7, “Financial Statement Information: Qualitative Characteristics and Related Considerations”
• Chapter 8, “Elements of Financial Statements”
• Chapter 9, “Recognition and Measurement in Financial Statements” and
• Chapter 10, “Presentation Concepts for Financial Statements.”

While respondents indicated overall support for the content in these chapters, the discussion focused on comments regarding:

• the budget objective (Chapter 6);
• the terminology (Chapter 7);
• the comparison of asset and liability definitions with those of the International Public Sector Accounting Board (Chapter 8);
• the choice of historical cost as a primary measurement attribute (Chapter 9);
• the development of accounting policies by reporting entities (Chapter 10); and
• the request to remove the recognition exclusions for non-purchased natural resources.

PSAB plans to approve the entire new Conceptual Framework, the consequential amendments arising from the new Conceptual Framework and the accompanying Basis for Conclusions at the June 2022 Board meeting.

PSAB received a significant amount of stakeholder feedback on the Exposure Draft “The Conceptual Framework for Financial Reporting in the Public Sector.” At this meeting, the Board reviewed the feedback related to:

• Chapter 1, Introduction to the Conceptual Framework;
• Chapter 2, Characteristics of Public Sector Entities;
• Chapter 3, Financial Reporting Objective;
• Chapter 4, Role of Financial Statements; and
• Chapter 5, Financial Statement Foundations.

While respondents indicated overall support for the content in Chapters 1-5, some of their feedback related to:

• including the interdependency on other levels of government to fulfill the obligation to serve the public in Chapter 2;
• recognizing the United Nations Declaration of the Rights of Indigenous Peoples in Chapter 3;
• concern with the inconsistency of certain control paragraphs in Chapter 5 with those in Section PS 1300, Government Reporting Entity; and
• delaying the effective date of the Conceptual Framework for users.

PSAB reviewed and provided comments on proposed revisions to Chapters 1-5 as a result of the feedback and on the accompanying Basis for Conclusions document.

PSAB will receive an analysis of the feedback related to Chapters 6-10 of the Exposure Draft at the March 2022 Board meeting.

PSAB appreciates the extensive feedback and the time respondents took to review the various Exposure Drafts. The Board acknowledges the stakeholders’ efforts to provide input while dealing with other extraordinary challenges.

PSAB approved four important exposure drafts:

1. “The Conceptual Framework for Financial Reporting in the Public Sector,” which PSAB proposes will replace certain aspects of the existing conceptual framework in Section PS 1000, Financial Statement Concepts, and Section PS 1100, Financial Statement Objectives;
2. “Financial Statement Presentation, Proposed Section PS 1202,” which PSAB proposes will replace the existing reporting model standard in Section PS 1201, Financial Statement Presentation;
3. “Consequential Amendments Arising from the Proposed Conceptual Framework,” which summarizes the implications for the rest of the CPA Canada Public Sector Accounting (PSA) Handbook; and
4. “Consequential Amendments Arising from Financial Statement Presentation, Proposed Section PS 1202,” which summarizes the implications for the rest of the PSA Handbook.

PSAB will also issue a basis for conclusions for each of the conceptual framework and reporting model exposure drafts to set out its reasoning for the proposals. The Board expects to issue the documents in January 2021, with comments due by mid-May 2021.

Exposure drafts represent the pronouncements PSAB expects to include in the PSA Handbook after considering stakeholder feedback. All stakeholders are encouraged to provide feedback on these proposals once they are issued in January. The Board will provide various ways to do so, including a new community engagement platform that seeks to make providing feedback easier.

PSAB reviewed the following:

• the exposure draft for the proposed conceptual framework and the accompanying basis for conclusions document; and
• the exposure draft for the proposed revised reporting model (i.e., a proposed revised financial statement presentation standard) and the accompanying basis for conclusions document.

The Board provided its feedback to the Concepts Underlying Financial Performance Task Force for consideration.

PSAB will receive the revised documents at its September 2020 meeting. The Board will also receive an update on the development of two exposure drafts for proposed consequential amendments (one related to the proposed conceptual framework and another related to the proposed revised reporting model).

PSAB reviewed the stakeholder feedback related to Chapter 6, Financial Statement Objectives, of the Statement of Concepts, “A Revised Conceptual Framework for the Canadian Public Sector," and the key issues raised in the feedback related to the Statement of Principles, “A Revised Reporting Model for the Canadian Public Sector.”

Some of the feedback received related to:

• relocating net debt to its own statement;
• introducing “accumulated other” as a third component of net assets or net liabilities;
• revising the net debt calculation; and
• removing the requirement to present the statement of change in net debt.

PSAB also reviewed:

• the revised Chapter 6 that would be part of the exposure draft for a revised conceptual framework and the accompanying basis for conclusions document; and
• some of the recommended proposals for a revised reporting model.

The Board provided its feedback to the Concepts Underlying Financial Performance Task Force for consideration.

PSAB will receive an update on the development of the two exposure drafts (one for the conceptual framework and one for a revised reporting model) at the June 2020 Board meeting.

PSAB reviewed the feedback related to the following chapters of the Statement of Concepts, “A Revised Conceptual Framework for the Canadian Public Sector”:

• Chapter 8, Elements of Financial Statements; and
• Chapter 10, Presentation Concepts.

Some of the feedback received from respondents to the Statement of Concepts related to:

• the support for the element definitions and the presentation concepts;
• encouraging PSAB to reconsider its position on deferred inflows and deferred outflows, and “other resources” and “other obligations” from the Canadian reporting model; and
• how the exclusions included in the “government” definition create confusion.

PSAB also reviewed:

• revised Chapters 8 and 10 that would be part of the exposure draft for a revised conceptual framework;
• the accompanying basis for conclusions document related to Chapters 8 and 10; and
• the feedback related to the proposed definition of “government”

and provided their feedback to the Task Force for consideration.

The Board will receive an update on the exposure draft’s development at the March 2020 Board meeting.

PSAB reviewed the feedback related to the following chapters of the Statement of Concepts, “A Revised Conceptual Framework for the Canadian Public Sector”:

• Chapter 3, Financial Reporting Objective
• Chapter 4, Role of Financial Statements
• Chapter 5, Financial Statement Foundations
• Chapter 7, Qualitative Characteristics and the Related Considerations
• Chapter 9, Recognition and Measurement

Some of the feedback received related to:

• how the notion of service capacity is broad and cannot be fully articulated in financial statements;
• how some of the control discussion contradicts aspects of Section PS 1300, Government Reporting Entity;
• including definitions of economic resources and economic obligations;
• support for the improvements to the qualitative characteristics;
• the need to document the implication, if any, of removing the term “conservatism” in Section PS 3300, Contingent Liabilities, and Section PS 3320, Contingent Assets;
• the redundancy in the general recognition and derecognition criteria; and
• the strong support for removing the recognition exclusions from the conceptual framework.

PSAB also reviewed:

• revised Chapters 3, 4, 5, 7, and 9 that would be part of the exposure draft for a revised conceptual framework; and
• the accompanying basis for conclusions document related to Chapters 3, 4, 5, 7 and 9,

and provided their feedback to the Task Force for consideration.

The Board will receive an update on the exposure draft’s development at the December 2019 Board meeting.

PSAB reviewed the feedback related to Chapter 1, “Introduction to the Conceptual Framework,” and Chapter 2, “Characteristics of Public Sector Entities,” of the Statement of Concepts, “A Revised Conceptual Framework for the Canadian Public Sector.” Some of the feedback related to:

• where to communicate Board justification of any future inconsistency between a new or revised standard and the conceptual framework;
• how the conceptual framework fits within the GAAP hierarchy;
• how the characteristics of public sector entities apply to government not-for-profit organizations (GNFPOs);
• the longevity of governments; and
• ·other improvements to the description of the characteristics.

The Board also reviewed:

• the revised Chapters 1 and 2 that would be part of the exposure draft for a revised conceptual framework; and
• the accompanying basis for conclusions document related to Chapters 1 and 2.

PSAB will receive an update on the development of the exposure draft for a revised conceptual framework at the September 2019 Board meeting.

The Public Sector Accounting Board (PSAB) received a high-level summary of the responses to the Statement of Concepts, “A Revised Conceptual Framework for the Canadian Public Sector,” and the Statement of Principles, “A Revised Reporting Model for the Canadian Public Sector,”

PSAB discussed the relationship between the Conceptual Framework, the International Strategy, and the Government Not-for-Profit (GNFP) Strategy projects. The Board reconfirmed the need for continuing collaboration between the three projects. The Board will be provided an update on the development of the exposure draft for a revised conceptual framework at its June 2019 meeting.