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Antonella Risi:
Hello, everyone. And thank you for attending our webinar on PSAB’s New Conceptual Framework for Financial Reporting for the Canadian public sector.
Before we begin, we just wanted to apologize for the delay in starting the webinar. We were having some technical issues. It was one of those things where we sort of had to restart our computer to be able to deliver this webinar to you today. So we sincerely apologize for that. And we'll try to make up the time. My name is Antonella Risi and I'm an Associate Director with PSAB. With me is Martha Jones Denning, PSAB's other Associate Director. Martha and I will spend the next one and a half hours with you on this very interesting topic.
Before we start, I'd like to mention some features of our webinar. First, we're pleased to offer simultaneous translation of the English presentation to French. At the bottom of your screen, you will see a button called Interpretation. This will allow you to listen to the webinar in French. Second, we are also pleased to offer the language selection of the slide. If you would like to view the slides in French, please go to the “view options” at the top of your screen and select French or Français under “shared screens.”
Lastly, we're committed to providing closed captioning to promote the accessibility of our webinars. As a result, you have the option of turning on closed captioning today. At the bottom of your screen, there is a CC button that you can use to put up subtitles or view a live transcript. The CC button is for the English closed captioning only. If you're viewing the French slides, the closed captioning will appear automatically.
PSAB has a commitment to diversity and inclusion. In keeping with Indigenous Protocol and building respectful relationships between Indigenous and non-Indigenous peoples in Canada, it is customary to acknowledge the Traditional Territories or Ancestral Lands of Indigenous peoples. We're meeting virtually, so we would like to acknowledge that the Indigenous people are the traditional stewards of the land and waters where each of us attends this webinar.
We the presenters are pleased to present today from the Treaty Lands and Territory of the Mississaugas of the Credit First Nation, which were also the traditional territory of the Huron-Wendat and the Haudenosaunee peoples. The Mississaugas of the Credit are a water people. Their history is centred around water. And they revere water as a spiritual being. There must be a code of respect and dignity. Water is also vital to the survival of the Mississaugas of the Credit First Nation and all the forms of life.We respect them as stewards of the lands and waters, and support their advocacy for a healthy environment for the people and wildlife that live within their Treaty Lands and Territory. Their stewardship and advice on how to preserve the waters are important for the future of humanity in this corner of the planet.
There are few important administrative matters that you should be aware of. Today's webinar is being recorded in both English and French. So if you have to drop off or want to share it with colleagues not in attendance today, it will be available online soon via the same web page you used to register for today.
The PowerPoint slides are also available on the webinar web page in both languages. If you're experiencing technical difficulties, like we were experiencing before we started this webinar, please use the Q&A button on the bottom of your screen to enter the issues, and someone will try to respond to you. And so at this point in time, I did want to pause and express our sincerest gratitude to Deven McFadden, who is working behind the scenes today helping with the technical aspects. He's been a tremendous help to us over the past few months in bringing this webinar to you.
We will have time at the end of the session for questions, so please submit your questions, using the Q&A button at the bottom of your screen, and we will do our best to address these questions
at the end of the formal part of the webinar.
Lastly, this webinar qualifies towards fulfilling your CPD requirements. You must attend the full webinar and successfully complete a post-webinar quiz to receive your CPD certificate. The link to the post-webinar quiz will be provided at the end of the webinar.
So now let's talk about PSAB's new Conceptual Framework. And let's start off by taking a look at what a Conceptual Framework is. A Conceptual Framework is like the North Star for a few reasons. First, all standards in the Public Sector Accounting Handbook will be based on or revolve around the foundations and concepts established in the Conceptual Framework.
Secondly, a Conceptual Framework is like the North Star because it helps you as a user navigate and determine a way forward when PSAB has not yet issued a standard on the topic or a specific question is indulged with explicitly in an issued standard. That is because the Conceptual Framework includes fundamental concepts such as: What is the objective of financial reporting? What makes financial information useful? What are assets, liabilities, revenue and expenses? When they should be recognized or derecognized? How should they be measured and presented?
Now that PSAB has issued a new Conceptual Framework, this will be the new North Star – the public sector financial reporting in Canada. Before getting into the details of the new Conceptual Framework, we want to offer the agenda for the webinar. We will start off by providing you a quick summary of the journey of how PSAB got to its new Conceptual Framework. We will now provide you with a quick overview of PSAB’s new Conceptual Framework, the main amendments from the superseded Conceptual Framework and the key effects of the new Conceptual Framework. We will spend most of the presentation, answering three questions in relation to each chapter of the Conceptual Framework as noted in the three boxes on this slide.
So let's look at the journey of how PSAB got to where it is today. In PSAB approved the Concepts Underlying Financial Performance project.
The objective of the project was to review and amend if necessary the concepts underlying financial performance and the superseded public sector Conceptual Framework, and the reporting model. The result of the project was a -chapter Conceptual Framework and the development of a standard for a financial statement reporting model – that is, FINANCIAL STATEMENT PRESENTATION, Section PS Since the project's inception, nine documents for comments were issued.
PSAB conducted extensive consultation. In August Consultation Paper was issued. Its purpose was to refine and better describe the characteristics of government and other public sector entities. In October Consultation Paper was issued. It articulated the objective of public sector financial reporting, the primary users of those reports, the broad financial reporting accountability, and more specific financial statement accountability. It also asked for views on three possible reporting model approaches. In March Consultation Paper was issued. It highlighted many of the concepts and principles proposed for revised Conceptual Framework and reporting model. And the feedback from that Consultation Paper provided guidance to develop the reporting model proposed in the Statement of Principles and the concepts in the Statement of Concepts, which were issued in May The feedback from the Statement of Concepts and Statement of Principles provided guidance for the development of various Exposure Drafts. And in January PSAB issued four Exposure Drafts: one related to the Conceptual Framework, one related to the Consequential Amendments Arising from the Proposed Conceptual Framework, one related to the Financial Statement Presentation standard, and the last one related to the Consequential Amendments Arising from the Financial Statement Presentation Standard. In June PSAB approved its new Conceptual Framework and the various consequential amendments. And in March PSAB approved its new reporting model and the various consequential amendments arising from them.
All this work would not have been possible without the knowledge, experience and expertise of a group of talented and diverse individuals – PSAB’s Concepts Underlying Financial Performance Task Force, who dedicated a great deal of time – years for most members – to review all the feedback provided and put forward recommendations to PSAB that considered the public interest and the various public sector entities that exist in the Canadian public sector.
We thank all of these individuals for their incredible contributions to public sector accounting standard setting in Canada. We also want to thank all individuals and public sector entities who provided PSAB with feedback. As you can see from the slides, which will be changed in just a moment, PSAB received a significant amount of feedback on all its documents for comment. We heard from respondents across the country. Thank you for taking the time to provide input into these important pieces of the Public Sector Accounting Handbook.
It is important to understand why PSAB undertook this project. First, interested and affected parties asked PSAB to review the Conceptual Framework and reporting model to ensure it properly reflects and is grounded in the public sector environment. Second, it is important for PSAB to periodically review its Conceptual Framework and reporting model to ensure it remains relevant. And the third reason and possibly the most important reason for reviewing the Conceptual Framework and reporting model was to increase the understandability of financial statement. Transactions have become a lot more complex since the last time the Conceptual Framework and reporting model were issued.
And so PSAB embarked on a journey to make the financial statements more understandable in the world where new and complex transactions are regular occurrences. Now that we have looked at the journey of how PSAB got to where it is today on both the Conceptual Framework and reporting model, we want to dedicate the rest of this webinar to reviewing PSAB’s new Conceptual Framework. And we will start with an overview of the new Conceptual Framework as a whole so that you can see how it all fits together.
PSAB’s new Conceptual Framework includes chapters as noted on the slide. And these chapters replace the conceptual aspects of FINANCIAL STATEMENT CONCEPTS found in Section PS and FINANCIAL STATEMENT OBJECTIVES found in section PS These two sections served as your North Star. Now you have a new North Star. So what has changed? This next slide gives you a snapshot of the main amendments: PSAB’s new Conceptual Framework has a few new concepts, PSAB has updated various concepts, PSAB has also clarified a few concepts, and PSAB has relocated the recognition exclusions. And we will talk about many of these changes during the webinar.
Now, you may be wondering, What are the effects of these changes? And on this slide, we try to provide you with a snapshot of the effects of the new Conceptual Framework.
First, entities would need to use a new Conceptual Framework to develop or select accounting policies when no standard specifically applies to a particular economic resource, economic obligation, transaction or other event. They would also need to use a new Conceptual Framework if they are amending any existing entity-developed accounting policies before the effective date of the new Conceptual Framework. Entities applying the new presentation concepts in Chapter may need to review their financial statement disclosures. Consequential amendments were made throughout the PSA Handbook to make it consistent with the new Conceptual Framework, and you will need to check to see any of these and implications for your entity. The Conceptual Framework – specifically Chapter that sets off the amended financial statement objectives – foreshadows the new reporting model. These amended objectives led to the creation of Section PS FINANCIAL STATEMENT PRESENTATION standard. Entities will need to apply the requirements of Section PS And we have a separate webinar on these requirements.
Further, the relocation of the recognition exclusions out of the Conceptual Framework create an opportunity for these items to possibly be recognized in the future once they make it to PSAB’s technical agenda. And the new Conceptual Framework will have an impact on PSAB’s international strategy because it is the primary touchstone and the Criteria for Modifying and Reviewing IPSAS Principles and PSAB’s International Strategy and so will be considered when developing future Canadian public sector standards.
The most important effect of the new Conceptual Framework is to make the financial statements more understandable to the user. And during the webinar, we will provide some details on these effects. Now that we have provided a very high-level overview of PSAB’s new Conceptual Framework, let’s look at each chapter and answer the questions mentioned at the beginning of the webinar.
And let’s start with Chapter : Introduction to the Conceptual Framework. Chapter defines what a Conceptual Framework is and outlines its importance, applicability, objectives, status, and sets of the transitional provisions. This chapter sets the foundation for the Conceptual Framework itself. The content allows for an increased understanding of the Conceptual Framework and how it can and should be used. Most of the content in this chapter is new, and some of the content in this chapter we alluded to at the start of the webinar when we compared the Conceptual Framework to the North Star.
However, we did want to highlight a few matters that may be important to you: the status of the Conceptual Framework, the effective date, and the transitional provisions. The Conceptual Framework provides concepts and guidance for developing internally consistent accounting standards. It is not a standard. Nothing in the Conceptual Framework overrides any specific standard. Now, although nothing in the Conceptual Framework overrides any specific standard, the Conceptual Framework is important and relevant because it will help PSAB develop standards based on consistent concepts; it will help preparers develop consistent accounting policies when no standard applies to a particular item, transaction, or other event; and it will help all parties understand and interpret the standards.
The Conceptual Framework is the foundation for Generally accepted accounting principles (GAAP), including the development of accounting principles for specific transactions and specific financial statement items. PSAB will be applying the Conceptual Framework immediately to its standard-setting activities. But for public sector entities using the PSA Handbook, the new Conceptual Framework applies to fiscal years beginning on or after April Earlier adoption is permitted. And it is to be applied prospectively. In the Exposure Draft, PSAB proposed that the Conceptual Framework would be effective for the board and public sector entities as soon as it was published.
However, respondents indicated that PSAB should consider deferring the effect of date so that it is effective at the same time as the reporting model, given the interrelationship between the two. PSAB considered the feedback and agreed. However, there are a few consequences of deferring the effective date. And these consequences relate to entity-developed policies.
There may be circumstances in which an entity develops its own accounting policy when the PSA Handbook is silent. And this is referred to as an entity-developed accounting policy. And such a circumstance could occur after the issuance of the Conceptual Framework and before its effective date. So between December and March for March year-ends, or between December and December for December year-ends.
To provide preparers with guidance on what to do during this period, PSAB made consequential amendments to GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, Section PS to clarify that during this period if an entity is developing a new entity-developed accounting policy, the entity will need to consider the new Conceptual Framework, as it provides a stronger foundation for applying professional judgment in developing appropriate accounting policies when the PSA Handbook is silent.
There may also be instances when an entity decides to amend an existing entity-developed accounting policy during this period. As a result, PSAB made consequential amendments to ACCOUNTING CHANGES, Section PS to clarify that if an entity is amending an accounting policy that it has developed, such an amendment would need to be consistent with the new Conceptual Framework. This is to ensure that any changes made during this period are reflective of the most up-to-date conceptual thinking.
PSAB discussed whether an entity should update all its existing entity-developed accounting policies to be consistent with the Conceptual Framework by the effective date. PSAB noted that from a purely technical perspective it would be appropriate for an entity to review and amend as necessary all existing entity-developed accounting policies to be consistent with the new Conceptual Framework. PSAB also acknowledged that for some entities this may be an extensive undertaking. As a result, PSAB concluded that flexibility should be provided too as to a reasonable time frame to complete the review of existing entity-developed accounting policies.
Entities would look at their own individual circumstances to determine a reasonable timeline to amend their existing entity-developed accounting policies to be consistent with the new Conceptual Framework. Professional judgment would be used to determine the reasonable timeline. Considerations for determining which existing entity-developed accounting policies should be updated, and the reasonable timeline could include:
Does PSAB have a project on its technical agenda related to the entity-developed accounting policy? If so, the entity-developed accounting policy could be updated when the standard being developed is finalized. Has PSAB recently issued a standard or guideline on the topic addressing in the accounting policy for which the effective date is pending? If so, that entity-developed accounting policy would be updated when the standard guideline is adopted. Is the entity-developed accounting policy related to circumstances material to the entity? Will updating the entity-developed accounting policy relate to a material difference in the accounting? These are just a few of the items to consider as part of developing a plan for updating entity-developed accounting policies.
Now let’s look at Chapter.
Chapter identifies the key characteristics of public sector entities that have financial reporting implications. These characteristics fundamentally shape the objective of public sector financial reporting. Identifying the characteristics of public sector entities as the basis for standard setting will result in concepts and standards that are appropriate to the public sector.
Public sector entities exist to serve the public. This purpose is the lens through which the key characteristics were identified. And the characteristics are noted on the slide. Inherent public accountability is the overriding characteristic of public sector entities because they are entrusted with public resources and are responsible for how public resources are used, managed, and maintained.
Public sector entities vary. Governments, whether resulting from the constitution, laws, or the right to self-determination as in the case of some Indigenous governments, are likely to have all of the characteristics. On the other hand, an individual government component or government organization may not share all of these characteristics. Government components and government organizations may have some unique characteristics that are different from those of the government.
This chapter built on and replaced Appendix A, “Unique Characteristics of Government,” found in FINANCIAL STATEMENT OBJECTIVES standard, superseded Section PS The inclusion of the chapter provides an increased knowledge of the Canadian public sector. This chapter is important, as it outlines the unique aspects of the Canadian public sector that are relevant to PSAB standard-setting work.
Related to Chapter is the fact that the definition of government was removed. Certain governments requested that the former definition be reviewed as a referred to “elected, and appointed policy-makers” rather than an ongoing entity that survives a change in the elective representatives. PSAB proposed an alternative definition; however, it was not supported by respondents.
Based on the feedback received, PSAB concluded that “government” did not need to be defined for various reasons. First, Chapter was developed, which laid out the understanding of the public sector environment, including the longevity of the public sector. And secondly, the PSA Handbook readers understand the term “government” to normally represent the whole government financial reporting entity. They also understand what “government” refers to and relation to authorizing tax policies or spending.
Let’s now look at Chapter.
Chapter identifies the financial reporting objective, which is to provide information for accountability purposes. This conclusion then leads to identifying those to whom are public sector entities accountable and for what. The new Conceptual Framework states that a public sector entity is accountable to the public and its elected or appointed representatives. The public and its elected or appointed representatives are the primary users of public sector financial reports. And public sector financial reports are prepared for the primary users.
All the sector entities are accountable for serving the public and providing information on the broad accountabilities expected by users. The three broad accountabilities that public sector financial reports should respond to are performance against financial authorities, financial condition, and financial performance. All the content in this chapter is new.
The financial reporting objective identifies a purpose. And the primary users’ broad accountability, qualitative characteristics of financial information, and the concepts for recognition, measurement, and presentation follow logically from that objective.
Now, we want to spend a minute or two on “service capacity”, as it is fundamental to meeting the broad accountabilities required of financial reporting in the public sector.
Chapter states that the purpose of public sector entities is to serve the public. As such, identifying and measuring a public sector entity’s capacity or ability to serve the public is important. This capacity or ability is referred to as “service capacity.”
The notion of service capacity underpins the broad accountability – specifically, financial condition and financial performance – because reporting of financial condition provides insight into an entity’s service capacity, and reporting on financial performance provides insight into how an entity’s decisions, transactions and other events of the period have affected its service capacity.
The term “service capacity” will not replace any of the existing terminology in the financial statements. This concept is similar to the capital maintenance concept in the private sector. The concept is not new; only its articulation in the Conceptual Framework and its label are. We note, however, that the service capacity is a broad concept that can not be entirely reported on in financial statements. But financial statements provide a key part of the information needed to assess service capacity.
Now, let’s turn our attention to Chapter. Chapter provides a segue between the first three chapters of the Conceptual Framework, which relate to all types of financial reporting in the public sector, and the last six chapters, which apply solely to financial statements. Chapter identifies financial statements as a critical type of financial report, explaining what can and cannot be reported on in financial statements. The remainder of the Conceptual Framework focuses on the concepts and foundations necessary for financial statement reporting.
Financial statements are a fundamental component of the financial reporting of the public sector entity. They serve as the means by which a public sector entity provides an accounting of its administration of public financial affairs and resources. The information provided on financial statements can only show certain aspects of what an entity is accountable for. Nevertheless, financial statements are a central feature of public sector financial reporting because they help satisfy the needs of users who have limited authority, ability or resources to obtain information and for whom the financial statements are an important source of information. And financial statements are an important anchor of an entity’s other financial and accountability reporting, especially when they are audited.
The key concepts in relation to the role of financial statements have remained the same. Additional guidance was included to explain some of the limitations of financial statements and how aspects of service capacity in the broader capabilities are reflected in the financial statements. This additional guidance helps to better understand the role of financial statements and the accountability they provide.
Let’s now look at Chapter : Financial Statement Foundations. Chapter sets out the four basic decisions standard-setters make as the basis for establishing concepts and standards for financial statements. The foundations relate to the boundaries of the identifiable reporting entity, the concept of control, the unit of measure being the Canadian dollar with no adjustments for changes in the purchasing power, and the basis of accounting being accrual accounting.
While these foundations were in the original Conceptual Framework, PSAB concluded it was important to identify and explain them more clearly and fully. In particular, PSAB concluded that additional information about the concept of control should be provided. The concept of control permeates the theory underlying the determination of what is included in an entity’s financial statement. As a result, PSAB agreed that the general idea and role of control in determining what economic resources and entities are included in the reporting entities financial statements should be articulated in the Conceptual Framework. However, the application of control, including the mechanisms of how control works, determining if there is a preponderance of evidence that control exists, and the implications of controlled economic resources and entities for financial statements are articulated at the standard level.
The concept of control is not new. Only its articulation in the Conceptual Framework is. The general idea of control is meant to be consistent with how control is used in the rest of the PSA Handbook. A review of Section PS GOVERNMENT REPORTING ENTITY STANDARD, was outside the scope of the project. But the conceptual underpinnings of control are set out in the Conceptual Framework are considered by PSAB to be consistent with the principles in Section PS.
The Conceptual Framework also tries to clarify that an entity having a power or right alone does not constitute control. A past event or event to acquire control is required. And one of the ways control is acquired is through invoking a power or right. Control of a resource is not considered to be acquired unless the entity invoking the power or right gains coincident access to the future economic benefits and/or exposure to the risks associated with the resource.
Let’s now move to Chapter which foreshadows the new reporting model issued in Section PS FINANCIAL STATEMENT PRESENTATION standard. Chapter identifies the six financial statement objectives, and these are noted on the slide. These objectives provide a high-level overview of what should be recorded in financial statements. “How” they are reflected in financial statements is included in the FINANCIAL STATEMENT PRESENTATION standard, Section PS. Specifically, Objectives –are explained, or further explained, in Section PS. And “how” the first objective is met is detailed in Section PS GOVERNMENT REPORTING ENTITY standard. Meeting Objectives –will be detailed in the Reporting Model webinar.
We encourage you to register for that webinar if you have not. The link is on the slide. For now, we do want to highlight some of the key amendments made to the financial statement objectives. This slide and the next show some of the main changes made to the financial statement objectives. The first amendment relates to Objective PSAB amended the explanatory material related to this Objective to introduce the notion that accountability reporting is improved when the financial statements separately report the significant identifiable sources or components of an entity’s financial position and when the financial statements separately report that financial or not financial nature of both economic resources and economic obligations. Specifically, the natural and non-financial obligations were introduced.
Acknowledging financial and non-financial liabilities recognizes that there are different types of economic obligations. And acknowledging different sources or components of financial position recognizes the reality that financial position is made up of more than an accumulation of surpluses and deficits. Retaining the aspect of financial position represented by net financial resources or net financial obligations, formerly known as net debt, was also important to preserve an important measure in public sector financial reporting. However, if you listen to the Recording Model webinar, you will learn how and where this measure is to be reported.
With respect to the third objective, Reporting Changes in Financial Position, the amendments relate to introducing the notion that some changes in economic resources or economic obligations in the period are recognized outside of that period surplus or deficit and removing the discussion on requiring the reporting of the change in net debt. We will talk more about these amendments in the Reporting Model webinar.
On this next slide, you can see the former Objective was divided into two objectives. PSAB decided to separate the objective, as it deals with two separate matters.
The two matters are retained but included as separate objectives. PSAB also added a new Objective, which requires disclosing risks and uncertainties that impact financial position or changes in financial position. Financial statements that are comprehensive and respond to the accountability objective require presenting the risks and uncertainties to which an entity is exposed. Complying with this financial statement objective is limited to disclosing those risks and uncertainties that could affect an entity’s financial position or changes in financial position. It is not intended to require disclosure of those risks and uncertainties that are better suited for disclosure outside the financial statements – for example, in an entity’s Financial Statement Discussion and Analysis.
Before going to the next chapter, we want to spend some time on Objective : “disclosing non-compliance with financial authorities.” It is important to know that the intent of the objective is to consider solely non-compliance with financial authorities in relation to revenue, borrowing, investing, expense, and expenditure limits. This is the same intention as that of former Objective in superseded Section PS. The intent is not to make the new objective broader or to require disclosures additional to those required to meet the requirements in Section PS.
Now let’s look at Chapter. Chapter establishes the qualitative characteristics of financial information to be reported in financial statements, and then related considerations for determining the nature and extent of financial information to be included in financial statements. The qualitative characteristics are the attributes that make financial statement information useful to users for accountability purposes. And the qualitative characteristics are noted in the slides. PSAB believes that financial statements should aim to achieve an appropriate balance among the qualitative characteristics. The relative importance of the characteristics in different cases is the matter of professional judgment. The considerations to take into account in striving to achieve this balance among the characteristics are benefit versus cost, materiality, and prudence. And I will now pass it over to Martha to take you through the remainder of the presentation.
Martha Jones Denning:
Thank you, Antonella. This slide and the next depict the amendments in the qualitative characteristics from superseded Section PS. And we want to focus on two amendments. First, accountability value was elevated to be the objective of financial reporting. So, it's no longer a qualitative characteristic. Accountability is the underlying theme of the whole Conceptual Framework and the lens through which the concepts throughout the framework were established. Second, PSAB elevated “timeliness” to be a qualitative characteristic. Separate from and not merely an aspect of relevance. Timeliness is linked to other qualitative characteristics, not just relevance. For example, timely information is useful if it’s relevant and faithfully represented. If information is faithfully represented but not provided in a timely fashion, it may not be relevant for accountability or decision-making purposes.
On this next slide, you can see that PSAB replaced "reliability” with “faithful representation.” The research of other standard-setters such as the International Accounting Standards Board (the IASB) and the International Public Sector Accounting Standards Board (the IPSASB) indicated that faithful representation is easier to understand and apply than reliability. And often reliability was confused with verifiability. PSAB also removed "conservatism” as an aspect of a qualitative characteristic and added “prudence” as a consideration. In practice, conservatism often means a preference for understatement of revenue and assets and overstatement of expenses and liabilities. And this introduces a bias into the financial statements that conflicts with the neutrality aspect of faithful representation.
PSAB also elevated “verifiability” to be a qualitative characteristic – set separate from Faithful Representation – because information may be verifiable without being faithfully representing of the economic resource, economic obligation transaction or other event that it purports to represent. Aside from the benefit-cost consideration included in the superseded Conceptual Framework, which has been retained, PSAB included materiality and prudence as additional considerations. Now, materiality has always been a concept in applying the standards in the PSA Handbook. Standards don’t apply to immaterial items. Materiality relates to and can impact several qualitative characteristics of information included in financial standards. And so it should be a consideration, not an aspect of a single qualitative characteristic.
And prudence is a part of every professional judgment made in determining the information to be provided in financial statements. Prudence is more neutral than conservatism. Like materiality, it should also be a consideration. In conclusion, for Chapter the objective of the amendments made was to clarify the qualitative characteristics and related considerations, consider the work done by international standard-setters, orient the qualitative characteristics and considerations towards the accountability objective, and make financial statement information more understandable. So now let’s look at Chapter.
Chapter defines and explains the four elements recognized in financial statements. Elements are the basic building blocks from which financial statements are constructed. The elements are assets, liabilities, revenues, and expenses. The bulk of the guidance related to these elements is found in individual standards. This approach emphasizes the requirement for all items that meet the definition of an asset or a liability to be recognized in the financial statements regardless of whether the PSA Handbook includes a specific standard on that type of asset or liability. We want to highlight a few important facts about Chapter.
First, although revenue and expense are defined in terms of changes in assets and liabilities, for accountability purposes, revenues and expenses are just as important as assets and liabilities. Second, deferred inflows and outflows that do not meet the definition of an asset or a liability would not be recognized in the financial statements. And lastly, net assets or net liabilities is a residual amount. It’s not an element. Defined as or considered to be a residual amount doesn’t mean that net assets or net liabilities is meaningless. It is a measure of the entity’s financial position at a point in time that provides information useful in evaluating the financial sustainability of the entity and its ability to serve the public in the future.
So what’s changed? Improvements have been made to all of the element definitions. The “asset” and “liability” definitions were modified to be singular and constructed in a parallel fashion. This was done to make the similarities and differences between the definitions clearer. No change in substance is intended; no change in practice is expected. And the consequential amendments were made to Section PS LIABILITIES, and Section PS ASSETS, to make them consistent with the changes made to the Conceptual Framework. Revenues and expenses. So, the “revenue” and “expense” definitions were refined by making them singular consistent with the asset and liability definitions, incorporating the effect on net assets and net liabilities from explanatory text in the superseded Conceptual Framework into the definitions, removing unnecessary detail, and constructing them in a parallel fashion as appropriate. Again, no change in substance is intended; no change in practice is expected. Consequential amendments were made to Section PS REVENUE, to make it consistent with the changes made to the Conceptual Framework.
Chapter discusses recognition and the general recognition criteria, due recognition, measurement and the measurement attribute, and going concern. Recognition is the inclusion of an item, transaction or other event within one or more financial statements. Recognition does not mean disclosure in the notes and schedules to the financial statements. The general recognition criteria are that an item, transaction or other event is recognized in the financial statements; when the item, transaction or other event meets the definition of an element, it’s expected that the future economic benefits related to the item will be obtained or sacrificed; and the item, transaction or other event can be measured in a way that satisfies the qualitative characteristics of information and takes into account the related considerations that we outlined in Chapter.
So, I wanted to highlight that there is a redundancy between the first two general recognition criteria. This is because the definition of an element also considers the expectation of obtaining or sacrificing future economic benefits.
In reviewing the general recognition criteria, PSAB recognized this redundancy. So, way back in Consultation Paper the Board proposed revising the asset/liability definitions to remove this redundancy. But after considering input from respondents, the Board decided to retain the redundancy. So, removing the redundancy would not ultimately affect what was recognized in public sector financial statements, but it could impose a burden on preparers to evaluate more possible assets and possible liabilities. So, the general recognition criteria are substantively the same as in the superseded Conceptual Framework.
Derecognition. Derecognition is the removal of all or part of a previously recognized item from the financial statements. It normally occurs when all or part of an item no longer meets the definition of an asset or a liability, or it’s no longer expected that the future economic benefits related to the item will be obtained or sacrificed, or the item can no longer be measured. A similar redundancy with the asset/liability definitions was included in the derecognition criteria to make them consistent with the general recognition criteria. So, derecognition criteria in the Conceptual Framework is new. PSAB felt that it needed to include material on derecognition to fill a gap in the Conceptual Framework.
So, these general derecognition criteria apply when a specific standard does not address derecognition. No substantive change in practice is expected. Before we get to the measurement aspect of Chapter we want to note one important amendment to the Conceptual Framework in relation to recognition. And that is the relocation of the recognition exclusions. So, the recognition paragraphs in the superseded CONCEPTUAL FRAMEWORK, PS exclude some items from recognition in financial statements These are natural resources that have not been purchased, Crown lands that have not been purchased, works of art and historical treasures, and developed and non-purchased intangibles.
These items were previously excluded, and it was done quite a while ago. They were excluded from recognition on the basis that their costs, benefits and economic value could not be reasonably and verifiably quantified using existing methods. Things have changed. While measurement techniques and methodologies have improved, PSAB concluded that these pragmatic exclusions are not conceptually based and should be removed from the Conceptual Framework. But the Board also thought these exclusions should continue to be retained for now. Before these exclusions can be removed, each type of economic resource must be considered individually.
Appropriate guidance regarding the recognition and measurement must be provided. As a result, the Board relocated these exclusions to the Financial Statement Presentation Standard, the new reporting model, and, for now, the existing reporting model that you’re using. Such relocation allows the Board to consider these topics when setting its future technical agenda. Revising a standard is easier than reopening a Conceptual Framework. PSAB concluded that as standards related to the recognition exclusions are developed, consequential amendments to the Financial Statement Presentation standard to remove the relevant exclusions could be made.
So, there’s no immediate effect on the user or preparer with this relocation. But in the future, there is a possibility to recognize items that are currently prohibited from being recognized. For example, PSAB approved a project on intangible assets that maintain aims to provide guidance on purchased and internally developed intangible assets. This project will result in partial removal of the recognition exclusions related to intangibles. That is, internally developed intangibles will no longer be pragmatically excluded from recognition. The new Public Sector Accounting Standard on intangible assets would apply instead.
Now, let’s look at measurement. Although the Board reflected on the work done by other standard-setters on measurement, PSAB did not conduct a full reconsideration of the relative merits of all possible measurement attributes that could be used in public sector financial statements. In fact, PSAB’s interested and affected parties encouraged endorsing the existing measurement approach. So, as per the superseded Conceptual Framework, the financial statements of public sector entities, we continue to be prepared primarily by reflecting assets, liabilities, transactions, and other events at their historical cost unless PSAB determines that another measurement attribute better serves the accountability objective.
Any time PSAB requires a measurement attribute other than historical cost, that would be determined at the standards level. Its use would be justified and explained in terms of how it better contributes to better information for accountability purposes. And this explanation would be exposed for comment by interested and affected parties as part of the Exposure Draft. If retained after consultation, it would ultimately be documented in the relevant standard’s Basis for Conclusions. So what has changed? The guidance related to the measurement attribute – that is the fact that the Board can determine whether a different measurement attribute should be used to better serve the accountability objective. That is slightly different from what’s included in the superseded Conceptual Framework.
But the intent is the same. It specifically restricts any choice of an alternative measurement attribute to the Board. This was the intent of the guidance in the superseded Conceptual Framework. And so the Board believes that this clarification would not create a change in practice. A few respondents wondered whether the tighter guidance on the measurement attribute would have any unintended consequences for entities that consult a secondary source of GAAP when the transaction or event is not considered in the PSA Handbook. So according to Section PS GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, the secondary source of GAAP that is being consulted needs to be consistent with the primary sources of GAAP and the Conceptual Framework.
As a result, the tighter language around the primary measurement attribute would restrict entities from using a measurement attribute from a secondary source that is other than historical cost. For example, if entities are currently seeking guidance on how to account for intangible assets, IPSAS INTANGIBLE ASSETS, is one source that can be consulted. This standard requires the recognition of intangibles using the cost or re-evaluation models. The cost model is consistent with PSAB’s Conceptual Framework. As a result, the cost model would be appropriate to use, but the re-evaluation model would not. Before we move to the presentation concepts, we want to close off the discussion of measurement with going concern.
So, financial statements are prepared on the presumption that the entity is a going concern. This means that the entity will continue in operation, and we’ll be able to realize assets and discharge liabilities and meet it statutory and other obligations in the normal course of operations for the foreseeable future. Governments are long-term institutions. Under normal circumstances, they and the related government components that function as core government are expected to operate in perpetuity. This is noted in the going concern discussion in Chapter The going concern presumption applies to government organizations in the same way it applies to the controlling government.
But government organizations may be discontinued or sold as governments look for alternative mechanisms for delivering services. And so they may not operate in perpetuity. So that has to be taken into consideration. It’s important to note that the going concern discussion in Chapter builds on the longevity discussion in Chapter of the Conceptual Framework, and the going concern discussion in Financial Statement Presentation, new Section PS NEW REPORTING MODEL, builds on the going concern concepts in Chapter These three related aspects to a going concern evaluation in the public sector should be considered together.
And we’ll talk a bit more about going concern in the Reporting Model webinar. The last note on going concern is that the concept is not new. What’s new is the additional guidance provided. This was meant to provide clarity as to the applicability of the going concern principle in the public sector.
Now, let’s look at Chapter. Chapter is a bit of a “sleeper chapter,” as its implications may not be immediately obvious. So we’ll highlight some of its implications for public sector entities. Chapter defines “presentation,” and it identifies the presentation concepts that lead to achieving the presentation objective in financial statements. So presentation is defined as how an entity communicates information in its financial statements to meet the financial reporting objective, accountability and the specific financial statement objectives from Chapter.
The presentation objective is to maximize the accountability value of the financial statements to the users. Presentation Concept states that no one individual statement in the financial statement package is more important than any other individual statement. Each statement has its own purpose. The notes and schedules to the financial statements have the same significance as information recognized in or reported on the face of the financial statements. Presentation Concept states that information presented in financial statements meets the presentation objective when it provides information at the level of detail appropriate to financial statements, gives higher profile in disclosure to matters of importance that have occurred in the reporting period and is entity and period specific.
Presentation Concept states that disclosure in the notes and schedules to the financial statements is not a substitute for the proper recognition or measurement of an item transaction or other event. Presentation Concept states that presentation choices are made within the context of whether they add to or support the accountability value provided by the set of financial statements. So this chapter is wholly new. It completes the Conceptual Framework. PSAB believed it should be the last chapter because it provides guidance on how financial information assembled by applying the requirements of the PSA Handbook to achieve fair presentation would be presented for accountability purposes in financial statements.
It emphasizes providing understandable information to the primary users. It sets out ways to make the information in financial statements more understandable and accessible to users. One way to do this is through the use of emerging technology. For example, including links between related notes and financial statement line items may make the information be more understandable to the reader. Also providing a digital copy of the financial statements may allow the financial statements to be more accessible to users. Some of the concepts in this chapter are based on the paragraphs in FINANCIAL STATEMENT PRESENTATION, superseded Section PS.
It’s the model you’re currently applying. PSAB thought that some of the paragraphs in PS were more conceptual in nature and should be moved to or at least foreshadowed in the Conceptual Framework. New presentation concepts have also been added in Chapter to promote the preparation of understandable financial statements to meet the accountability objective. So to summarize, Chapter encourages entities to review the disclosures and focus on the things that are important in that year and demonstrate the relationships between the disclosures to show a cohesive picture.
The chapter states that entities should avoid boilerplate disclosures – rather, consider how to make the disclosures more user-friendly, including ensuring readability by re-evaluating the structure of the notes and how they link to each other. Are the disclosures aggregated appropriately? Entities should ensure that disclosures are not overly detailed or overly complex to the extent possible, given the subject matter. It’s important to really have a look at your disclosures and decide whether they are right for your particular entity and whether users can understand them.
Some entities may already apply the concepts in Chapter. Others may need to institute new practices when implementing Chapter concepts, to ensure that the financial statements are understandable. So, a review of financial statement disclosures is likely warranted before the effective date of the Conceptual Framework of April.
So, that’s an overview of the new Conceptual Framework. PSAB believes that the Conceptual Framework will set the foundation for standard-setting for years to come because it is responsive and responsible. It’s rooted in the notion of ACCOUNTABILITY and what’s in the PUBLIC INTEREST. It considers all public sector entities. It considers all the very extensive feedback we receive to all the documents for comment.
Before we end the formal part of the webinar, we want to highlight two important effects of the Conceptual Framework. The first is related to the series of consequential amendments that were made to the PSA Handbook. The second is related to PSAB’s International Strategy. So, let’s look at the impact of the Conceptual Framework on the rest of the PSA Handbook.
The work on the Conceptual Framework created the need for a series of consequential amendments to the Handbook. Essentially, these consequential amendments are being made to ensure internal consistency throughout the Handbook.
The Conceptual Framework in Sections PS and PS have been withdrawn. Any references to them have been amended. The INTRODUCTION TO PUBLIC SECTOR ACCOUNTING STANDARDS has been renamed the INTRODUCTION TO THE PUBLIC SECTOR ACCOUNTING HANDBOOK, as it applies to the entire PSA Handbook, including the Conceptual Framework, not just Public Sector Accounting standards.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, Section PS has been amended to include a definition of “entity-developed accounting policies,” and new transitional paragraphs have been added that provide guidance on what to do in relation to entity-developed accounting policies before the adoption of the Conceptual Framework and to note significant amendments to the section.
FINANCIAL STATEMENT PRESENTATION, Section PS was updated to include definitions of “financial assets,” “non-financial assets” and “tangible capital assets” and the recognition exclusions. These paragraphs came from withdrawn Section PS. And this was done as an interim measure until the new FINANCIAL STATEMENT PRESENTATION standard, the new reporting model in Section PS is effective.
GOVERNMENT REPORTING ENTITY, Section PS was updated. To reflect wording, a Financial Statement Objective found in Chapter of the Conceptual Framework. And a footnote was added to ensure consistent understanding of how the word “power” is used in Section PS contrasted with how the term is used in the control discussion in Chapter of the Conceptual Framework.
DISCLOSURE OF ACCOUNTING POLICIES, Section PS was amended to include references to digital technology and to remove certain restrictions where technology can assist in making the disclosures and thus the financial statements more understandable. Because this amendment results in a change in practice, a transitional provision paragraph was added to reference the effective date.
ACCOUNTING CHANGES, Section PS was updated to include new transitional paragraphs that provide guidance with respect to updating existing entity-developed accounting policies.
The general application standards LIABILITIES, Section PS and ASSETS, Section PS were updated to make the definitions and essential characteristics of an asset and liability consistent with those in Chapter of the Conceptual Framework.
REVENUE, Section PS was amended for refinements to the definition of “revenue.” And a series of standards were updated to remove references to “service capacity.” The new Conceptual Framework defines service capacity more broadly than what is intended in the standards.
And various other standards were updated to remove references to “reliability,” as reliability is no longer a qualitative characteristic in the new Conceptual Framework. And lastly, standards that included the definition of materiality were updated to reflect the new definition. Other minor editorial amendments were also made.
And I want to emphasize that most of the consequential amendments were editorial in nature. They don’t introduce a new principle, they don’t change an existing principle and they don’t change practice. There are a few consequential amendments where new requirements are introduced, and these mostly relate to entity-developed accounting policies, which we’ve mostly discussed.
PSAB proposed amending references to “measurement uncertainty” in the Exposure Draft to replace it with “estimation uncertainty.” We were told that was too narrow and it might change practice. And so PSAB decided not to go ahead with that change.
Now let’s look at the effect of the new Conceptual Framework on PSAB’s International Strategy. The new Conceptual Framework will have an effect on setting future standards. When developing future standards, the Board will use the principles of an International Public Sector Accounting Standard (an IPSAS) if an IPSAS equivalent exists for the topic that the Board has on its technical agenda. And it will use those principles if it’s determined that a modification of those principles is not required.
PSAB will amend an IPSAS principle for use in Canada if it is contrary to PSAB’s Conceptual Framework. So this begs the question, When would an IPSAS principle be contrary to PSAB’s new Conceptual Framework? To be able to answer this question, we have put together a comparison of the various concepts within PSAB and IPSASB Conceptual Frameworks. And the link to that resource is on the slide.
You can see from the next slide that most of the concepts noted are similar between the two frameworks. So I’d like to go straight to the next two slides that capture some of the differences that we’d like to bring to your attention.
On this slide, I want to briefly focus on the fact that the IPSASB includes other resources and other obligations as categories of financial position in its Conceptual Framework. PSAB does not. However, the IPSASB has not yet identified any transactions that would fall into these categories. If the IPSASB decides to use “other resources” and “other obligations” in a standard that PSAB wishes to leverage for developing a standard in Canada, PSAB will need to determine an alternative accounting treatment that meets the financial objective of providing accountability information. This alternative accounting treatment may or may not result in the same impact on the net financial position indicator.
For example, PSAB may consider using the accumulated other component. This component may be used to recognize items, transactions or other events. The PSAB fields should be recognized out of surplus or deficit when they arise to better serve the accountability objective. More information on accumulated other will be provided in the Reporting Model webinar.
On this slide, I want to highlight two differences. The first difference is with the asset and liability definitions. PSAB’s definitions include expectation of receipt or sacrifice, a future economic benefits; and the IPSASB definitions do not. And the same difference between the two frameworks appears in the general recognition criteria. The theoretical implication of this difference is that applying the IPSASB’s definitions and recognition criteria may result in more items meeting the definition of an asset or a liability and possibly more assets and liabilities being recognized.
However, PSAB is of the view that in most cases PSAB and IPSASB will recognize similar assets and liabilities as this is the case currently. PSAB finds that when the element definitions, the recognition criteria and the measurement uncertainty considerations are taken into account, PSAS, Public Sector Accounting Standards, and IPSAS will end up in about the same place. This is because, holistically, similar information is considered in determining the item to be recognized and at what amount it is measured.
In setting future standards, PSAB will need to determine whether an asset or liability recognized in an IPSAS meets its own element definitions and recognition criteria. If it does not, PSAB will need to determine if recognizing an item required to be recognized by the individual IPSAS principle under consideration meets the Canadian financial reporting objective of providing accountability information.
The last key difference I want to mention is related to measurement. PSAB has a primary measurement attribute – historical cost. The IPSASB does not. In its Conceptual Framework, the IPSASB lists series of measurement bases that could be used, and some of the individual IPSAS allow or require measurement bases other than historical cost. The difference in the measurement approach may lead to significant differences in the future when developing standards.
For now, although the measurement approach is different, a review of the various IPSAS and standards in the PSA Handbook reveals that many similar transactions can be accounted for using the same measurement attributes. So tangible capital assets can be recorded at cost, financial instruments are recorded at fair value, etc.
So, there’s a lot we’ve presented and a lot to take in. So, we want to summarize the presentation so far for you. PSAB’s new Conceptual Framework includes chapters. These chapters replace the conceptual aspects of FINANCIAL STATEMENT CONCEPTS, Section PS and FINANCIAL STATEMENT OBJECTIVES, superseded Section PS These two sections used to serve as your North Star; the new chapters will serve as your new North Star.
This slide, next slide, gives you a snapshot of the main amendments. PSAB’s Conceptual Framework has a few new concepts, such as the financial reporting objective, the primary users and the broad financial accountabilities; the service capacity concept; derecognition; and new presentation concepts. PSAB has updated various concepts, such as the characteristics of public sector entities that have financial reporting implications, the financial statement objectives, the qualitative characteristics of financial information in the related considerations, the element definitions, and the measurement attribute. And PSAB has also clarified a few concepts, such as the foundation of the Conceptual Framework, and financial statement foundations, and the going concern presumption. And PSAB relocated the recognition exclusions. And during our presentation, we talked about some of these changes.
On the next slide, you see a snapshot of the effects of the new Conceptual Framework we’ve reviewed. Entities would need to use the new Conceptual Framework to develop or select accounting policies when no standard specifically applies to a particular economic resource, economic obligation transaction or other event. They’d also need to use the new Conceptual Framework if they’re amending any existing entity-developed accounting policies before the effective date of the new Conceptual Framework. And entities may need to develop a timeline for updating all of their entity-developed accounting policies to be consistent with the Conceptual Framework.
Entities applying the new presentation concepts in Chapter may need to review their financial statement disclosures. Consequential amendments were made here at the PSA Handbook to make it consistent with the new Conceptual Framework. Entities will have to consider these amendments even though they’re mostly editorial. The Conceptual Framework, especially the chapter that sets out the amended financial statement objectives and foreshadows the new reporting model – that is the new aspect to be presented in the financial statements – led to the creation of Section PS NEW FINANCIAL STATEMENT PRESENTATION, the new reporting model. Entities will need to apply the requirements of Section PS by the same effective date as the Conceptual Framework – April – and we have a separate webinar on these requirements.
Further, the relocation of the recognition exclusions out of the Conceptual Framework creates an opportunity for these items to possibly be recognized in the future once they make it to PSAB’s technical agenda. So, keep an eye out for these future projects. And the new Conceptual Framework will have an impact on PSAB’s International Strategy because it’s the primary touchstone in the Criteria for Modifying and Reviewing IPSAS Principles. So, it will be considered in developing all future Canadian standards. The most important effect of the new Conceptual Framework is to make the financial statements more understandable to the users.
So, there are five key takeaways we want you to take away from this webinar.
The effective date of the Conceptual Framework is April If an entity is amending entity-developed accounting policies, it must ensure they are consistent with the new Conceptual Framework. If an entity is developing new entity-developed accounting policies between December when the framework was issued, and March for March year-ends, or between December and December for December year-ends, then these new entity-developed accounting policies must be consistent with the new Conceptual Framework. Preparers should review their financial statement note disclosures to ensure they’re understandable and consistent with the new presentation concepts in Chapter And we feel you should consider watching the Reporting Model webinar because they’re so interrelated. And that will provide information on the requirements related to the new reporting model.
So, time will be needed to become familiar with the new Conceptual Framework. But how much time is needed to implement the Conceptual Framework will depend on a few factors, such as: How many entity-developed accounting policies does an entity have? Are those entity-developed accounting policies consistent with the new Conceptual Framework? And are an entity’s note disclosures consistent with the presentation concepts? And also consideration has to be given to the fact that implementation of the new reporting model is at the same time as the new Conceptual Framework, the effective date of April Before we end this portion of the webinar, we want to provide a link to some helpful resources.
This slide provides you a link to the project page. The project page has been updated. It includes links to various other web pages that either outlined the history of the project or provide resources related to the Conceptual Framework. Three resources have already been issued, and they are noted on the right-hand side of the slide. We encourage you to take a look at these resources as you work through the new Conceptual Framework and become familiar with it.
They can be found in the resources link of the project page.
So, we’ve now arrived at the final part of our webinar. Before we get to the Q&A, for all of you listening to the webinar, you’ll see up on the screen a link to the post-webinar quiz. By attending this webinar for at least hours and successfully completing the quiz, you will receive your CPD certificate, which may help towards fulfilling your CPD requirements for the year – so, verifiable CPD for the year. Deven will put the QR code and link to the quiz in the chat as we go to the next slide.
Because now we’re going to open the floor for questions. Antonella will ask the questions that have been received, and both Antonella and I will attempt to answer your questions.
Antonella Risi:
Thank you, Martha. We received two questions that we can answer at this time. And I noticed that two attendees put up their hands. I would ask if those attendees have questions that they can take the question in the Q&A function. So, I think that we answer the first question. The question is, Can you, please, elaborate on examples of non-financial obligations and how they will be presented and disclosed in financial statements? My simple answer is that please register for the Reporting Model webinar. In that particular Webinar, we actually take you through some of the examples of non-financial obligations and how they will be presented in the financial statements and how they impact the calculation of net … of what is formerly called net debt, now called non-financial liabilities. So, I hope that answers your question.
So, the second question that we received is the following. And I don’t know, Martha, if you wanted to take this or wanted to start on it. It says, With respect to updating existing policies for the new Conceptual Framework, () Are there any existing public sector accounting standards that are inconsistent with the new Conceptual Framework? If so, is there a summary document? And () In practice, what would be common examples of when the existing accounting is inconsistent with the new Conceptual Framework? So I don’t know if you wanted to start that off, and then I can add to it.
Martha Jones Denning:
Okay. So, if you have accounting policies that are consistent with an existing standard, then that … you’re fine. You don't have to update your accounting policy because it’s consistent with GAAP. It’s only when you have an entity-developed accounting policy and there isn’t a standard in the PSA Handbook and so you’ve had to look at other sources through the GAAP hierarchy in Section PS to develop an accounting policy for your entity because the PSA Handbook is silent on that particular topic. So if … And there are some existing examples where there’s some inconsistencies between existing older standards and the new framework, but they’re part of GAAP, and so you apply them for now. And if it becomes a priority for PSAB’s technical agenda to update a standard that they feel is out of date or somewhat inconsistent with the new Conceptual Framework, then there will be a project on it. It'll either be a narrow-scope amendment or a full project, depending on the difference. But any existing standard is part of GAAP, and it will remain part of GAAP until it is amended by the Board and a new replacement standard is issued. It’s the ones that are not developed using existing GAAP but using other sources that you’d need to update to be consistent with the new Conceptual Framework.
And the second part, which is what would be common examples of when the existing accounting is inconsistent with the new Conceptual Framework … I’m not sure if that’s just a tweak on the first one. But for individual entities, you may have entity-developed accounting policies for your entity that are different than another similar entity because you looked at different sources, using the GAAP hierarchy to develop your policy. And it might be one that’s been around for quite a while. And it’s a topic that PSAB hasn't addressed. So, I’m not sure if I can give common examples of entity-developed accounting policies. One might be though related to intangibles, and PSAB has a current project on that and is developing an Exposure Draft based on IPSAS So, that will be something. You remember when Antonella had a slide saying, okay, some of the reasons … think considerations … and considering whether you need to update your entity-developed accounting policies. And one was, Does PSAB have a project ongoing right now? Well, if it does, then you should probably just wait to update that policy until PSAB issues something. If it has an Exposure Draft out … Or is it an already issued standard, but there’s an effective date, and you just haven’t implemented it yet. You’d update it to be consistent with the newly issued standard. So, it’s going to depend by entity what your common examples of entity-developed accounting policies are.
Antonella Risi:
Thank you, Martha. I have nothing to add to that. And I see it’s But we, we have one other question. So, I thought we’d try to squeeze it in, given that we started a little bit late. And again please accept our apologies for that. It was technical issues that were beyond our control. We even practised ahead of time, and we couldn’t believe it was the perfect storm. But let me get to this particular question. Does the Framework set foundations for new standards on emerging and complex issues such as cryptocurrency, carbon credits, et cetera? I can start this off. And, Martha, please feel free to add. That would be intent of reviewing the Conceptual Framework and adding the guidance that has been added to the new Conceptual Framework to make sure that it is relevant, to make sure that it stands a test of time, at least, hopefully for the next years or so. And we … to make sure that it can deal with emerging and complex issues. Having said that, to deal with things like cryptocurrency or carbon credits, we feel that a specific standard is required. So, the foundation … the Conceptual Framework sets the foundation. Now, these topics just need to get out technical agenda. I don’t know if you have anything.
Martha Jones Denning:
And in the meantime, you’re going to have to look at the GAAP hierarchy and look for sources elsewhere to help you develop an entity-developed accounting policy on topics like cryptocurrency and carbon credits.
I will, however, say that although it’s non-authoritative, PSAB’s public sector accounting discussion group has discussed both of those topics in the past. And the meeting reports on that are available. Let me see if I can put it in the chat. Can I put it in the chat? Let me see if I can. There. I’ll put it in the chat. And hopefully that works.
So, what it was is people that are dealing with these entities, that are dealing with this now, and we don't have a standard in Canada and in some cases anywhere, did raise some issues. And they talked about how the Conceptual Framework might apply and foundational things like, Are they assets? Are they liabilities? When is there one, et cetera? They were discussed by the PSABDG. And it’s non-authoritative, but it does give you some pretty senior people with experience in the public sector, discussing the issue. And so it might give you a starting place, even though there isn’t anything in the PSA Handbook yet on those topics.
Antonella Risi:
Thank you, Martha. And I see that one final question came up. So, I’m going to try to answer very, very, very quickly. Do you have a list of purchase intangibles applicable to the public sector? And, actually, we have the person. Martha was involved with PSAB drafting the purchased intangibles guideline. And so please correct me if I’m wrong, but some of the things that I can think of with respect to what purchased intangibles particular to the public sector are fishing licences. That we specifically heard from Indigenous peoples out east, I believe. So, I believe … fishing licences … was forestry licences as well.
I don’t know, Martha, if you wanted to add very quickly before we close off the webinar.
Martha Jones Denning:
Pretty much any type of licence – logging, mining, fishing. And some of the public sector ones are going to be the same as the private sector – customer lists and things like that. It depends on the business of the entity. What it’s doing. I’m trying to think. We had input when we got comments on the Exposure Draft. We’ve had questions for years about ones that people have incurred a cost for and would like to recognize as an asset because they’re allowed to recognize them in the private sector.
At the moment, we have a project, we’re working on it, and the purchased intangibles guideline is just that. It’s just opening the door to the recognition of purchased intangibles. But I think you can find some examples in IPSAS as a source for now of types of purchased intangibles that exist in the public sector. That’s probably not a bad place to start.
Antonella Risi:
And on that note, stay tuned because as Martha noted, we, PSAB, and there’s a team of us working on the intangible standards. And so with that, I’ll pass it over to you, Martha, to conclude the webinar.
Martha Jones Denning:
Okay. I just… There we go. Thanks, Deven. So, if you have any further questions, please feel free to contact us. Our contact information is on the slides, and, as Antonella said, the slides are available on the website. So if you’re on the webinar web page. So if you’re looking at English, the slides are in English. And if you’re looking at French, the slides are in French. And the contact information is around slide And I just want to conclude by saying thank you to all our attendees today.
We appreciate your time and your interest in our work. And have a great rest of the day. Thanks for joining us.