Message from the Chair – January 2017
Happy new year and warmest greetings as we begin 2017!
2016 saw a lot of progress on many of our key projects and initiatives, which we plan to continue this year.
December 2016 PSAB Meeting
We approved two exposure drafts that will be issued for public comment in the next few months. We look forward to considering your views before finalizing the new standards.
Asset Retirement Obligations
We approved an exposure draft that provides accounting and reporting principles for asset retirement obligations related to tangible capital assets. The exposure draft also proposes to include asset retirement obligations related to landfills, currently covered under Section PS 3270, Solid Waste Landfill Closure and Post-Closure Liability.
Asset retirement activities are common in the public sector. They may include the decommissioning of nuclear reactors, removal of asbestos or retirement of X-ray machines. Having a standard that specifically requires recognition of asset retirement obligations will draw attention to the need for, and the costs of, retirement of an asset early in the decision-making process.
We approved a new exposure draft, “Revenue,” subject to drafting changes and a written ballot, that proposes a framework for the recognition of two categories of revenue:
- exchange transactions; and
- unilateral transactions.
The key distinction between the two is whether there is a performance obligation. The exposure draft includes guidance for understanding this distinction.
Having a standard that provides guidance for the recognition of revenues earned by public sector entities that are not already addressed within the CPA Canada Public Sector Accounting (PSA) Handbook will allow for the consistent recognition and measurement of these types of revenue transactions.
Concepts Underlying Financial Performance
We continued discussing a reporting model that will have a significant impact on the future of public sector reporting and standard setting. Our discussion included considering issues that gave rise to the project and that could arise in the future. After a thorough discussion, we provided the Conceptual Framework Task Force with direction on a proposed reporting model to be presented in a statement of principles.
There are some concerns surrounding the audit opinions that can be issued for public sector financial statements. We received a presentation from Eric Turner, Director, Auditing and Assurance Standards Board, on Auditor Reporting requirements. He said that an auditor’s report can be issued on a fair presentation framework or a compliance framework. An audit opinion issued on a fair presentation framework would indicate whether the financial statements present fairly the financial position, results of operations, changes in net debt and cash flows of the entity. On the other hand, an audit opinion issued on a compliance framework would not comment on the fair presentation of the financial statements.
Strategic Plan for 2017-2020
Our 2017-2020 Strategic Plan will be issued in the spring of 2017, following further review by us and the Accounting Standards Oversight Council.
PSA Discussion Group
The Public Sector Accounting (PSA) Discussion Group met on November 18, 2016. The first half of the meeting focused on topics related to the application of the PSA Handbook, including:
- shared control in relation to government partnerships;
- application of the Introduction to Public Sector Accounting Standards; and
- determining whether an investment holding company can be a government business enterprise.
The second half of the meeting focused on items that are not currently recognized in financial statements because of the recognition prohibitions in the PSA Handbook — i.e., investment in urban forests and early intervention initiatives.
The submitters of the topics presented arguments for recognizing these as assets in public sector financial statements. These topics are emerging issues that could challenge current thinking and may drive the evolution of accounting. The report on the public meeting will be posted soon.
The next meeting of the Group will be held on March 15, 2017. You are encouraged to submit issues relating to the application of the PSA Handbook by January 31, 2017. You are also welcome to observe the meeting. Registration prior to the meeting is required.
We are very excited to welcome Charles-Antoine St-Jean as the new Chair effective July 1, 2017. Charles-Antoine served as Comptroller General of Canada, was a member of PSAB from 2006-2009 and leads Ernst & Young’s Canadian Government and Public Sector practice. As Chair, he will be instrumental in leading us in achieving the objectives of the 2017-2020 Strategic Plan.
Rod Monette, FCPA, FCA
Chair, Public Sector Accounting Board