ITEMS PRESENTED AND DISCUSSED AT THE NOVEMBER MEETING
International Public Sector Accounting Standards Board’s (IPSASB) Strategy and Work Program 2024-2028
On October 17, 2024, the IPSASB published its 2024-2028 Strategy and Work Program.
To help provide context, PSAB staff presented PSAB's International Strategy by highlighting its international activities. Then the IPSASB staff presented its information session. As part of its Annual Plan, PSAB determines which IPSASB documents for comment to respond to, taking into consideration Canadian-specific issues and perspectives.
IPSASB staff presented the key areas of their strategy and work program to the Group, highlighting plans to build on the previous strategy’s success. They also explained how they intend to rebalance the work program toward maintaining International Public Sector Accounting Standards (IPSAS) and enhancing sustainability reporting.
The Group shared its views on the IPSASB’s 2024-2028 Strategy and Work Program:
- A Group member expressed support for IPSASB’s strategic objective to strengthen public financial management. The benefits extend beyond financial reporting alone, as public sector entities leverage financial information to support their planning and management efforts.
- A Group member noted that while adoption remains a key priority for the IPSASB, further investment and expertise may be required for some jurisdictions to fully adopt and implement IPSAS.
- A Group member asked whether the IPSASB considers the influence and potential impacts of work from other standard setters when evaluating potential projects referring to IFRS 18 Presentation and Disclosure in Financial Statements in CPA Canada Handbook – IFRS Accounting Standards. The IPSASB staff noted that the IPSASB monitors and assesses advancements and new standards on an ongoing basis to determine if any changes are needed to enhance its processes and standards.
Group members expressed that the IPSASB’s Strategy and Work Program appears well thought out and noted the importance of performing reviews of its standards to assess potential application challenges and issues in determining whether amendments to existing guidance are necessary.
IPSASB Exposure Draft 92, “Tangible Natural Resources”
In October 2024, the IPSASB issued the Exposure Draft 92, “Tangible Natural Resources,” for public comment. This Exposure Draft proposes guidance on the recognition, measurement, display, and disclosure of tangible natural resources. The Exposure Draft is open for public comment through February 28, 2025.
The IPSASB concluded its global consultation phase, Consultation Paper, “Natural Resources,” to develop guidance addressing issues related to the recognition, measurement, presentation, and disclosure of natural resources. In the summer of 2022, PSAB consulted with Canadians to ensure Canadian-specific issues and perspectives informed PSAB’s response to the IPSASB’s paper. When it met on November 16, 2023, the Group was presented with and discussed the IPSASB’s Consultation Paper.
The Group was asked to consider this session a roundtable on the IPSASB’s Exposure Draft, addressing its specific matters for comment and the questions posed by IPSASB staff. The Group’s input will provide valuable Canadian perspectives to the IPSASB and inform PSAB’s response to the Exposure Draft.
- Residual standard: The proposed definition of tangible natural resources was purposely broad. The IPSASB suggests that most tangible natural resources would fall within the scope of existing IPSAS based on the primary intended use, such as IPSAS 12, Inventories; IPSAS 16, Investment Property; IPSAS 27, Agriculture; and IPSAS 45, Property Plant, and Equipment. Should a tangible natural resource not meet the recognition criteria of the other existing standards, the proposed standard in Exposure Draft would apply.
- Acts of conservation: Exposure Draft notes that tangible natural resources held for conservation are the most common example of tangible natural resources that may fall within the Exposure Draft’s scope.
- Next phases: At its future meetings, the IPSASB will explore non-financial reporting of natural resources. This may encompass other natural resources that do not fall within the Exposure Draft’s scope.
Roundtable discussion of the IPSASB’s Exposure Draft
The Group noted that the demand from interested and affected parties for such guidance is growing and that there is an opportunity to develop standards to support how public sector entities manage and disclose information on their tangible natural resources.
Group members shared the following feedback:
- Standalone standard: The IPSASB considered whether concepts proposed in the Exposure Draft should be a standalone standard or embedded within other existing standards. Some Group members noted that a standalone standard would bring more attention to natural resources. While a few Group members noted that embedding the guidance within other IPSAS may be less work, they believed the benefits of a standalone standard would be far more practical, for example, allowing for clear navigation of tangible natural resources throughout the IPSAS Handbook.
- Scope of proposed standard: The Group was unable to identify any other tangible natural resources aside from those held for conservation that would fall within the Exposure Draft’s scope. However, Group members supported the broader scope, noting that there may be tangible natural resources that could fall within scope in the future. The IPSASB staff indicated that consideration of other existing IPSAS is needed for such occurrences.
- Measurement and valuation: Group members shared concerns related to measurement and valuation involving tangible natural resources, like those expressed when discussing the IPSASB Consultation Paper. The Exposure Draft indicates that tangible natural resources held for conservation are the most common example of assets that may meet the recognition criteria. Group members noted the difficulty of valuing such resources and the continued issues involving control and ownership of such assets. The Exposure Draft proposes allowing for either the current value or historical cost for tangible natural resources held for conservation. The Group discussed the difficulties and implications of having a choice in measurement principles. Considering the need for professional judgment and the flexibility allowed by some principles in the Exposure Draft, the Group concluded that ensuring the completeness of information might also be challenging. It noted the continued struggle to apply measurement principles, and the responsibilities public sector entities may have measurement activities involving acts of conservation.
- Usefulness of information: Group members were asked to discuss if guidance proposed in the Exposure Draft would provide useful information. They noted that should PSAB propose a future project using the IPSASB’s proposed tangible natural resources standard (as part of PSAB’s International Strategy), it will need to consider the differences between IPSAS and PSAS.
A Group member also suggested that PSAB assess the implications for public sector entities in managing and disclosing information on tangible natural resources, ensuring that the adoption process is practical and beneficial for Canadian jurisdictions.
IPSASB Sustainability Reporting Standards (SRS) Exposure Draft 1, “Climate-related Disclosures”
The SRS Exposure Draft 1, “Climate-related Disclosures,” responds to growing demand for guidance addressing the issues governments face related to climate change and supporting sustainable development. On May 12, 2022, the Group discussed the IPSASB’s Consultation Paper, “Advancing Public Sector Sustainability Reporting.”
PSAB’s 2022-2027 Strategic Plan states that, in line with its International Strategy, PSAB will ensure that it can collaborate and influence the development of IPSAS. Therefore, Canadians are encouraged to respond to IPSASB documents for comment and to work with the IPSASB on areas of joint interest for the public sector, including relevant sustainability-related initiatives. In line with this objective, Group members were asked to share their views on the questions raised in the IPSASB’s SRS Exposure Draft 1.
In October 2024, the IPSASB issued the SRS Exposure Draft for public comment. It proposes public sector specific guidance that builds on the International Sustainability Standards Board’s (ISSB) global baseline.1 The SRS Exposure Draft closes for public comment on February 28, 2025.
The SRS Exposure Draft proposes disclosure requirements for public sector entities to report on information that is useful for primary users of general-purpose financial reports to support decision making and accountability, such as:
- the climate-related risks and opportunities to its own operations; and
- climate-related public policy programs and their outcomes.
The Group was asked to consider this session a roundtable on the IPSASB’s SRS Exposure Draft, addressing the specific matters for comment and the questions posed by IPSASB staff. The Group’s input will provide the IPSASB with feedback on Canadian perspectives.
1The IPSASB’s SRS Exposure Draft proposes conceptual foundations and general requirements based on concepts from the IPSASB Conceptual Framework and consistent with requirements adapted from IFRS S1. The SRS Exposure Draft aims to support global climate action by proposing guidance aligned with the Taskforce for Climate-related Disclosures and IFRS S2 while integrating the Global Reporting Initiative’s multi-stakeholder focus.
Roundtable discussion of the IPSASB’s SRS Exposure Draft 1
The Group applauded the IPSASB for initiating this project and appreciated the innovative approach to climate-change reporting despite the challenges of proposing new concepts. Group members shared their feedback:
- Starting point in advancing sustainability reporting for the public sector: The IPSASB based the SRS Exposure Draft on the ISSB’s global baselines IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, while proposing concepts specific to the public sector. The Group discussed several challenges, including but not limited to the lack of expertise, resource constraints, measurement complexities, and reporting inconsistencies in sustainability reporting. While there is much to work through considering adoption of the requirements, the Group commended the IPSASB in spearheading this initiative, which advances sustainability reporting in the global public sector. The IPSASB’s Canadian member encouraged the Group to consider potential implementation challenges and that the SRS Exposure Draft 1 establishes a starting point. The Group noted that accepting the proposed concepts and their implications may take time.
- Integrity of information and reporting: Much of the discussion focused on the verifiability of information from this proposed standard. Group members highlighted challenges in gathering comparable data and ensuring consistent validation and measurement, which brings both implementation and audit challenges. While new measurement concepts and advancements may emerge, the auditability of verifiable information remains a key concern. Group, members discussed that applying certain principles will be a matter of professional judgment, which may affect the comparability of climate-related disclosures across public sector entities.
Implementation challenges: The Group members discussed the cost-benefit of gathering this information, as well as the expertise and capacity required to adopt climate-related reporting. They noted that some of this information might already be reflected in policy programs for some public sector entities. The Group noted that the scalability of climate-related reporting may prove challenging in Canada, as smaller public sector entities may not have the resources to implement the requirements of the proposed standard. One Group member noted that it will be interesting to see whether public sector entities have a strong appetite for adopting sustainability reporting. Another mentioned that a phased approach to adoption could alleviate some of the transitional challenges associated with implementing this proposed standard.
The Group emphasized the importance of the public sector implementing policies to address climate change. Some Group members questioned what information might be better reported outside the general-purpose financial statements rather than within the general-purpose financial reports. The Group discussed that some public sector entities, in particular governments, already have public policies in place that may monitor, track, report, or set targets with respect to climate-related reporting. It was noted that having the IPSASB take on reporting in this area would help provide guidance and a framework, thereby improving consistency and standardization across public sector entities that adopt such reporting requirements. IPSASB’s SRS Exposure Draft and prospective projects involving sustainability would help align reporting practices, making it easier to compare and validate climate-related disclosures, ultimately enhancing transparency and accountability in addressing climate change.
One Group member encouraged clear communication identifying which Board, PSAB or the Canadian Sustainability Standards Board, would be leading sustainability reporting for the Canadian public sector.
The Group thanked the IPSASB staff for the opportunity to discuss Canadian perspectives on the topic and to provide feedback on matters proposed in the SRS Exposure Draft.