The Public Sector Accounting Board (PSAB) has issued the Exposure Draft, “2026-2027 Annual Improvements to Public Sector Accounting Standards,” which proposes amendments to the following standards:
Collectively, these standards are referred to as the financial instruments suite of standards.
This Exposure Draft is intended to clarify existing pronouncements in the CPA Canada Public Sector Accounting (PSA) Handbook. These annual improvements are not expected to propose any new principles or change any existing principles. Most importantly, the proposed annual improvements are not intended to change practice.
To ensure feedback received through its Financial Instruments Monitoring and Financial Instruments Post-implementation Review Assessment projects are considered and addressed, PSAB approved the development of the following items relating to the financial instruments suite of standards during its March 2026 meeting:
- this Exposure Draft;
- a feedback statement; and
- a future narrow-scope amendment(s) project.
This Exposure Draft is the first of three items that will consider and address feedback on the financial instruments suite of standards, helping ensure PSAB remains responsive and responsible to its interested and affected parties.
This Exposure Draft focuses on the financial instruments suite of standards and proposes amendments to:
- replace the word “government” with “public sector entity,” “entity,” or another appropriate term in certain Sections of the PSA Handbook;
- update “financial asset(s)” and “financial liability” references to “financial instrument asset(s)” and “financial instrument liability” in Section PS 2601;
- amend Section PS 2601 to clarify the accounting treatment relating to foreign currency denominated financial instruments. This amendment proposes to address feedback received through PSAB’s Financial Instruments Monitoring and Financial Instruments Post-implementation Review Assessment projects;
- amend Section PS 3450 as follows to address feedback received through PSAB’s Financial Instruments Monitoring and Financial Instruments Post-implementation Review Assessment projects:
- add references to Section PS 3041; Section PS 3100, Restricted Assets and Revenues; and Section PS 3230, Long-Term Debt, to clarify the accounting treatment for financial instrument assets and financial instrument liabilities relating to sinking funds;
- add clarification explaining that the listing of embedded derivative examples provided within application guidance are not exhaustive; and
- add a decision tree as Appendix B to Section PS 3450 to help clarify the process for identifying embedded derivatives.
- make editorial updates to:
PSAB expects to issue the final amendments to the PSA Handbook in summer 2027, effective immediately upon issuance. These annual improvements are not expected to affect practice, and many are purely editorial in nature.