Public Sector Accounting Standards

Invitation to Comment, Employment Benefits: Deferral Provisions in Sections PS 3250 and PS 3255

Summary

This Invitation to Comment sets out the issues and considerations related to a review of the deferral provisions in the Public Sector Accounting Board’s (PSAB) standards on employment benefits, including:

  • RETIREMENT BENEFITS, Section PS 3250; and
  • POST-EMPLOYMENT BENEFITS, COMPENSATED ABSENCES AND TERMINATION BENEFITS, Section PS 3255.

The objectives of this Invitation to Comment are to:

  • explain why PSAB is considering whether the deferral provisions in the standards remain appropriate;
  • identify potential alternatives and related considerations; and
  • seek stakeholder input prior to PSAB establishing its preliminary views on this issue.

Separate invitations to comment will be issued in the future on, for example, discount rates and other aspects of the project PSAB deems necessary to give the issue due attention and consideration. This Invitation to Comment does not cover all aspects of Phase I as it is described in the “Background to the project” section (page ii).

The ultimate objective of this project is to issue a new employment benefits Section in the CPA Canada Public Sector Accounting Handbook, replacing Sections PS 3250 and PS 3255.

Staff Contact(s)

Michael Puskaric, MBA, CPA, CMA

Director, Public Sector Accounting Board

Background

The main features of this Invitation to Comment are as follows:

  • There are three deferral provisions in Sections PS 3250 and PS 3255 – two related to deferral and amortization treatment of actuarial gains and losses and one related to valuation of plan assets at market-related values.
  • PSAB needs to consider if the deferral provisions in its standards remain appropriate and justified, given that many equivalent employee benefits standards issued by other standard setters have moved away from the deferral approach.
  • Understanding the nature of each component of the actuarial gains and losses, and the causes of the changes in them, would help with evaluating the appropriateness of, and justification for, the deferral treatment for each component of the actuarial gains and losses.
  • Changes in the value of the accrued benefit obligation that are subject to the deferral treatment can arise from changes in actuarial assumptions (demographic, discount rate and other economic) and experience adjustments.
  • Changes in the value of plan assets that are subject to the deferral treatment are the unexpected returns on plan assets.
  • Determining the appropriate accounting for each component of the changes in the value of the accrued benefit obligation and plan assets also involves considering:
    • the conceptual soundness of the recognition alternatives;
    • the operating environment in the public sector;
    • the practicality of the overall solution; and
    • if the resulting financial information can stand the test of time.
  • Recognition options for each component of the changes in the value of the accrued benefit obligation and plan assets include:
    • recognition in the annual surplus/deficit immediately;
    • recognition in the annual surplus/deficit in subsequent periods (recycling); or
    • no recognition in the annual surplus/deficit (no recycling).
  • Valuation options for plan assets include market value only or market-related value (which means market value or a value that is adjusted to the market over a period).