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COVID-19 and its Potential Effect on the Financial Self-sufficiency of Government Business Enterprises

April 8, 2021 Resource, Guidance

How to Evaluate a GBE’s Financial Self-Sufficiency

A critical part of this new Public Sector Accounting Board (PSAB) how-to guidance examines factors affecting a Government Business Enterprise’s (GBE’s) current and future financial performance – which could include the COVID-19 pandemic.

The COVID-19 pandemic may impair the viability of some GBEs, and/or their financial self-sufficiency from revenue outside their controlling government’s reporting entity. “How to Evaluate a GBE’s Financial Self-Sufficiency” examines factors affecting a GBE’s current and future financial performance, which could include the COVID-19 pandemic. It also:  

  • draws on and magnifies CPA Canada Public Sector Accounting Handbook guidance for meeting the financial self-sufficiency criteria in the GBE definition; 
  • outlines factors, changes in factors, and questions for controlling governments to consider; and 
  • represents an important new starting place for comprehensively evaluating a GBE’s financial self-sufficiency.

Other guidance and support 

AcSB/AASB Close Call Going Concern Assessments Guidance 

On January 25, 2021, the Accounting Standards Board (AcSB) and Auditing and Assurance Standards Board (AASB) released Close Call Going Concern Assessments, which examines COVID-19’s implications on the viability of Canadian firms. It notes that “some companies may be in a situation where they’ve had a significant decline in their operations or are closed, which may call into question their long-term viability or their ability to continue as a going concern.”  

Like other companies that follow IFRS® Standards, the viability of GBEs as going concerns during COVID-19 should be evaluated. 

If its circumstances decline, a GBE may remain viable as a going concern because of its relationship with its controlling government. But, if the government’s assistance to a GBE is too significant, its financial self-sufficiency may be called into question.

Public Sector Accounting Discussion Group – GBE discussions 

This new publication builds on two discussions at PSAB’s Public Sector Accounting Discussion Group. Read the meeting reports for these sessions: 

Staff Contact(s)

Martha Jones Denning, CPA, CA Associate Director, Public Sector Accounting Board