PSAB Financial Instruments Update – Respond to IPSASB Exposure Draft 62, Financial Instruments

August 16, 2017 Resource

PSAB Financial Instruments Update – Respond to IPSASB Exposure Draft 62, Financial Instruments

August 2017

Since February of 2016, Public Sector Accounting Board (PSAB) staff have made great efforts to consult the government and not-for-profit community about the financial instruments suite of standards in the CPA Canada Public Sector Accounting (PSA) Handbook.1

PSAB has received continual updates and has learned a great deal about how financial instruments are being used by governments. The Board deliberated many different perspectives on how to account for this difficult topic. We thank all stakeholders for their valuable feedback.

Hedge accounting option

The sovereign government community has communicated a need for a hedge accounting option.

PSAB staff, in collaboration with stakeholders, have identified certain timing issues in PS 3450 that may impact a government’s surplus or deficit in a manner that is unrepresentative of the underlying hedging transactions.

In search of a solution, the Board has followed the work of the International Public Sector Accounting Board (IPSASB).

The IPSASB developed a new model that includes a hedging option and was designed for the public sector. PSAB believes this standard would resolve the hedge accounting issues identified in Canada. We are considering the use of this standard. 

Comment on the IPSASB Exposure Draft

The IPSASB recently issued its Exposure Draft 62, Financial Instruments, with the comment period closing on December 31, 2017.

We encourage Canadian governments, legislative and public auditors, and other interested stakeholders to participate in the IPSASB’s due process and provide comments to articulate the Canadian landscape. As IPSASB is an open and transparent standard setter, PSAB will also consider the comments provided to the IPSASB.

Fair value considered

We also considered stakeholder concerns about the volatility that will be introduced to the net debt of governments by recording derivative instruments at their fair value each reporting period.
Recording financial instruments at fair value is not within the scope of investigating a hedge accounting option. If PSAB’s stakeholders are in favour of the IPSASB proposal, the Board will consider the implications for net debt in finalizing the hedge accounting requirements for inclusion in the PSA Handbook.

Stay up to date on PSAB’s Financial Instrument project.



1 PS3450, Financial instruments, PS 2601, Foreign currency translation, PS 1201, Financial statement presentation, PS 3041, Portfolio investments