PSAS: Government transfers what you need to know

Transcription

1 PSAS: Government trnsfers wht you need to know Ferury 2018 Overview This summry will provide users with n understnding of the significnt recognition, presenttion nd disclosure requirements of the stndrd. Contents Pge A Scope 2 B Trnsferring government 2 Recognition 2 Authoriztion 2 Cpitl trnsctions 3 C Recipient government 3 Recognition 3 Authoriztion 4 Cpitl trnsctions 4 Liilities 4 D Presenttion nd disclosure 5 E Trnsitionl provisions 5

2 PSAS: Government trnsfers wht you need to know 2 A Scope Section PS 3410 Government Trnsfers estlishes guidnce on the recognition, presenttion nd disclosure of government trnsfers mde to individuls, orgniztions nd other governments. The stndrd provides guidnce specificlly from the perspectives of oth trnsferring governments nd recipient governments. Government trnsfers re trnsfers of monetry ssets or tngile cpitl ssets from government to n individul, n orgniztion or nother government for which the government mking the trnsfer does not: c receive ny goods or services directly in return, s would occur in purchse/sle or other exchnge trnsction; expect to e repid in the future, s would e expected in lon; or expect direct finncil return, s would e expected in n investment. Although negotitions regrding trnsfer terms generlly occur, government trnsfers re ultimtely discretionry trnsfers nd re completely under the direction of the trnsferring government. The trnsferring government hs the ility to impose trnsfer terms clled eligiility criteri nd stipultions, which re defined in detil in the glossry t the end of the stndrd. Eligiility criteri re terms imposed y trnsferring government tht specify who qulifies to receive trnsfer nd/or the ctions necessry to qulify for trnsfer. The nture nd sustnce of the eligiility criteri is such tht they must e met efore trnsfer is provided. Stipultions re terms imposed y trnsferring government regrding the use of trnsferred resources or the ctions recipient must perform in order to keep trnsfer. Stipultions must e met y recipients who hve lredy qulified to receive (y meeting eligiility criteri), or hve received, trnsfer. The nture nd sustnce of stipultions is such tht they re met fter trnsfer is provided. The stndrd provides further guidnce s to how eligiility criteri nd stipultions should e interpreted. Symmetricl ccounting my not result, in ll cses, for the trnsferors nd recipients of government trnsfers. Recognition requirements for trnsferring nd recipient governments pply eqully to operting trnsfers, cpitl trnsfers nd trnsfers of tngile cpitl ssets. B Trnsferring government Recognition A trnsferring government must recognize government trnsfer s s n expense in the period the trnsfer is uthorized nd ll eligiility criteri hve een met y the recipient. Authoriztion Authoriztion occurs when either: 1 There is evidence tht oth of the following hve occurred:

3 PSAS: Government trnsfers wht you need to know 3 the enling uthority to provide trnsfer is in plce (which is conveyed through pproved legisltion, regultions or y-lws of the trnsferring government); nd n exercise of uthority under tht pproved legisltion, regultions or y-lws hs occurred (i.e., decision hs een mde y the trnsferring government under the pproved legisltion, regultions or y-lws tht clerly demonstrtes tht it hs lost its discretion to void proceeding with the trnsfer). or 2 There is evidence tht oth of the following hve occurred: ctions nd communictions of the trnsferring government clerly demonstrte tht it hs lost its discretion to void proceeding with trnsfer (thus the government is demonstrly committed to pproving the enling legisltion, regultions or y-lws for the trnsfer nd proceeding with the trnsfer); nd finl pprovl in the stu period of the enling legisltion, regultions or y-lws confirms tht the trnsferring government ws demonstrly committed to pproving nd proceeding with the trnsfer. Asence, t the finncil sttement dte, of definitive uthority to py my indicte tht the required exercise of uthority is not complete nd, in fct, the trnsferring government my hve retined its discretion to void proceeding with trnsfer until the uthority to py is in plce. Cpitl trnsctions Government trnsfers of tngile cpitl ssets in non-exchnge trnsction lso fll under the scope of the stndrd nd re recognized s n expense y the trnsferring government t the net ook vlue of the tngile cpitl sset trnsferred. C Recipient government Recognition A recipient governments timing of recognition of government trnsfers s revenue differ depending on the existence of trnsfer terms. A trnsfer without eligiility criteri or stipultions is recognized s revenue when the trnsfer is uthorized. A trnsfer with eligiility criteri ut without stipultions is recognized s revenue when the trnsfer is uthorized nd ll eligiility criteri hve een met. A trnsfer with or without eligiility criteri ut with stipultions is recognized s revenue in the period it is uthorized nd ny eligiility criteri hve een met, except when the stipultions give rise to n oligtion tht meets the definition of liility for the recipient government (in ccordnce with Section PS 3200 Liilities), in which cse, the mounts would e recognized s revenue s the trnsfer stipultions re met.

4 PSAS: Government trnsfers wht you need to know 4 Authoriztion Authoriztion is viewed from the perspective of the trnsferring government; when the government trnsfer is uthorized s descried in Authoriztion item 1 ove; uthoriztion exists for the recipient s well. Illustrtive exmple A locl government is notified tht they re entitled to receive $200,000 csh trnsfer from provincil government, estlished y finlized provincil legisltion. The csh trnsfer hs two stipultions ttched to it. The funds: 1 cn only e used for cpitl expenditures which re prescried y the PSA Hndook; nd 2 cnnot e used to py down det relted to cpitl ssets. Shortly fter receiving notifiction, the locl government purchsed cpitl ssets in the mount of $50,000 nd pproved dditionl cpitl sset purchses for the remining $150,000 tht re expected to e completed within the next six months. The provincil government hs uthorized the trnsfer of the funds, s they hve notified the locl government of their entitlement due to the finliztion of legisltion. Although nothing hs een received, the locl government s entitlement gives rise to n ccounts receivle in the mount of $200,000. However, s the locl government hs only spent $50,000 on cpitl expenditures (internl pprovl to purchse is not legl commitment), they hve not yet met the full stipultions required to recognize the full trnsfer s revenue. The locl government would recognize $50,000 s revenue nd would recognize liility for the remining $150,000. The liility would e recognized into revenue when the dditionl cpitl purchses re completed. Cpitl trnsctions Government trnsfers of tngile cpitl ssets re ccounted for in ccordnce with this stndrd. However, this stndrd does not prescrie how recipient government vlues contriuted tngile sset. Footnote 8 in this stndrd sttes: TANGIBLE CAPITAL ASSETS, Section PS 3150, prescries the vlue t which to recognize contriuted tngile cpitl sset. Liilities The determintion s to whether liility, s opposed to revenue, would rise for recipient government is influenced y: The stipultions of the trnsfer lone; or The stipultions of the trnsfer tken together with the ctions nd communictions of the recipient government efore the finncil sttement dte. Liilities tht re recognized re reduced nd n equivlent mount of revenue is recognized s the liility is settled. For cpitl trnsfer, revenue recognition my occur over the relted sset's useful life or over lesser period depending on the terms of the liility. Generlly, in prctice, it would e rre to hve cpitl trnsfer recognized s revenue over the life of the cpitl sset.

5 PSAS: Government trnsfers wht you need to know 5 A cpitl trnsfer relting to non-deprecile ssets such s lnd would only meet the definition of liility until the sset is cquired. At the dte of cquisition, the cpitl trnsfer would e recognized in revenue. Illustrtive exmple Trnsfer of non-deprecile property A provincil government hs trnsferred piece of lnd to school ord. There were no eligiility criteri ttched to the trnsfer; however, the trnsfer stipultes tht n elementry school must e uilt within three yers of the trnsfer or the school ord would e required to py the provincil government n mount equl to the crrying vlue of the lnd t the dte of trnsfer. The lnd hs crrying vlue of $500,000 on the finncil sttements of the provincil government. An pprisl t the dte of trnsfer plced fir vlue of $1,200,000 on the lnd. At the dte of trnsfer, the provincil government would derecognize the lnd nd recognize n expense in the mount of $500,000 (the crrying vlue of the lnd). Although there is stipultion ttched to the trnsfer, the school ord must recognize the trnsfer s revenue, in full, t the dte of trnsfer. At the dte of trnsfer, the school ord would recognize the lnd nd recognize revenue using the guidnce in Section PS Therefore, the vlue used y the school ord to recognize the tngile cpitl sset nd revenue is the fir vlue of $1,200,000. D Presenttion nd disclosure Finncil sttements should disclose the mjor kinds of trnsfers recognized during the ccounting period nd informtion out the nture nd terms of liilities, if ny, rising from government trnsfers received. E Trnsitionl provisions This stndrd pplies to fiscl periods eginning on or fter April 1, 2012, with erlier doption encourged. This stndrd my e pplied retroctively or prospectively. Aout Grnt Thornton in Cnd Grnt Thornton LLP is leding Cndin ccounting nd dvisory firm providing udit, tx nd dvisory services to privte nd pulic orgniztions. We help dynmic orgniztions unlock their potentil for growth y providing meningful, ctionle dvice through rod rnge of services. Together with the Queec firm Rymond Chot Grnt Thornton LLP, Grnt Thornton in Cnd hs pproximtely 4,000 people in offices cross Cnd. Grnt Thornton LLP is Cndin memer of Grnt Thornton Interntionl Ltd, whose memer firms operte in over 100 countries worldwide. The informtion in this puliction is current s of Ferury 6, We hve mde every effort to ensure informtion in this puliction is ccurte s of its issue dte. Nevertheless, informtion or views expressed herein re neither officil sttements of position, nor should they e considered technicl dvice for you or your orgniztion without consulting professionl usiness dvisor. For more informtion out this topic, plese contct your Grnt Thornton dvisor. If you do not hve n dvisor, plese contct us. We re hppy to help.