Public Sector Accounting Board (PSAB) Annual Update

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1 Public Sector Accounting Board (PSAB) Annual Update Canadian Association of Government Finance Officers (CAGFO) September 12, 2018 The PSA Handbook is the primary authoritative source of public sector GAAP. The opinions stated in the presentation are those of the author and do not necessarily reflect the views of PSAB. Official positions of PSAB are established only after extensive public due process.

2 Strategic plan International Strategy NFP Strategy Conceptual Framework Stakeholder Acceptance Public Interest September 12,

3 Interrelated Strategies September 12,

4 Review of International Strategy September 12,

5 Current Approach to IPSASB Maintain a Canadian standard-setting capability while contributing to and influencing the work of the IPSASB o contribute to the development of standards by: briefing the Canadian members of IPSASB responding to IPSASB documents for comment o encouraging Canadian public sector entities to respond to IPSASB s documents for comment September 12,

6 International Strategy Why Now? International Standards have matured o Conceptual Framework, robust due process and a comprehensive set of Accounting Standards International adoption momentum Canada s role in influencing International Standards Time & resources spent on developing Canadian public sector standards September 12,

International Strategy Strategic Plan Review our approach to International Public Sector Accounting Standards Conduct research on the differences between Canadian Public Sector Accounting Standards

7 International Strategy Strategic Plan Review our approach to International Public Sector Accounting Standards Conduct research on the differences between Canadian Public Sector Accounting Standards and International Public Sector Accounting Standards Learn about experiences of other jurisdictions that have elected to follow International Public Sector Accounting Standards Issue a public consultation paper to get the opinion of stakeholders Develop options for our international strategy September 12,

8 Consultation Paper # 1 Neutral Approach o PSAB has not decided which option to pursue Introduce decision making model Not seeking opinions on which option PSAB should adopt o Discuss criteria that will be used to evaluate these options September 12,

9 Consultation Paper # 1 Resources and timeframes for implementation are not in scope Responses received from CP #1 will be incorporated into CP #2 PSAB to be in a position to make a decision by March 2020 September 12,

10 Consultation Paper # 1 Asking stakeholders to comment on: Are there additional criteria the Board should include in its business cases when evaluating the options? Should any criteria take precedence over others? Are there other significant facts that should be taken into consideration? September 12,

11 Consultation Paper # 1 Asking stakeholders to comment on: Are there additional options for PSAB to consider and for which it should develop a business case? Are there any other matters that should be brought to the Board s attention for consideration? September 12,

12 Timeline September 12,

13 Evaluation Criteria Criterion 1: Canadian influence over the standard-setting process Criterion 2 : Quality of accounting standards Criterion 3 : Transition costs Criterion 4 : International alignment Criterion 5 : Due process Criterion 6 : Use of standard-setting resources September 12,

14 International Strategy - Options Business Case Approach Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs September 12,

15 Option # 1 Status Quo Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs Status quo is defined as continuing the existing standardsetting process. This option maintains PSAB s role in establishing PSA standards independently from other standard setters. September 12,

Option # 2 Adapt IPSAS Principles Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs This option involves PSAB continuing to develop standards for Canada.

16 Option # 2 Adapt IPSAS Principles Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs This option involves PSAB continuing to develop standards for Canada. However, future standards would be based on existing IPSASs. The Board would establish a process detailing when departures from IPSASs are warranted. September 12,

circumstances where a departure is warranted.

17 Option # 3 Adapt IPSASs Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs This option involves applying IPSASs in Canada, except in circumstances where a departure is warranted. PSAB moves away from developing standards for Canada except when a Canadian issue is identified. September 12,

18 Option # 4 Adopt IPSASs Status Quo Adapt IPSAS principles Adapt IPSASs Adopt IPSASs This option involves PSAB adopting IPSASs as issued by the IPSASB. September 12,

19 PSAS / IPSAS Comparison Consistency of PSAS with IPSAS [VALUE] Standards ([PERCENTAGE]) [VALUE] Standards ([PERCENTAGE]) Consistent Difference Significant difference [VALUE] Standards ([PERCENTAGE]) September 12,

20 Resources In Brief Plain and Simple Overview of the Consultation paper Video Reviewing our International Strategy Comments Due: September 28, 2018 September 12,

21 Questions and/or Comments September 12,

22 Effective dates Date April 1, 2021 April 1, 2021 Topic Governments and some organizations only: - F/S Presentation PS Foreign Currency Translation PS Financial Instruments PS Portfolio Investments PS 3041 Government and Government Organizations - Asset Retirement Obligations, Section PS 3280 April 1, 2022 Government and Government Organizations - Revenue, Section PS

23 Annual Plan Documents Final Standard (FS) Exposure Draft (ED) Statement of Principles (SOP) Invitation to Comment (ITC) Consultation Paper (CP) Project Asset Retirement Obligations Revenue Financial Instruments (Narrow Scope) Annual Improvements Conceptual framework Public private partnerships Employment benefits (Pensions) Review of International Strategy - CP #1 & 2 Not-For-Profit September 12,

24 Final Revenue Standard Local Government Considerations: Building permits are in scope Identify performance obligations and recognize revenue when satisfied Development Charges are out of scope Section 3100 will continue to apply Review agreements and determine performance obligations Final Standard release, In Brief and Podcast In November 24

25 Final Asset Retirement Obligations Standard Local Government Considerations: Landfills are in Scope Replaces solid waste landfill closure and post closure liabilities (PS 3270) Assets controlled by the public sector Includes Asbestos In productive use, or no longer in productive use Review agreements, determine whether there are unrecorded liabilities Final Standard released August 2018 In Brief and Podcast available 25

26 Financial Instruments Extensive Consultation Process Consultation with Sr Governments, Auditor Generals, Local Governments and Government Not-For-Profits across Canada Effective date extended to 2021 Narrow scope amendments project targeting specific items: Transitional provisions Clarifying scope Bond repurchase issue Exposure Draft approval December 2018 In Brief plain language explanation of decision 26

27 Government Not-For Profit Organizations (GNFPO) September 12,

28 Background Assess the specific needs of GNFP stakeholders Strategic Plan Understand if some of our standards should apply differently to GNFPOs Strategic Plan Enhance engagement with the users of GNFPO organization s general-purpose financial statements PSAB Annual Plan Implement a GNFP strategy that meets the public interest Strategic Plan September 12,

29 Background Staff consulted with over 100 GNFPOs and their stakeholders The objective of the consultations was: Understand the fiscal and regulatory environment in which GNFPOs operate in; Identify their financial reporting needs; Understand their financial reporting concerns September 12,

30 Summary of findings Diversity in financial reporting framework Presentation of GPFS: Net debt Fund accounting Impact on balanced budget requirement Endowments Accounting Presentation September 12,

31 Next Steps Present a consultation paper for approval at the December 2018 meeting The consultation paper will articulate: Evolution of PSAB and GNFP landscape Results of the 2017/2018 GNFP consultations Seek stakeholder input to develop strategy Webinar October 29, 2018 In Brief explanation of the consultation findings in November September 12,

32 Questions and/or Comments September 12,

33 Employment Benefits September 12,

34 Project Objective Issue a new employment benefits standard replacing: Section PS 3250, Retirement Benefits; and Section PS 3255, Post-employment Benefits, Compensated Absences and Termination Benefits September 12,

35 Project Task Force Robert Lefrancois, Lefrancois Dufour CPA Inc. (Chair) Terence DeJong, Assistant Auditor General, Office of the Auditor General of Canada Lucy Durocher, PwC Partner Uros Karadzic, Actuary, E & Y Partner Paul Martin, Comptroller, Province of New Brunswick Cheryl McMullin, Chief, Fiscal Policy Division, Department of Finance Canada Martin Raymond, Actuary, Deloitte Partner Suzanne Wile, Executive Director, Nova Scotia Department of Finance September 12,

36 Project Advisory Group Adam Bell, Accounting Manager, City of Fredericton Yvon Bouchard, Director, Quebec Ministry of Municipal Affairs Karen Dixon, Actuary, Dixon Actuarial Services Inc. Conrad Ferguson, Actuary, Morneau Shepell Partner Nathalie Joncas, Actuary, Confédération des syndicats nationaux Kim MacPherson, Auditor General, Province of New Brunswick Josee Patry, Actuary, Normandin Beaudry Partner William Robson, President & CEO, C.D. Howe Institute Lori Taylor, Manager, Provincial Comptroller s Office, Saskatchewan Ministry of Finance September 12,

37 Due Process Documents Invitation to Comment Statement of Principles Exposure Draft New Standard September 12,

38 Key Issues Deferral provisions Discount rate guidance Non-traditional employment benefit plans September 12,

39 Changes in actuarial assumptions Changes in actuarial assumptions Investment return Invitation to Comment #1 - Deferrals Changes in the value of plan assets Realized gains and losses Unrealized gains and losses Contributions Expected return Unexpected return Benefit payments Administrative cost Plan settlement Actuarial gains and losses Unexpected return Demographic Discount rate Other economic Experience adjustments Changes in the value of the accrued benefit obligation Current service cost Past service cost Interest cost on obligation Benefit payments Demographic Discount rate Other economic Experience adjustments Plan curtailment Plan settlement September 12,

40 Responses to ITC on Deferrals Controller Auditor Local Gov t SUCH Org Actg firms Actuaries Others Total Canada BC AB SK MB 1 1 ON QC NB NS 1 1 NFLD Total September 12,

41 Invitation to Comment #2 - Discount Rates The role of discount rates o Benefit obligation is often incurred years before the payments are due need to calculate the value of the obligation at the reporting date Present Value of Benefit Obligation Discount Rate Future Benefit Payments September 12,

42 Responses to ITC on Discount Rates Controller Auditor Local Gov t SUCH Org Actg firm Actuary Pension Plan Union Other Total Canada BC AB SK MB 0 ON QC NB 1 1 NS PEI 1 1 NFLD Total September 12,

43 ITC #3 Non-Traditional Plans Scope Pension Plans only All pension plans Traditional DC Traditional DB In-between Focus Reflecting risk/cost of the plan to Employer /Sponsor September 12,

44 Pension Evolution in the Canadian Public Sector Defined Contribution PENSION PLANS IN SECTION PS 3250 Joint defined benefit Defined benefit Multiemployer defined benefit Multiple-employer defined benefit Employees Sharing of risks related to pension benefits between employer and employees Employer Colours correspond to characteristics of: defined contribution plans joint defined benefit plans multiemployer plans defined benefit plans target benefit plans risk-sharing provisions PENSION PLANS IN THE PUBLIC SECTOR Multiemployer defined contribution Target benefit with fixed employer contribution Target benefit with employer contribution limit Joint target benefit Joint defined benefit with risk-sharing provisions Multiemployer joint defined benefit Multiemployer target benefit with joint trustees Defined benefit with employees sharing surplus/deficit Defined benefit basic pension and defined contribution indexation Defined benefit with conditional indexation Multiemployer defined benefit with joint trustees September 12,

45 Shaping the Future Projects will define the future of Public Sector Accounting Stakeholder Involvement and Participation: o o o Documents for Comment Public Sector Discussion Group Task Force/Advisory Group o Outreach Opportunities September 12,

46 Questions and/or Comments September 12,

47 For more information, visit Contact: Michael A. Puskaric Director, Public Sector Accounting Board Phone: +1 (416) Charles-Antoine St-Jean Chair, Public Sector Accounting Board Phone : +1 (613) CSt-Jean@cpacanada.ca 47

PSAB Update September 13 th, 2017

PSAB Update September 13 th, 2017 The PSA Handbook is the primary authoritative source of public sector GAAP. The opinions stated in the presentation are those of the author and do not necessarily reflect