MODULE 6 Public Sector Accounting Standards Lecturer: Peter Moreira, MBA, CGA

PUBLIC SECTOR ACCOUTING STANDARDS two public sector standard setting bodies Public Sector Accounting Board (PSAB) in Canada International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) both boards consult with stakeholders and professionals and issue guidance on public sector accounting issues both Canadian and international standards similar to those issued for private sector but cover issues unique to public sector

PUBLIC SECTOR ACCOUNTING BOARD CICA Public Sector Accounting Board (PSAB) establishes financial accounting and reporting standards for use by federal, provincial, territorial and local governments similar to CICA Accounting Standards Board (AcSB) which sets standards contained in CICA Handbook Accounting AcSB develops and establishes standards and guidance governing financial accounting and reporting in Canada for profit and non profit organizations (US - FASB, International - IASB)   accounting standards (primary source of GAAP) specify how transactions and other events are to be recognized, measured, presented and disclosed in financial statements Canada Business Corporations Act and provincial corporations and securities legislation generally require companies to prepare f/s in accordance with GAAP

Accounting Standards Oversight Council (AcSOC) oversees activities of and appoints members to both PSAB and the AcSB independent body established by CICA which provides support in setting accounting standards reports to public and consists of 26 members including regulators, investors and public accountants PSAB consists of 12 members and a Chair (meets 4 times year) and two thirds of members will be people who prepare, audit and use government f/s and reports senior government officials municipal treasurers and auditors academics bond-raters

HISTORY OF PSAB 1993 - Public Sector Accounting and Auditing Board (PSAAB) established as reformation of a committee into a board 1995 - conversion of the then Public Sector Accounting and Auditing Statements and Guidelines into Public Sector Accounting and Auditing Handbook 1998 - PSAAB was renamed Public Sector Accounting Board (PSAB) when responsibility for public sector auditing standards was transferred to Assurance Standards Board which deals with private sector auditing standards Public Sector Accounting and Auditing Handbook became PSAH

PUBLIC SECTOR ACCOUNTING HANDBOOK AcSB in charge of setting standards for Public Sector Accounting Handbook (PSAH) PSAH is primary source of generally accepted accounting principles for federal, provincial, territorial and local governments defer to CICA Handbook - Accounting if not covered in PSAH new standards exposure drafts issued and input welcomed from interested parties especially others in accounting profession standard development process ends with issuance of either a standard, public sector guideline or a statement of recommended practice

accountability and transparency require an accounting of nature and extent of financial affairs and resources of government PSAH comprised of Standards (45) Public Sector Guidelines (7) Statement of Recommended Practice (4) offer general guidance to public sector entities on specific aspects of reporting on financial condition and financial/nonfinancial performance (not part of GAAP) enhance decision making and accountability by improving understandability of reports issued in public sector

Standards (PS) 1000 F/S concepts 1100 F/S objectives 1150 GAAP 1200 F/S presentation 1300 Government reporting entity 2100 Disclosure of accounting policies 2120 Accounting changes 2130 Measurement uncertainty 2400 Subsequent events 2500 Basic principles of consolidation 2510 Additional areas of consolidation

2600 Foreign currency translation 2700 Segment Disclosures 3030 Temporary investments 3040 Portfolio investments 3050 Loans receivable 3060 Government partnerships 3070 Investments in government business enterprises 3100 Restricted assets and revenues 3150 Tangible capital assets 3200 Liabilities 3230 Long term debt 3250 Retirement benefits 3260 Liability for Contaminated Sites 3255 Post employment/termination benefits, compensated absences 3270 Solid waste landfill closure and post closure liability 3300 Contingent liabilities 3390 Contractual obligations 3410 Government transfers 3800 Government assistance

Public Sector Guidelines (PSG) 1 Employee pension obligations local governments 2 Leased tangible capital assets 3 Sale leaseback transactions - withdrawn see PSG 5 4 Funds and reserves 5 Sale leaseback transactions (previous Sale leaseback transactions expense based) 6 Value measurements 7 Tangible capital assets of local governments Statement of Recommended Practice (SORP) 1 F/S discussion and analysis 2 Public performance reporting

PSAB PROJECTS PSAB undertakes projects to develop or revise standards, guidelines and SORPs PSAB commissions CICA Studies Department to conduct research on relevant topics in public sector accounting, reporting and performance measurement main steps in standards development (PSGs same) project scoping and approval (project proposal) formulation and agreement on basic principles (statement of principles) preparation and issue of an exposure draft for public comment (exposure draft) approval/issue of final standard in PSAH (2/3 vote of PSAB members in writing)

concepts underlying financial performance - The objective of this project is to review and amend, if necessary, the conceptual framework in Sections PS 1000, Financial Statement Concepts, and PS 1100, Financial Statement Objectives. This review could also affect Section PS 1200, Financial Statement Presentation. identifying and reporting performance indicators - project has been deferred PSA Handbook Terminology - The PSA Handbook was written primarily for government summary financial statements. The term “government” was used throughout the PSA Handbook. As part of PSAB’s initiative to improve the PSA Handbook for government organizations including GNFPOs, the Board considered the need to clarify the application of the Sections for government organizations and to replace the reference to “government(s)” with a term that would include entities that will adopt the PSA Handbook in the foreseeable future. related party transactions - The objectives of this project is to issue a new accounting standard that: defines a related party in the context of government and government organizations; and describes the disclosure required for related parties and related party transactions.

INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS BOARD International Public Sector Accounting Standards Board (IPSASB) is body of International Federation of Accountants (IFAC) IFAC is global organization for accountancy profession which works with 163 member organizations (CGA Canada) in 120 countries to protect public interest by encouraging quality practices by accountants IPSASB members (17 countries including G7 members) are nominated by IFAC member bodies

IPSASB uses principles based consultative approach to standard setting (similar to PSAB) to issue pronouncements that will harmonize international public sector accounting standards for governments key part of IPSASB strategy is to converge the IPSASs with International Financial Reporting Standards (IFRSs) issued by IASB (modify IFRSs for application by public sector entities) IPSASs strengthen financial reporting by governments globally PSAB provides technical support

IPSASs IPSAS 1 - Presentation of Financial Statements IPSAS 2 - Cash Flow Statements IPSAS 3 - Surplus/Deficit, Fundamental Errors, Changes Accounting Policies IPSAS 4 - Effects of Changes in Foreign Exchange Rates IPSAS 5 - Borrowing Costs IPSAS 6 - Consolidated f/s, Accounting for Controlled Entities IPSAS 7 - Accounting for Investments in Associates IPSAS 8 - Financial Reporting of Interests in Joint Ventures IPSAS 9 - Revenue from Exchange Transactions IPSAS 10 - Reporting in Hyperinflationary Economies IPSAS 11 - Construction Contracts IPSAS 12 - Inventories IPSAS 13 - Leases IPSAS 14 - Events After the Reporting Date IPSAS 15 - Financial Instruments: Disclosure/Presentation IPSAS 16 - Investment Property IPSAS 17 - Property, Plant and Equipment IPSAS 18 - Segment Reporting IPSAS 19 - Provisions, Contingent Liabilities and Assets IPSAS 20 - Related Party Disclosures IPSAS 21 - Impairment of Non-Cash-Generating Assets

Module Summary Identify the role of PSAB, its mandate and objectives, and its accountabilities. (Level 1) Identify which set of accounting standards applies to the various types of government organizations and the concept of neutrality in standard setting. (Level 1) Explain major events and periods in the development of PSAB standards. (Level 2) Review the status and purpose of current PSAB projects. (Level 1) Explain the roles and mandates of the U.S. and international public sector accounting standard setting bodies. (Level 2)