Deloitte’s Digest An overview of standard-setting activities

May 31, 2015

© Deloitte LLP and affiliated entities Deloitte’s Digest – May 2015 1

At a time when it has become a difficult task to keep up to date with the

recent developments in standard-setting activities, the Deloitte Digest

presents a useful single source of reference for current financial

reporting developments.

Table of Contents

Summary by standard ............................................................................................................................................. 1

Abbreviations, a list of most commonly used acronyms ....................................................................................... 28

Additional resources .............................................................................................................................................. 29

Contacts, our experts network is available for your questions .............................................................................. 30

© Deloitte LLP and affiliated entities Deloitte’s Digest – May 2015 1

Summary by standard From time to time, standard-setters and regulators issue new rules and standards that affect your financial reporting. This document briefly describes these pronouncements and other regulatory and professional developments and indicates their effective date, transition application and entities affected. At the time of publication, the external links included in this page were active. However, if the documents on the hosting site have been subsequently modified, moved or archived, these external links may no longer work. If you need to locate a specific document and/or external site listed on this page that is no longer active, please contact us.

Table of contents

Summary by standard ............................................................................................................................................. 1

Final standards ................................................................................................................................................. 3

PSAB Related Party Transactions ....................................................................................................... 4

IPSASB Governance Review Group – Recommendations ................................................................. 5

IPSASB Recommended Practice Guideline 3 (RPG 3), Reporting Service Performance Information6

IPSASB Strategy and Work Program for 2015-2019........................................................................... 7

PSAB Assets, Contingent Assets and Contractual Rights UPDATED ...................................................... 8

PSAB Restructuring Transactions UPDATED ........................................................................................... 9

PSAB Strategic Plan for 2013 – 2016 ............................................................................................... 10

Proposed standards ........................................................................................................................................ 11

PSAB/AcSB Improvements to Not-for-Profit Standards .................................................................... 12

PSAB Conceptual Framework Fundamentals and the Reporting Model .......................................... 14

PSAB Post-Implementation Review: Section PS 3410, Government Transfers UPDATED ................... 15

IPSASB Consultation Paper - Public Sector Combinations .............................................................. 16

IPSASB Applicability of IPSASs to Government Business Enterprises and Other Public Sector Entities ............................................................................................................................................... 18

PSAB Amendments to Section PS 3450, Financial Instruments: Transition ..................................... 19

PSAB Asset Retirement Obligations ................................................................................................. 21

PSAB Revenue .................................................................................................................................. 22

Projects ........................................................................................................................................................... 23

IPSASB Public Sector Specific Financial Instruments ...................................................................... 24

IPSASB Social Benefits ..................................................................................................................... 25

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PSAB Concepts Underlying Financial Performance.......................................................................... 26

PSAB Impairment of Non-financial Assets UPDATED ............................................................................ 27

Abbreviations, a list of most commonly used acronyms ....................................................................................... 28

Additional resources .............................................................................................................................................. 29

Contacts, our experts network is available for your questions .............................................................................. 30

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Final standards

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Final standards

Public sector accounting standards

PSAB Related Party Transactions Effective date: Fiscal years beginning on or after April 1, 2017. Earlier adoption is permitted.

Standard: Two new Handbook Sections — Section PS 2200, Related Party Disclosures, and Section PS 3420, Inter-Entity Transactions

Transitional provisions: Applicable to fiscal years beginning on or after April 1, 2017. Earlier adoption is permitted

Published by: PSAB

Last updated: March 2015

Applicable to: Public sector

Recent activities On March 2, 2015, the PSAB issued Basis of Conclusions documents in respect of the two new Sections. At its meeting on December 15-16, 2014, the PSAB approved two new Handbook Sections — Section PS 2200, Related Party Disclosures, and Section PS 3420, Inter-Entity Transactions. These two new Sections have been included in the PSA Handbook during March 2015.

In summary

Overview Section PS 2200 defines a related party and establishes disclosures required for related party transactions. Disclosure of information about related party transactions and the relationship underlying them is required when they have occurred at a value different from that which would have been arrived at if the parties were unrelated, and they have, or could have, a material financial effect on the financial statements. Section PS 3420 establishes standards on how to account for and report transactions between public sector entities that comprise a government's reporting entity from both a provider and recipient perspective. The main features of the new Section are: (i) under a policy of cost allocation, revenues and expenses are recognized on a gross basis; (ii) transactions are measured at the carrying amount, except in specific circumstances; (iii) a recipient may choose to recognize unallocated costs for the provision of goods and services and measure them at the carrying amount, fair value or other amount dictated by policy, accountability structure or budget practice; (iv) the transfer of an asset or liability for nominal or no consideration is measured by the provider at the carrying amount and by the recipient at the carrying amount or fair value; and (v) inter-entity transactions are considered in conjunction with Section PS 2200.

Available resources and links • PSA Handbook Sections 2200 and 3420 (March 2015) • Basis of Conclusions – PSA Section 2200 (March 2015) • Basis of Conclusions - PSA Section 3420 (March 2015)

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Final standards

Public sector accounting standards

IPSASB Governance Review Group – Recommendations Effective date: Not applicable

Standard: IPSASB Governance Review Group – Recommendations

Transitional provisions: Not applicable

Published by: IPSASB Governance Review Group

Last updated: March 2015

Applicable to: Public sector

Recent activities On March 2, 2015, the IPSASB issued a press release welcoming the IPSASB Governance Review Group’s final recommendations on the future governance of the IPSASB, released on the same date.

In summary

Overview The recommendations include the establishment of a governance body—the Public Interest Committee—to ensure that the public interest is served by the IPSASB’s standard-setting activities, as well as the establishment of an IPSASB Consultative Advisory Group. The IPSASB Governance Review Group was formed to assess the IPSASB’s governance arrangements and to make recommendations to strengthen these processes and structures. It is chaired by the International Monetary Fund, Organization for Economic Co-operation and Development, and World Bank; members are representatives from the Financial Stability Board, International Organization of Securities Commissions, and International Organization of Supreme Audit Institutions.

Available resources and links • IPSASB Press Release (March 2015) • IPSASB Governance Review Group - Recommendations (March 2015)

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Final standards

Public sector accounting standards

IPSASB Recommended Practice Guideline 3 (RPG 3), Reporting Service Performance Information Effective date: Issued March 31, 2015; no stated effective date

Standard: Recommended Practice Guideline 3 (RPG 3), Reporting Service Performance Information

Transitional provisions: Not applicable

Published by: IPSASB

Last updated: March 2015

Applicable to: Public sector

Recent activities On March 31, 2015, the IPSASB published Recommended Practice Guideline 3 (RPG 3), Reporting Service Performance Information that provides guidance on the reporting of service performance information. The RPG is designed to allow public sector entities to be held accountable through the provision of high quality service performance information, by providing guidance on how such information should be presented, and its recommended characteristics.

In summary

Overview RPG 3 follows an ED published in 2013 and an earlier consultation paper released in 2011. It responds to the perceived need for a principles-based and consistent framework for service performance information that focuses on user needs. The guidance in RPG 3 aligns with the IPSASB's view that public sector financial reporting has a greater scope than financial statements alone. Therefore, it: (i) provides principles applicable to the presentation of service performance information and definitions that establish a standardized service performance information terminology; (ii) addresses the reporting entity and reporting period for service performance information; (iii) provides guidance on the choice of performance indicators that show an entity's achievements with respect to its service performance objectives, disclosures about the basis of the reported information, and service performance-related narrative discussion and analysis; and (iv) states that service performance information may be presented either in the same report as the financial statements or in a separate report, and identifies factors to consider when making that decision. RPGs are pronouncements that provide guidance on good practice in preparing general purpose financial reports (GPFRs) that are not financial statements. Unlike IPSASs RPGs do not establish requirements.

Available resources and links • IPSASB Press Release (March 2015) • IPSASB At A Glance Summary of RPG 3 (March 2015) • RPG 3 Reporting Service Performance Information (March 2015)

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Final standards

Public sector accounting standards

IPSASB Strategy and Work Program for 2015-2019 Effective date: April 1, 2015 to March 31, 2019

Standard: IPSASB Strategy and Work Program for 2015-2019

Transitional provisions: Not applicable

Published by: IPSASB

Last updated: March 2015

Applicable to: Public sector entities that present their financial statements in accordance with IPSASs

Recent activities Most recently, at its meeting on March 10-13, 2015, the IPSASB approved the following: (i) a project brief on Revenue; (ii) a project brief on Non-exchange Expenses; (iii) a limited scope brief on Cash Basis Accounting Review; (iv) a limited scope brief on Consequential Amendments to IPSAS 1 (as a result of the new IPSASB Conceptual Framework); and (v) a limited scope brief in respect of Amendments to IPSAS 25 (as a result of recent amendments to IAS 19). At its meeting on December 8-11, 2014, the IPSASB approved its Strategy for 2015 forward and its Work Plan for 2015-2019.

In summary

Overview The Work Plan includes determining the need to prioritize projects addressing the following: (i) revenue – convergence with IFRS 15 of the IASB; (ii) non-exchange expenses; (iii) measurement - public sector specific issues; and (iv) public sector assets such as heritage assets and infrastructure assets.

Available resources and links • Webcast re the IPSAB Strategy and Work Program for 2015-2019 (March 2015)

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Final standards

Public sector accounting standards

PSAB Assets, Contingent Assets and Contractual Rights UPDATED Effective date: Fiscal years beginning on or after April 1, 2017. Earlier application is encouraged.

Standard: Three new PSA Handbook Sections, Assets, Contingent Assets and Contractual Rights

Transitional provisions: Effective for fiscal years beginning on or after April 1, 2017. Earlier application is encouraged.

Published by: PSAB

Last updated: May 2015

Applicable to: Public sector entities

Recent activities On May 29, 2015, Highlight Summary No. 43 was issued dated June 2015, which includes the following new PSA Handbook material: Section PS 3210, Assets, Section PS 3320, Contingent Assets, and Section PS 3380, Contractual Rights. At its meeting on March 19-20, 2015, the PSAB approved three new Handbook Sections, Assets, Contingent Assets and Contractual Rights.

In summary

Overview Section PS 3210, Assets, provides guidance for applying the definition of assets and establishes general disclosure standards for assets. Disclosure of information about the major categories of assets that are not recognized is required. When an asset is not recognized because a reasonable estimate of the amount involved cannot be made, the reason(s) for this should be disclosed. Section PS 3320, Contingent Assets, defines and establishes disclosure standards on contingent assets. Disclosure of information about contingent assets is required when the occurrence of the confirming future event is likely. Section PS 3380, Contractual Rights, defines and establishes disclosure standards on contractual rights. Disclosure of information about contractual rights is required including a description about their nature and extent and the timing.

Available resources and links • PSAB Decision Summary (March 2015) • PSAB ED (August 2014) • PSAB Project Summary

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Final standards

Public sector accounting standards

PSAB Restructuring Transactions UPDATED Effective date: Restructuring transactions occurring in fiscal years beginning on or after April 1, 2018. Earlier application is encouraged.

Standard: A new PSA Handbook Section in respect of restructuring transactions

Transitional provisions: The new Section will apply to restructuring transactions occurring in fiscal years beginning on or after April 1, 2018. Earlier application is encouraged.

Published by: PSAB

Last updated: May 2015

Applicable to: Public sector entities

Recent activities On May 29, 2015, Highlight Summary No. 43 was issued dated June 2015, which includes the following new PSA Handbook material: Section PS 3430, Restructuring Transactions. At its meeting on March 19-20, 2015, the PSAB approved a new PSA Handbook Section in respect of restructuring transactions.

In summary

Overview The main features of the new Section are: (i) a restructuring transaction is a transfer of an integrated set of assets and/or liabilities, together with related program or operating responsibilities without consideration based primarily on the fair value of the individual assets and individual liabilities transferred; (ii) the net effect of a restructuring transaction should be recognized as revenue or as an expense by entities involved; (iii) a recipient should recognize individual assets and liabilities received in a restructuring transaction at their carrying amount with applicable adjustments at the restructuring date; (iv) a transferor and a recipient should not restate their financial position or results of operations; and (v) a transferor and a recipient should disclose sufficient information to enable users to assess the nature and financial effects of a restructuring transaction on their financial position and operations.

Available resources and links • PSAB Decision Summary (March 2015) • PSAB ED (August 2014) • PSAB Project Summary

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Final standards

Public sector accounting standards

PSAB Strategic Plan for 2013 – 2016 Effective date: April 1, 2013 to March 31, 2016

Standard: N/A – Strategic Plan

Transitional provisions:

N/A

Published by: PSAB

Last updated: April 2015

Applicable to: All public sector entities

Recent activities Most recently, at its meeting on March 19-20, 2015, the PSAB approved its 2015-2016 work plan and reviewed its 2014-2015 interim performance report. On December 18, 2013, the Strategic Plan for 2013-2016 was posted to the PSAB’s website. At its meeting on June 12-13, 2013, the PSAB approved its Strategic Plan for 2013-2016 after considering responses received from stakeholders. On March 27, 2013, the PSAB issued for comment its draft Strategic Plan for 2013-2016.

In summary

Overview The Strategic Plan outlines the broad policy objectives that will guide the PSAB’s activities and outputs for the period 2013 – 2016. In summary, and based on the objectives that PSAB wishes to meet over the strategic planning period 2013-2016, PSAB has adopted six strategies, as follows: (i) PSAB will have a conceptual framework that is widely accepted and used for the development of standards; (ii) PSAB will have an informed community of stakeholders who understand and accept the due process for developing standards; (iii) PSAB will have one financial reporting framework used by all entities who apply the PSA Handbook; (iv) Stakeholders are engaged in the development of our standards; (v) The Canadian public sector is engaged in and influences standards development by the IPSASB; and (vi) PSAB is aware of new developments in accounting and financial reporting. The Plan includes both a number of strategies that complete initiatives started in the previous plan, and a number of new strategies to address the communications needs of stakeholders. The top priority for PSAB is the completion of its conceptual framework project.

Available resources and links • PSAB Strategic Plan 2013-2016 (December 2013)

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Proposed standards

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Proposed standards

Public sector accounting standards

PSAB/AcSB Improvements to Not-for-Profit Standards Comment period ends on December 15, 2013

Proposed standard:

Statement of Principles - Improvements to Not-for-Profit Standards

Proposed effective date:

N/A – Statement of Principles only.

Published by: PSAB (jointly with the AcSB)

Last updated: April 2015

Applicable to: Public sector and private sector not-for‐profit organizations

Recent activities: Most recently, at its joint meeting with the AcSB on March 19-20, 2015, the PSAB considered a number of fundamental issues needing to be addressed prior to initializing specific project-related work. The Boards discussed (i) the various types of not-for-profit organizations and their diversity within the not-for-profit sector; (ii) whether financial statements within the not-for-profit sector need to be comparable regardless of whether the organization operates in the private or public sector; (iii) the different priorities facing each Board; and (iv) whether they should address the issues raised by respondents together. The Boards are committed to continuing to provide ongoing communications to inform stakeholders of developments. The AcSB plans to agree on the next steps it will undertake in respect of the standards for not-for-profits in the private sector at its meeting in May 2015. At its meeting on September 15-16, 2014, the PSAB considered key issues raised by public sector stakeholders in their responses to its SOP. PSAB also discussed the issues identified in the June 2014 joint meeting with the AcSB. The PSAB recognized that some of the issues raised by respondents are not unique to government not-for-profit organizations and require broader public sector considerations. There are areas where improvements can be made. PSAB noted that it needs to consider fundamental questions in the context of the public interest. At their meeting on June 17, 2014, the AcSB and the PSAB met to begin the process of jointly considering the written responses to their April 2013 SOP. The Boards: (i) began the process of assessing the overarching principles and questions that need to be considered and additional information that should be gathered as the Boards progress with the project; and (ii) discussed next steps and how they can continue to collaborate on this topic. As of February 2014, the AcSB and PSAB have received a substantial number of responses from a broad variety of stakeholders in the private and public sectors. Stakeholders have provided the Boards with a variety of carefully considered positions on each of the principles described in the SOP. Out of the 290 comment letters received to date, approximately 190 provided responses to the AcSB, 45 to PSAB and 55 to both Boards. On July 15, 2013, the PSAB and the AcSB extended the comment deadline on the SOP from September 15, 2013 to December 15, 2013. On April 10, 2013, the PSAB (jointly with the AcSB) issued a SOP which includes 15 proposed principles which should underlie accounting standards for NFPOs.

In summary

Overview The main features affecting both private and public sector NFPOs are as follows: (i) A contribution would be recognized as an asset, when the NFPO has control of the contribution, would exercise that control if

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necessary and can reasonably estimate the amount to be received. A contribution would be revenue, except when the contribution gives rise to an obligation that meets the definition of a liability. The proposals replace the deferral and restricted fund methods and would affect the recognition of contributions by NFPOs in both the private and public sectors. The proposals could also have a significant impact on the accounting for contribution pledges and endowment contributions (Principles 1 to 3) and (ii) A capital asset would be recognized by an NFPO on its statement of financial position regardless of the size of the NFPO, thereby removing the size exemption currently available for NFPOs in both the private and public sectors (Principle 7). The main features affecting public sector (or government) NFPOs only are as follows: (i) The accounting for tangible capital assets and controlled and related entities, and financial statement presentation by a public sector NFPO would follow the standards in the PSA Handbook currently followed by governments and other government organizations. The proposals would remove the current options available for reporting controlled and related entities by a public sector NFPO. The proposals would require a public sector NFPO to show the “net debt” indicator, statements of change in net debt and remeasurement gains and losses, and budget information in their financial statements (Principles 5, 10, 13 and 14). Intangibles, works of arts and historical treasures (including collections), and economic interests would continue to be accounted for and presented on a basis consistent with the guidance currently in the PS Section 4200 series until PSAB gives further consideration to these matters (Principles 6, 8, 9 and 11).

Available resources and links • PSAB/AcSB SOP (April 2013) • PSAB Project Summary

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Proposed standards

Public sector accounting standards

PSAB Conceptual Framework Fundamentals and the Reporting Model Comment period ends on August 31, 2015

Proposed standard:

Consultation Paper entitled Conceptual Framework Fundamentals and the Reporting Model

Proposed effective date:

Not yet specified

Published by: PSAB

Last updated: March 2015

Applicable to: Public sector entities

Recent activities: On March 11, 2015, the PSAB’s Conceptual Framework Task Force issued a third Consultation Paper (CP), entitled Conceptual Framework Fundamentals and the Reporting Model.

In summary

Overview The issue of the CP is the third phase of the PSAB project on Concepts Underlying Financial Performance. See separate Project item. The CP proposes a new reporting model and draft principles on public sector characteristics, financial statement objectives, qualitative characteristics, elements, recognition, measurement and presentation.

Available resources and links • PSAB Consultation Paper - Conceptual Framework Fundamentals and the Reporting Model (March

2015) • PSAB Project Summary

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Proposed standards

Public sector accounting standards

PSAB Post-Implementation Review: Section PS 3410, Government Transfers UPDATED Comment period ends on May 15, 2015

Proposed standard:

N/A - Post-Implementation Review: Section PS 3410, Government Transfers

Proposed effective date:

The PSAB currently expects to issue its Feedback Statement in respect of this project in Q1/2016.

Published by: PSAB

Last updated: May 2015

Applicable to: Public sector entities

Recent activities: On November 3, 2014, the PSAB issued a Request for Information to gather information, as part of its post-implementation review, about stakeholders’ experience in the implementation and ongoing application of Section PS 3410, Government Transfers.

In summary

Overview While a post-implementation review of Section PS 3410 is not required because the revised standard was issued in 2010, prior to the post-implementation review requirement, there are indications of different interpretations and applications of the standard. PSAB is keenly aware that difficult decisions were needed during the implementation process. Now that stakeholders have had an opportunity to work through the issues related to Section PS 3410, PSAB would appreciate learning how those issues were dealt with and whether there are any issues on a go-forward basis.

Available resources and links • PSAB Request for Information (November 2014) • PSAB Project Summary

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Proposed standards

Public sector accounting standards

IPSASB Consultation Paper - Public Sector Combinations Comment period ends on October 31, 2012

Proposed standard:

N/A. The Consultation Paper explores concepts applicable to presentation of information in general purpose financial reports and represents the first stage of a project to develop a conceptual framework for general purpose financial reporting by public sector entities

Proposed effective date:

N/A.

Published by: IPSASB

Last updated: March 2015

Applicable to: All public sector entities

Recent activities: Most recently, at its meetings on December 8-11, 2014 and March 10-13, 2015, the IPSASB reviewed an Issues Paper on public sector combinations prepared by staff; and provided direction on the development of an IPSAS on public sector combinations. As part of the review, the IPSASB discussed the approach to classifying public sector combinations (reorganizations, amalgamations and (less important in the public sector) acquisitions) and the accounting treatments to be applied to these different classes of combinations. At its meeting on June 24-27, 2014, the IPSASB carried out an initial review of the responses to the CP and also discussed an Issues Paper. On July 19, 2012, the IPSASB has issued a Consultation Paper on the possible accounting treatment for public sector combinations (such as an acquisition or an amalgamation). Canadian stakeholders are encouraged to provide their views to IPSASB.

In summary

Overview The objective of this Consultation Paper (CP) is to initiate discussion on the possible accounting treatment for public sector combinations (PSCs) in the general purpose financial statements (GPFSs) of an entity that uses accrual-based IPSASs. It considers matters such as the timing of recognition, and the initial measurement basis or approach that could be adopted for the wide range of combinations that may occur in the public sector. Currently, IPSASs do not provide guidance on how to account for a PSC—instead, IPSAS 6, Consolidated and Separate Financial Statements, explains that guidance on accounting for entity combinations can be found in the relevant international or national accounting standard dealing with business combinations. This means that there may not be consistent or appropriate reporting of such combinations in the GPFSs of public sector entities. Consequently, users may not be able to obtain the information needed to evaluate the nature and financial effect of a PSC. This CP defines a PSC as “the bringing together of separate operations into one entity, either as an acquisition or an amalgamation.” An acquisition is defined as “a transaction or other event that results in a recipient gaining control of one or more operations,” and an amalgamation is defined as “a transaction or other event where (a) two or more operations combine, (b) none of the combining operations gain control of the other operations, and (c) the transaction or other event is not the formation of a joint venture.” For acquisitions, this CP considers separately (a) acquisitions that take place between parties that are controlled by the same ultimate controlling entity, in other words, under common control (UCC), and (b)

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acquisitions that take place between parties that are not controlled by the same ultimate controlling entity, i.e., not under common control (NUCC). For amalgamations, the IPSASB considers that the factors relating to the choice of accounting treatment do not differ between amalgamations NUCC and amalgamations UCC. Hence, the CP discusses the possible accounting treatment for amalgamations without distinguishing whether or not they take place UCC. This CP considers that an acquisition NUCC should be recognized in the recipient’s GPFSs on the date the recipient gains control of the acquired operation, i.e., the acquisition date. The IPSASB is seeking respondents’ views as to whether other features of the acquisition method of accounting, such as the use of fair value as the measurement basis, are appropriate for some or all acquisitions in the public sector. The CP sets out two approaches to determining the appropriate measurement basis or approach to apply to the acquired operation’s assets and liabilities, as follows:

• Applying fair value measurement to the identifiable assets acquired and liabilities assumed in the operation at the date of acquisition for all acquisitions (Approach A); or

• Distinguishing between different types of acquisitions (Approach B) so that: - For acquisitions where no or nominal consideration is transferred, the carrying amounts

of the assets and liabilities in the acquired operation’s financial statements are recognized, with amounts adjusted to align the operation’s accounting policies to those of the recipient, at the date of acquisition; and

- For acquisitions where consideration is transferred, fair value measurement is applied to the identifiable assets acquired and liabilities assumed in the operation, at the date of acquisition.

The difference arising from an acquisition NUCC should be recognized by the recipient as (a) a gain in surplus or deficit where the recipient acquires net assets in excess of consideration transferred (if any), and (b) a loss in surplus or deficit where the recipient assumes net liabilities. The IPSASB is seeking respondents’ views as to whether the difference arising where the consideration transferred is in excess of the net assets acquired should be recognized as goodwill (in the statement of financial position), or a loss (in the statement of financial performance). For acquisitions UCC, this CP considers that the recipient should recognize the acquisition on the date the recipient gains control of the acquired operation, and recognize the carrying amount of the assets and liabilities in the acquired operation’s financial statements, with amounts adjusted to align the operation’s accounting policies to those of the recipient. The CP considers three options for the accounting treatment of the difference arising: (a) a gain or loss recognized in surplus or deficit, (b) a contribution from owners or distribution to owners, or (c) a gain or loss recognized directly in net assets/equity. The CP briefly considers the accounting treatment for the transferor in an acquisition UCC. For amalgamations, this CP considers that the sole definitive criterion for distinguishing an amalgamation from an acquisition is that, in an amalgamation, none of the combining operations gain control of the other operations. The CP considers that the resulting entity should apply the modified pooling of interests method of accounting. This method requires recognition of the amalgamation on the date it takes place. As a consequence, the surplus or deficit in the year of the amalgamation commences from the date of the amalgamation, and there are no comparatives for the first reporting period. The combining operations’ financial statement items are recognized without remeasurement at carrying amount, with amounts adjusted to align the accounting policies of the combining operations to those of the resulting entity. The CP also briefly considers the accounting treatment for the combining operations in the period between the announcement of the amalgamations and the date of the amalgamation.

Available resources and links • IPSASB Consultation Paper, July 2012 • IPSASB At a Glance Summary

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Proposed standards

Public sector accounting standards

IPSASB Applicability of IPSASs to Government Business Enterprises and Other Public Sector Entities Comment period ends on December 31, 2014

Proposed standard:

Possible changes to IPSAS 1, Presentation of Financial Statements, relating to the definition of a GBE

Proposed effective date:

Not yet specified

Published by: PSAB

Last updated: March 2015

Applicable to: Public sector entities

Recent activities: Most recently, at its meeting on March 10-13, 2015, the IPSASB discussed this project and decided that that the definition of a government business enterprise in IPSAS 1 should be deleted and replaced by a high level description of such entities. The IPSASB expects to review an ED of the proposed changes to IPSAS 1 at its meeting in June 2015. On August 27, 2014, the IPSASB issued for public comment a Consultation Paper (CP), The Applicability of IPSASs to Government Business Enterprises and Other Public Sector Entities.

In summary

Overview Government Business Enterprises (GBEs) are generally commercially oriented entities that can have a significant impact on a government’s financial performance and financial position and are defined in IPSAS 1, Presentation of Financial Statements. GBEs, as defined, are required by the IPSASB to follow IFRSs and not IPSASs. Feedback to the IPSASB indicates that there are a wide range of entities currently being described as GBEs, some of which clearly do not meet the IPSASB definition. The purpose of the CP is to consider alternative proposals of the IPSASB to address this situation. The IPSASB’s At a Glance document per the link below provides an overview of the CP. The IPSASB believes that the best approach is for the IPSASs to not define a GBE but to instead describe the characteristics of public sector entities for which IPSASs are intended, using the IPSASB’s current and developing terminology.

Available resources and links • IPSASB Press Release (August 2014) • IPSASB CP (August 2014) • IPSASB At A Glance Document (August 2014) • IPSASB Project Summary

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Proposed standards

Public sector accounting standards

PSAB Amendments to Section PS 3450, Financial Instruments: Transition Comment period ends on January 15, 2015

Proposed standard:

Proposed amendments to Section PS 3450, Financial Instruments

Proposed effective date:

The PSAB expects to issue the final PSA Handbook material in Q3/2015

Published by: PSAB

Last updated: April 2015

Applicable to: Public sector entities

Recent activities: Most recently, at its meeting on March 19-20, 2015, the PSAB reconfirmed the need to replace Section PS 2600, Foreign Currency Translation. The PSAB continues to be of the view that currency risk should reflect current rates and that derivatives used as hedging instruments need to be presented separately and not as part of a synthetic instrument. While generally supportive of much of the direction in Section PS 2601, Foreign Currency Translation, and Section PS 3450, the PSAB agreed to further explore the implementation of considerations put forth by stakeholders, particularly in the areas of hedge accounting and linkage to the Concepts Underlying Financial Performance project. To enable due process, the PSAB directed staff to prepare an implementation deferral for those stakeholders that continue to apply Section PS 2600, which would also respect early adopters of Sections PS 2601 and PS 3450, for approval at its June 2015 meeting. The PSAB deferred considering the amendments proposed in the ED until its June 2015 meeting. On October 10, 2014 the PSAB issued an ED clarifying aspects of the scope of application, and adding new guidance and transitional provisions to Section PS 3450, Financial Instruments.

In summary

Overview The amendments are being proposed to clarify aspects of the Section’s scope of application and add transitional provisions and new guidance, as follows: Purpose and Scope Two amendments are proposed:

• Unless a contractual right or a contractual obligation underlies a receivable or payable, the Section does not apply. By definition, there must be a contract for there to be a financial instrument.

• Paragraph PS 3450.003(e) (i) is removed because it is redundant. The clause is redundant because the focus of PSG-2, Leased Tangible Assets, is on how a government lessor accounts for a lease liability associated with the lease of a tangible capital asset. A government lessor would not have a receivable under PSG 2.

Presentation • A new paragraph clarifies how a transfer of collateral pursuant to a credit risk management

mechanism in a derivative contract is accounted for. Transitional Provisions

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Three clarifications are proposed. • Prior to adopting this Section, a public sector entity may have unamortized discounts or

premiums attributable to debt buy-backs. To comply with paragraph PS 3450.044, the issuer will derecognize these debt instruments at the beginning of the fiscal year in which Section PS 3450 is first applied. This derecognition is accounted for retroactively without restatement. An unamortized discount or premium associated with the derecognized debt instrument is accounted for as an adjustment to opening surplus/deficit.

• Prior financial assets or financial liabilities in the cost or amortized cost category may have an associated unamortized discount or premium. When this is the case, the discount or premium is included in the item’s opening carrying value.

• Derivatives may not have been recognized or may not have been measured at fair value prior to the adoption of Section PS 3450. When this is the case, any difference between the previous carrying value and fair value is recognized in the opening balance of accumulated remeasurement gains and losses.

Applying the Requirements • Appendix A is amended to include guidance explaining that derecognition of a financial asset

does not occur if the transferor of a financial asset retains substantially all of the risks and benefits of ownership.

Available resources and links • PSAB Press Release • PSAB ED (October 2014)

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Proposed standards

Public sector accounting standards

PSAB Asset Retirement Obligations Comment period ends on November 21, 2014

Proposed standard:

Proposed new Section of the PSA Handbook entitled Retirement Obligations

Proposed effective date:

The PSAB expects to issue an ED in respect of this project in Q1/2016

Published by: PSAB

Last updated: April 2015

Applicable to: Public sector entities

Recent activities: On August 19, 2014, the PSAB issued for public comment a Statement of Principles (SOP) entitled Retirement Obligations that addresses the accounting and reporting of asset retirement obligations.

In summary

Overview The main features of the SOP are as follows: (i) retirement obligations associated with tangible capital assets result from legal, constructive and equitable obligations; (ii) retirement costs increase the carrying amount of the related tangible capital asset or a component thereof and are expensed in a rational and systematic manner; (iii) subsequent remeasurement of the liability can result in either a change in the carrying amount of the related tangible capital asset or a component thereof, or an expense, depending on the nature of the remeasurement and whether the asset remains in productive use; (iv) retirement obligations associated with tangible capital assets include post-retirement operation, maintenance and monitoring; and (v) a present value technique is often the best method with which to estimate the liability.

Available resources and links • PSAB SOP (August 2014) • PSAB Project Summary

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Proposed standards

Public sector accounting standards

PSAB Revenue Comment period ended on February 3, 2014

Proposed standard:

Statement of Principles - Revenue

Proposed effective date:

The PSAB expects to issue a Request for Information in respect of this project in Q3/2015.

Published by: PSAB

Last updated: April 2015

Applicable to: Public sector entities

Recent activities: Most recently, at its meeting on March 19-20, 2015, the PSAB reviewed an issues paper on performance obligations and discussed an approach recommended by the Task Force. At its meeting on December 15-16, 2014, the PSAB received an update from staff on the discussions at the past two task force meetings, including the key issues identified by respondents to its SOP. On August 30, 2013, the PSAB issued a Statement of Principles (SOP) that contains proposals that will affect the reporting of a broad range of revenues by public sector entities.

In summary

Overview The main features of the proposals in the SOP are as follows: (i) The focus is on two main areas of revenue: (a) exchange transactions; and (b) unilateral (non-exchange) transactions. (ii) The presence of performance obligations for the public sector entity receiving the revenue is the distinguishing feature of an exchange transaction. (iii) Performance obligations are enforceable promises to provide goods or services. (iv) An exchange transaction is evaluated to identify which goods or services are distinct and accounted for as a separate performance obligation. (v) Revenue from an exchange transaction is recognized as the public sector entity satisfies a performance obligation. (vi) Unilateral revenues are recognized when there is the authority and a past event that gives rise to a claim of economic resources. (vii) When applying PSAB’s general recognition criteria, revenue is not reduced when collectability (associated with credit risk) is uncertain. The SOP also includes proposals on issues that affect when revenue is recognized, how it is measured, as well as its presentation and disclosure.

Available resources and links • PSAB SOP (August 2013) • PSAB Project Summary

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Projects

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Projects

Public sector accounting standards

IPSASB Public Sector Specific Financial Instruments

Proposed changes:

The objective of this project is to focus on issues related to public sector specific financial instruments which are outside the scope of those covered under current IPSAS 28–30.

Next steps: The initial research phase is anticipated to be completed by the end of 2014 and to culminate with the issuance of a Consultation Paper (CP) and a revised project brief.

Published by: IPSASB

Last updated: March 2015

Applicable to: All public sector entities

Recent activities Most recently, at its meetings on December 8-11, 2014 and March 10-13, 2015, the IPSAB continued its discussions in respect of the CP, including discussing the accounting for (i) monetary gold and other reserve instruments held by public sector entities; and (ii) currency and notes in circulation. At its meeting on March 11-14, 2014, the IPSASB considered an issues paper relating to the following items: (i) monetary gold; (ii) currency and coin in circulation; and (iii) IMF quota subscriptions and SDRs. Following the discussion, the IPSASB instructed staff to carry out further research. The IPSASB also discussed the outputs of the project and agreed that the goal is to develop one or more IPSASs. In December 2013, the IPSASB approved a new project relating to Public Sector Specific Financial Instruments which are outside the scope of those covered under current IPSAS 28–30.

In summary

Overview The IPSASB considered the scope of the project. It was agreed to address the following issues: (i) monetary gold; (ii) currency and coin in circulation; (iii) IMF Special Drawing Rights (SDRs) and reserve position in the IMF; (iv) statutory receivables; and (v) statutory payables The IPSASB specifically considered whether to include concessionary loans and financial guarantees issued in non-exchange transactions in the scope of the project. It was agreed by the IPSASB that these issues should not be in the scope, because there are requirements and guidance in IPSAS 28–30, and the implementation date for those standards was January 1, 2013. Further, it was agreed that this project would remain separate from any work related to maintaining alignment with International Financial Reporting Standards in, IPSAS 28–30.

Available resources and links • IPSASB Project Summary

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Projects

Public sector accounting standards

IPSASB Social Benefits

Proposed changes:

The proposed new standard (or standards) will specify the recognition, measurement and presentation of social benefits provided to beneficiaries in non-exchange transactions. It will also cover cash transfers and the provision of individual goods and services.

Next steps: The IPSASB expects to approve a Consultation Paper for public comment at its June 2015 meeting.

Published by: IPSASB

Last updated: March 2015

Applicable to: All public sector entities

Recent activities Most recently, at its meeting on March 10-13, 2015, the IPSASB discussed this project including confirming three alternative approaches for recognizing social benefits, namely: (i) the obligating event approach; (ii) the social contract approach; and (iii) the insurance approach. The IPSASB expects to approve a Consultation Paper for public comment at its June 2015 meeting. The IPSASB agreed to restart this project in 2013 and approved the project brief in September 2013.

In summary

Overview Governments and public sector entities provide constituents with social benefits in non-exchange transactions, which for many of them is a highly significant part of their operations. The objective of the project is to identify the circumstances and manner in which expenses and liabilities of certain social benefits of governments arise. Hence, the proposed new standard (or standards) will specify the recognition, measurement and presentation of such benefits provided to beneficiaries in non-exchange transactions. It will also cover cash transfers and the provision of individual goods and services. Issues the project intends to consider include (but are not necessarily limited to): (i) defining social benefits and their sub-categories; (ii) determining the conceptual approach or approaches to be applied; (iii) determining when a liability and an expense should be recognized; (iv) measurement of liabilities; and (v) presentation.

Available resources and links • IPSASB Project Summary

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Projects

Public sector accounting standards

PSAB Concepts Underlying Financial Performance

Proposed changes:

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.

Next steps: To be determined

Published by: PSAB

Last updated: March 2015

Applicable to: All public sector entities

Recent activities The third CP, entitled Conceptual Framework Fundamentals and the Reporting Model, was issued for comment on March 11, 2015 with a request for comments by August 31, 2015. See separate ED item. At its meeting on December 15-16, 2014, the PSAB reviewed a draft of a third Consultation Paper and provided feedback to its Task Force. On October 11 2012, the PSAB’s Conceptual Framework Task Force issued its second Consultation Paper, entitled Measuring Financial Performance in Public Sector Financial Statements, for comment by January 31, 2013. See separate ED item. At their meeting on March 21-23, 2012, the PSAB considered and supported a revised approach and timeline for the project. The revised approach focuses on two primary issues: (i) the characteristics of public sector entities (covered in the August 2011 Consultation Paper); and (ii) the measure of financial performance (now covered in the October 2012 Consultation Paper). On this basis, the project is expected to be completed by September 2015. On August 25, 2011, the PSAB’s Conceptual Framework Task Force issued its first Consultation Paper, entitled, Characteristics of Public Sector Entities, for comment by October 15, 2011.

In summary

The issues to be addressed by this project include: • How to measure financial performance; • What general purpose financial statements can do and cannot do in measuring financial

performance; • What aspects of the key concepts underlying financial performance in the framework require

review and why; • What alternative approaches to the key concepts that require review are; and • How the alternative approaches affect the measure of financial performance.

Available resources and links • PSAB Project Summary • First Consultation Paper – Characteristics of Public Sector Entities (August 2011) • Second Consultation Paper – Measuring Financial Performance in Public Sector Financial Statements

(October 2012) • Third Consultation Paper - Conceptual Framework Fundamentals and Reporting Model (March 2015)

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Projects

Public sector accounting standards

PSAB Impairment of Non-financial Assets UPDATED

Proposed changes:

The objective of this project is to provide Canadian guidance on the impairment of non-financial assets that have service potential.

Next steps: To be determined

Published by: PSAB

Last updated: May 2015

Applicable to: All public sector entities

Recent activities At its meeting on June 26-27, 2012, the PSAB approved a project proposal for this project.

In summary

Overview The project will focus on addressing the impairment of tangible capital assets that provide service benefits. Deferred maintenance issues will also be considered. The project will define impairment, and provide guidance on assessment, recognition, measurement and disclosure of impairment losses

Available resources and links • PSAB Project Summary

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Abbreviations, a list of most commonly used acronyms AASB Auditing and Assurance Standards Board AASOC Auditing and Assurance Standards Oversight Council AcSOC Accounting Standards Oversight Council AcSB Accounting Standards Board ASC Alberta Securities Commission AMF Autorité des marchés financiers BCSC British Columbia Securities Commission CAS Canadian Auditing Standard CPAB Canadian Public Accountability Board CPRB Canadian Performance Reporting Board CSA Canadian Securities Administrators DP Discussion Paper DTI Deposit-taking Institution ED Exposure Draft EIC Emerging Issues Committee FAQ Frequently Asked Questions FRE Federally Regulated Entities FRFI Federally Regulated Financial Institution OSC Ontario Securities Commission OSFI Office of the Superintendent of Financial Institutions Canada IAS International Accounting Standard IASB International Accounting Standards Board IAASB International Auditing and Assurance Standards Board IESBA International Ethics Standards Board for Accountants IFAC International Federation of Accountants IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standard IIROC Investment Industry Regulatory Organization of Canada IPSAS International Public Sector Accounting Standard IPSASB International Public Sector Accounting Standards Board ISA International Standard on Auditing ITC Invitation to Comment NFPO Not-for-profit Organization PSAB Public Sector Accounting Board RFI Request for Information SOP Statement of Principles

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Additional resources The following Deloitte resources will assist you in maintaining your financial literacy throughout the year. To obtain more information about any of these resources, please communicate with your Deloitte partner or one of our contacts listed at the end of the publication. Thought Leadership Centre for Corporate Governance This Web site is specifically designed to help board members with their responsibilities. It provides the latest information on regulatory and legislative developments, accounting and financial reporting, board roles and responsibilities, and best practices. (www.CorpGov.Deloitte.ca) Financial Reporting Assessment Tools Comprehensive assessment tools to help management and Directors determine whether or not their organizations’ financial statements and other financial filings meet all of the continuous disclosure obligations. (http://www.corpgov.deloitte.com/site/CanEng/self-assessments-tools-and-other-resources/financial-reporting-tools/)

Clearly IFRS guides A series of practical guides for adopting and implementing IFRS. (http://www.iasplus.com/en/tag-types/member-firms/canada/clearly-ifrs)

Financial reporting insights A bi-weekly communication covering all financial reporting frameworks used in Canada. (http://www.corpgov.deloitte.com/site/CanEng/deloitte-periodicals/financial-reporting-insights)

Deloitte Update Our new live webcast series featuring our professionals discussing critical issues that affect your business. (http://www.corpgov.deloitte.com/site/CanEng/financial-reporting/deloitte-update/)

Acknowledgement This Digest is the result of the efforts of the following team of Deloitte professionals: Editor: Chantal Rassart, CPA, CA, CPA (Illinois)

Contributing Editor: Michael Morrow, CPA, CA

Technical Editors: Anthony Bonanno, CPA, CA Nicole Deschamps, CPA, CA Elaine Hultzer, CPA, CA Kiran Kullar, CA Julia Suk, CPA, CA Nura Taef, CPA, CA

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Contacts, our experts network is available for your questions

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Digests are available at www.deloitte.com/ca/standards. Click here to subscribe to our publication alerts. This document serves merely as a summary; for more detailed information, readers should consult the original document. No measures should be taken without prior consultation with your professional advisor. Publication date May 31, 2015. This page does not reflect changes made by standard-setting bodies after this date. We would like your opinion on this publication. Please take a few minutes to complete this online survey and share your feedback with us.

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