Module 6

Question 0

Describe the seven steps of PSAB’s due process in standards development process of PSAB (Public Sector Accounting Board).

Answer 0

1. Project survey - identify the priority issues
2. Research - Assign staff, survey those impacted
3. Task force - constituent and geographical balance
4. Statement of Principles - accounting or financial reporting alternatives
5. Exposure draft - mandatory step; reflects consideration of the research conducted
6. Re-exposure draft - amend to reflect concerns of respondents; significant change ( Based on the feedback, they may reissue re-exposure draft)
7. Final standard - requires the votes of two-thirds of all members in writing; published in electronic version of the PSA Handbook

Question 1

PSAB follows an extensive due process to ensure all views and issues are raised and considered by the task force and PSAB. What is due process?

Answer 1

PSAB’s due process is described in its Due Process Procedures document. The PSAB follows a rigorous consultative procedure in the development and issuance of accounting standards and statements of recommended practices for the public sector.
The emphasis on due process is critical in maintaining the objectivity of the standard-setting process.

Due process is primarily associated with PSAB’s request for and consideration of comments on proposed standards. However, due process actually starts when a project is being considered for addition to PSAB’s technical agenda.

Question 2

Discuss the main responsibilities of the AcSOC (Accounting Standards Oversight Council)

Answer 2

1. Supporting the principle of private sector standard setting by the AcSB
2. Supporting the principle of public sector standard setting by the PSAB
3. Appointing individuals to serve on the AcSB and PSAB
4. Ratifying appointments to the EIC
5. Providing input to the AcSB and PSAB especially in terms of strategic direction and priorities
6. Informing the AcSB and PSAB of the views of diverse groups

Question 3

The main responsibilities of the PSAB are

Answer 3

1. Issue public sector accounting recommendations and guidelines
2. Commission research studies and reports
3. Fulfill the CICA commitment to the IPSASB (International Public Sector Accounting Standards Board)
4. Consult with constituents and stakeholders

Question 4

List the four types of authoritative guidance issued by the PSAB

Answer 4

1. Recommendations
2. Accounting guidelines
3. Statement of Recommended Practice (SORP)
4. Exposure drafts

Question 5

Define accounting standards

Answer 5

Accounting standards are authoritative standards for financial accounting and reporting developed through an organized standard-setting process and issued by a recognized standard setting body (the PSAB)

Question 6

PSAB’s seven steps in due process (Exam Q)

Answer 6

1. Project Survey - Identify Priority issues, key stakeholders
2. Research - Assign staff and survey those impacted
3. Task force - Recruit task force - constituent and geographical balance
4. The statement of principles - Development and publication of a statement of principles or other similar document
   The statement of principles are accounting and financial reporting alternatives.
5. Exposure draft - Mandatory steps, Exposure draft reflects consideration of research conducted
6. Re-exposure draft - Reconsideration of issues proposed by the exposure draft, a significant change/ Amended to reflect concerns of respondents
7. Final standards - requires the votes of two thirds of its members in writing; final standards are published in electronic version of the PSA Handbook

Question 7

Factors to consider in assessing users’ needs to determine whether an organization has the following characteristics as other government organizations :

Answer 7

1. has issued or is in the process of issuing debt or equity instruments that are, or will be, outstanding and traded in a public market
2. holds assets in a fiduciary capacity for outsiders as one of its primary businesses
3. has commercial-type operations and substantially derives its revenue from these activities
4. receives limited government assistance on an ongoing basis

Question 8

A government business enterprise is an organization that has all of the following characteristics:

Answer 8

1. It is a separate legal entity with the power to contract in its own name and that can sue and be sued.
2. It has been delegated the financial and operational authority to carry on a business.
3. It sells goods and services to individuals and organizations outside of the government reporting entity as its principal activity.
4. It can in the normal course of its operations, maintain its operations and meet its liabilities from revenues received from sources outside of the government reporting entity.

Question 9

A government not-for-profit organizations has all of the following characteristics:

Answer 9

1. It has counterparts outside the public sector as defined in para 03. (Public sector refers to federal, provincial, territorial and local governments, government organizations, government partnerships, and school boards)
2. It is an entity normally without transferable ownership interests.
3. It is an entity organized and operated exclusively for social, educational, professional, religious, health, charitable or any other non-for-profit purpose.
4. Its members, contributors and other resource providers do not receive any financial return directly from the organization.

Question 10

1. Definitions of Neutrality
2. Understand different applications
3. What neutrality looks like in auditing

Answer 10

Neutrality in accounting has a greater significance for those who set accounting standards than for those who have to apply those standards in preparing financial reports.
Neutrality means that either in formulating or implementing standards, the primary concern should be the relevance and reliability of the information that results, not the effect that the new rule may have on a particular interest
# PSAB assesses the merits of proposed standards from a position of neutrality. That is, the soundness of standards is not evaluated on the grounds of their possible impact on behaviour. PSAB does not choose standards according to the kinds of behaviour it wishes to promote and the kinds it wishes to discourage.
At the same time, it is admitted that some standards will have the effect of influencing behaviour, and PSAB is alert to the economic impact of the standards that it promulgates. But the justification for standards is conceptual and not in terms of their impact.

Question 11

Outline the requirements for any additions or revisions to standards.

Answer 11

0.19 Establishing standards for the public sector is an evolutionary process building on research, widespread experimentation, practical experience and consensus. As this evolutionary process evolves, standards will be developed to respond to changing information needs. There will also be periodic review and amendment of material previously issued.
.20 The approval of at least two-thirds of the members of PSAB is required for new standards and for changes in existing standards. PSAB issues public exposure drafts to ensure that those affected have the opportunity to comment on proposed standards before they are approved by PSAB.

Question 12

Look at the Appendix A - Lists of the accounting standards and illustrate the different applications and in particular, government-business type organization which may rely on public subsidies

Answer 12

1. Government - CPA Canada PSA Handbook
2. Government business enterprises - CPA Canada Handbook - Accounting for publicly accountable enterprises
3. Government not-for-profit organizations - CPA Canada PSA Handbook for non-for-profit organizations or CPA Canada PSA Handbook (without PS 4200 series)
4. Other government organizations - CPA Canada PSA Handbook or CPA Canada Handbook - Accounting for publicly accountable enterprises

Question 13

List thirteen active projects in progress on its Active Projects page as of March 2013.

Answer 13

1. Appropriations
2. Asset retirement obligations
3. Assets
4. Concepts underlying financial performance
5. First-time adoption by government organizations
6. Fiscal sustainability
7. Impairment of non-financial assets
8. Not-for-profit organizations
9. PSAH terminology
10. Related party transactions
11. Restructuring
12. Revenues
13. Service concession arrangements

Question 14

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Appropriations”

Answer 14

To propose standards for deciding when and how appropriations should be reported. (세출 예산이 언제, 어떻게 보고되야 하는지에 관한 결정을 내릴 수 있는 기준을 제안한다.)

Question 15

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Asset retirement obligations”

Answer 15

To propose a standard that addresses the reporting of legal obligations associated with the retirement of long-lived tangible capital assets currently in productive use (현재 사용하고 있는 고정 자산을 버리게 될 때에 보고해야 하는 법적인 빚/책임감을 다루고 있는 기준법)
This project will address the recognition, measurement, presentation and disclosure of legal obligations associated with the retirement of long-lived tangible capital assets currently in productive use. Recognition and measurement of the liability will be a major issue as will be accounting for the related expense.

Question 16

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“Assets”

Answer 16

To propose or amend standards on the application of the definition and essential characteristics of assets, and provide guidance on reporting contingent assets and contractual rights.
(자산의 의미와 자산의 중요한 성격에 관한 적용할 수 있는 회계법을 제안하거나 수정하기 위해서, 그리고 불확정 자신과 체결 권리를 보고하기 위한 가이드를 제공한다.)
# Assets are defined in Section PS 1000 Financial Statement Concepts, Guidance on applying the definition of assets is limited to identification of three essential characteristics. 
# A Statement of Principles that proposes additional guidance on the definition of assets, disclosure requirements for assets, and definitions of and standards on disclosure requirements for contingent assets and contractual rights.

Question 17

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Concepts underlying financial performance”

Answer 17

To review and amend, if necessary, the conceptual framework in Sections PS 1000- “Financial Statement Concepts,” and PS 1100-“Financial Statement Objectives.”
The conceptual framework in Sections PS 1000 Financial Statement Concepts and PS 1100 Financial Statement Objectives require review with a focus on measuring the financial performance of public sector entities. This review was identified as a high priority in the Public Sector Accounting Board’s (PSAB) Strategic Plan in response to a suggestion from senior government finance community. This project will consider the concepts underlying the measure of financial performance. The review may result in amendments to the conceptual framework and could also affect PS 1201, Financial Statement Presentation.

Question 18

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ First-time adoption by government organizations”

Answer 18

ED proposes to add a transitional provision to state that Section PS 2125 does not apply to new standards issued in the PSAH after Section PS 2125. (that is, after August 2010)

Question 19

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Impairment of non-financial assets”

Answer 19

• To propose standards that will define impairment and provide guidance on assessment, recognition, measurement, and disclosure of impairment losses, to consider deferred maintenance issues
• Currently, there is a lack of Canadian guidance on the impairment of non-financial assets that have service potential.
• The objective of this project is to issue a standard that addresses the impairment of tangible capital assets that have service potential.

Question 20

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Not-for-profit organizations”

Answer 20

• To amend the standards for not-for-profit organizations in the PS 4200 series of Sections in the CICA PSA Handbook (applicable to government non-for-profit organizations and established by PSAB)
• The Accounting Standards Board (AcSB) and Public Sector Accounting Board (PSAB) are working together to improve non-for-profit standards to better meet users’ needs.
• Certain non-for-profit standards have requirements that differ from the conceptual frameworks on which Part III of the CICA Handbook Accounting and the CICA Public Sector Accounting (PSA) Handbook are based. As a result, the two Boards established a Joint Not-for-Profit Task Force to review the standards in the 4400 series of Sections in the CICA PSA handbook.

Question 21

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ PSA terminology”

Answer 21

The PSA Handbook terminology will update terminology in the PSA Handbook to clarify standards and guidance that are applicable to public sector entities, which will be specifically defined in the Introduction to the Public Sector Accounting Standards.

ED proposes to amend the definition of a government organization to exclude entities that are component parts of a government and define a government component; provide additional guidance on which standards government components and government organizations would follow; provide guidance on which standards government partnerships would follow; define general purpose and special purpose financial statements; and clarify that the PSAH does not require government components, government organizations, or government partnerships to prepare general purpose financial statements.

Question 22

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“Related party transactions”

Answer 22

ED defines related parties and provides standards for recognition of related party transactions in the financial statements of provider and recipient organizations, the appropriate basis of measurement for recognized transactions, and disclosure requirements for transactions including those that have not been given accounting recognition.

Question 23

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Restructuring”

Answer 23

To propose standards that will define and provide guidance on a wide range of public sector restructuring transactions such as amalgamations (합병) and transfers of programs/operations.

Question 24

PSAB active projects objectives/ Exposure Draft Proposal as of March 2013
- Explain the background of each one and be able to explain differences between them.
“ Revenues”

Answer 24

To develop revenue recognition principles that apply to revenues of governments and government organizations other than government transfers and tax revenue.