2009-11-11 New GAAP Requirements for Public Sector Organizations

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This newsletter discusses current developments in financial reporting by certain government organizations, including not-for-profit organizations controlled by a government, and what primary source of GAAP should be adopted by these organizations.

New GAAP Requirements for Public Sector Organizations In September, the Public Sector Accounting Standards Board (PSAB) announced a number of decisions about accounting standards applicable for government organizations after Canada moves to IFRS. These decisions will significantly change the primary GAAP for a number of public sector entities, including certain Federal and Provincial Crown Corporations.
The Changes The following table compares existing GAAP requirements applicable to government organizations to the decisions the PSAB has made as to what will be required after Canada moves to IFRS.

Standards after Canada Moves to IFRS
Type of Organization
Existing GAAP		 Status of Decision
Decision
Governments PSA Handbook Final Public Sector Accounting (PSA) Handbook
Government – business entities (GBEs) CICA Handbook – Accounting Final International Financial Reporting Standards (IFRS)
Government –business type organizations (GBTOs) CICA Handbook – Accounting Final These entities must be re-categorized as either not-for-profit organizations or other government organizations
Government not-for-profit organizations (NPOs) CICA Handbook – Accounting Tentative, subject to Exposure Draft PSA Handbook or PSA Handbook supplemented by a modified version of existing Section 4400 of the CICA Handbook
Other government organizations (OGOs) PSA Handbook or CICA Handbook – Accounting based on objectives and circumstances Final PSA Handbook or IFRS (refer to detailed discussion below)

The final decisions will result in amendments to the Introduction to the PSA Handbook, which we expect to be issued in early December.

Details on the types of organization are included in the appendix to this newsletter.
Effective dates The amendments will be effective for years beginning on or after January 1, 2011 with retroactive application, other than those relating to NPOs. The effective date for NPOs has yet to be established. Existing requirements in the PSA Handbook for NPOs (i.e. apply the existing CICA Handbook – Accounting) will be retained until PSAB have completed their deliberations, exposed specific proposals and established timelines for transition.
Transition For those organizations adopting the PSA Handbook, PSAB will provide guidance on exceptions to the retroactive application with restatement of prior periods.
OGOs The Exposure Draft contains factors to consider in assessing whether the PSA Handbook or IFRS applies in the circumstances. The Exposure Draft also indicates that the presumption should be that the PSA Handbook will be the appropriate primary source of GAAP unless an OGO can clearly demonstrate that IFRS would best reflect the needs of its financial statement users. We expect that this presumption will be carried forward into the final amendments.
Learning more We will update this newsletter as more information is released.
Appendix – Types of Organizations
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