The Public Sector Accounting Board’s Conceptual Framework for Financial Reporting in the Public Sector was issued in the CPA Canada Public Sector Accounting Handbook (PSA Handbook) on December 1, 2022. The approval and issuance of the Conceptual Framework is a significant milestone for PSAB and financial reporting in the Canadian public sector. The new Conceptual Framework is the foundation for public sector financial reporting standard setting.
What’s Different?
The new Conceptual Framework:
- provides additional guidance and clarity;
- builds on the previous conceptual framework (in Section PS 1000, Financial Statement Concepts, and Section PS 1100, Financial Statement Objectives) by retaining and explaining more about key concepts, like recognition and measurement;
- includes new concepts, such as derecognition and service capacity; and
- removes recognition exclusions related to (1) developed and non-purchased intangibles, (2) Crown lands and natural resources that have not been purchased, and (3) art and historical treasures, as these were pragmatic exclusions that are not conceptually based. These were relocated to the reporting model standard (Section PS 1201) for consideration in PSAB’s future technical agenda and are retained in the new reporting model standard (Section PS 1202).
Effective Date
PSAB is already using this new Conceptual Framework in developing standards.
For public sector entities using the PSA Handbook, the Conceptual Framework will be effective for fiscal years beginning on or after April 1, 2026. Earlier adoption is permitted.
And it is to be applied prospectively.
How the Conceptual Framework Assists Performance Auditors
- Chapter 2, Characteristics of Public Sector Entities, provides details about the unique aspects of the public sector in Canada.
- Chapter 3, Financial Reporting Objective, explains that the objective of financial reporting by public sector entities is to provide information for accountability purposes, which may aid in the preparation of financial and accountability reports beyond the financial statements. Financial reporting is broader than financial statements. In fact, Chapter 3 identifies “value-for-money/performance reports” as a type of financial reporting. The notion of accountability is important to the Canadian Audit and Accountability Foundation and its members. Although the majority of PSAB’s Conceptual Framework focuses on financial statements, the concepts and foundations in the Conceptual Framework may be a useful reference for preparing other financial and accountability reports.
- Chapter 10, Presentation Concepts for Financial Statements, encourages entities to review their disclosures and focus on the year’s most important activities, avoid boiler-plate disclosures, and ensuring disclosures are not overly complex.
Learn More
Read:
Watch PSAB’s on-demand webinar outlining the changes and effects of the Conceptual Framework.
Visit PSAB’s Concepts Underlying Financial Performance project page.
Authors
Antonella Risi, CPA, CA
Associate Director, Public Sector Accounting Board
Martha Jones Denning, CPA, CA
Associate Director, Public Sector Accounting Board
Merwan Saher, FCPA, FCA
Former Auditor General of Alberta and Member of the Concepts Underlying Financial Performance Task Force
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