We understand the specialized markets in which you operate and provide tailored solutions to meet your unique business needs.
Our comprehensive suite of business services combines industry expertise, market knowledge and professional insights.
MNP is a leading national accounting, tax and business consulting firm in Canada.
Suite 2000, 330 5th Ave. S.W.
Submit an RFP
MNP careers are Different by Design. As an entrepreneurial firm, we truly believe there are no limits to where your career can go.
In January 2020 the Public Sector Accounting Board (“PSAB”) issued an Exposure Draft (“ED”),
Financial Instruments: Federal Government Narrow-scope Amendments which would provide the federal government with a scope exemption from
Foreign Currency Translation, Section PS 2601 and could present the exchange gains and losses relating to transactions intended to sustain its foreign exchange reserves and orderly conditions in the foreign exchange market for the Canadian dollar directly in the statement of operations. PSAB deliberated stakeholder feedback in July 2020 and plans to issue the Handbook amendments in October 2020.
In July 2020, the PSAB issued an ED,
Financial Instruments: Foreign Exchange Narrow-scope Amendments which proposes all public sector entities can make an accounting policy election to recognize exchange gains and losses, including the exchange gain or loss component of changes in fair value, directly in the statement of operations. The proposed election would be available for any financial asset or financial liability arising from a foreign currency transaction.
The PSAB proposes, subject to comments received following handbook exposure, to amend the following sections in the CPA Canada Public Sector Accounting Handbook:
The main features of the ED are:
PSAB proposes to amend Section PS 2601 to include an accounting policy election. The proposed election would allow all public sector entities to recognize exchange gains and losses on a financial asset or financial liability arising from a foreign currency transaction directly in the statement of operations. For a financial asset or financial liability in the fair value category, such as a derivative, the exchange gain or loss component of the change in fair value could be separated and recognized directly in the statement of operations. Amounts subject to this election would not be recognized in the statement of remeasurement gains and losses.
The election would be irrevocable but would be available upon initial recognition of a financial asset or liability. The election would be made separately for individual financial assets and financial liabilities.
PSAB has introduced disclosures in Section PS 3450 for those entities using the proposed election. An entity would have to disclose the carrying amounts of financial assets and financial liabilities at the financial statement date for which exchange gains and losses have been recognized directly in the statement of operations. In line with existing disclosure requirements in Section PS 2601, public sector entities are required to disclose the exchange gains and losses recognized in the statement of operations and the statement of remeasurement gains and losses.
The ED proposes that the amendments will be required to be applied to fiscal years beginning on or after April 1, 2022. For public sector entities already applying the Sections prior to the amendment (i.e., those who have adopted Financial Instruments standards) no specific transitional provisions are included in the ED. These entities would apply the amendments in accordance with the
Introduction to Public Sector Accounting Standards (i.e., early adoption permitted upon release of the amendments in the Handbook) and Section PS 2120
Accounting Changes (i.e., conforming to new Public Sector Accounting Standards may be applied retroactively or prospectively).
For those public sector entities not yet applying the Sections prior to amendment (i.e., those who have not yet adopted Financial Instruments standards), amendments to the transitional provisions for adoption of the amended Sections have been proposed in the ED. For those public sector entities initially adopting the amended Sections, the election can be made at the transition date. For financial assets and financial liabilities where this election was made at the date of transition, any exchange gain or loss arising prior to or as at the transition date would be recognized as an adjustment to accumulated surplus or deficit at the transition date.
Comments for this ED are due by October 28, 2020. PSAB will deliberate the feedback once the responses are received.
Full details on the project can be found
For more information on the financial reporting library, contact a local
MNP Assurance Professional, or
Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of July 31, 2020. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2020. All rights reserved.
Categories:Public Sector Standards
Suite 2000, 330 5th Ave. S.W.
Find an office near me