Alert: Financial Instruments Project Phase I - Narrow-Scope Amendments

Alert: Financial Instruments Project Phase I - Narrow-Scope Amendments

In December 2019, the Public Sector Accounting Board (“PSAB”) approved narrow-scope amendments to Section PS 3450 Financial Instruments (the “Amendments”) of the CPA Canada Public Sector Accounting (“PSA”) Handbook. The Amendments are part of the PSAB’s Financial Instruments Narrow-Scope Amendments project intended to develop a series of amendments to address specific stakeholder concerns raised related to:

  • the presentation of the fair value of derivatives;
  • the presentation of certain foreign exchange gains/losses and changes in the fair value of associated derivatives; and
  • the accounting for rate-setting transactions.

Bond repurchase transactions

The most substantive issue addressed relates to the accounting treatment for bond repurchase transactions. Specifically, the Amendments no longer require bond repurchase transactions to be treated as extinguishments, unless they meet the criteria in paragraph Section PS 3450.043 (i.e. legally discharged) or paragraph Section PS 3450.048 (i.e. exchange of debt).

Section application

The following amendments have been made:

  • clarification that Section PS 3450 does not apply unless a contractual right or a contractual obligation underlies a receivable or payable;
  • clarification on how a transfer of collateral pursuant to a credit risk management mechanism in a derivative contract is accounted for; and
  • addition of application guidance confirming the derecognition of a financial asset does not occur if the transferor retains substantially all the risks and benefits of ownership.

Transitional provisions

The following clarifications have been made:

  • controlling governments should use the carrying values of the financial assets and liabilities in the records of its government organizations when consolidating a government organization;
  • any unamortized discount, premium, or transaction costs associated with a financial asset or financial liability in cost or amortized cost category should be included in the item’s opening carrying value; and
  • in cases where derivatives were not recognized or were measured at fair value prior to adopting Section PS 3450, any difference between the previous carrying value and fair value should be recognized in the opening balance of accumulated remeasurement gains and losses.

The Amendments, which were reflected in the PSA Handbook on April 1, 2020, apply to fiscal years beginning on or after April 1, 2022, except for those government organizations that applied the CPA Canada Handbook – Accounting prior to adopting the CPA Canada Public Sector Accounting Handbook. Earlier adoption is permitted.

Information on this and other PSAB projects, including related supporting materials, can be accessed here.


This communication contains a general overview of the topic and is current as of December 31, 2019. 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 2019. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.