Alert: Financial Instruments Project Phase III - Foreign Exchange Narrow-Scope Amendments

Alert: Financial Instruments Project Phase III - Foreign Exchange Narrow-Scope Amendments

At its December 9, 2020 meeting, the Public Sector Accounting Board (“PSAB”) approved narrow-scope amendments to the CPA Canada Public Sector Accounting (“PSA”) Handbook permitting an accounting policy election to all pubic sector entities related to the accounting for foreign exchange gains and losses (the “Amendments”).

The Amendments relate to Phase III 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.

Accounting policy election

Section PS 2601, Foreign Currency Translation is amended to include an accounting policy election which allows 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 may be separated and recognized directly in the statement of operations.

The election is irrevocable but is available upon initial recognition of a financial asset or liability. The election should be made separately for individual financial assets and financial liabilities.


PSAB has introduced disclosures in Section PS 3450, Financial Instruments for those entities using the proposed election. An entity is required 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 Amendments 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 PSA Handbook. Earlier adoption is permitted.

Full details on this and other PSAB projects can be found here.

This communication contains a general overview of the topic and is current as of December 9, 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. 

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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.