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PSAB Financial Instruments Update – Respond to IPSASB ED, Financial Instruments

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Aug 24, 2017

On August 24, 2017, the Public Sector Accounting Board (PSAB) released an update on why they are considering the International Public Sector Accounting Board’s (IPSASB) financial instruments standard to address current Canadian hedge accounting issues. Stakeholders are encouraged to respond to the IPSASB exposure draft by December 31, 2017.

Hedge accounting option

PSAB staff, in collaboration with stakeholders, have identified certain timing issues in PS 3450 that may impact a government’s surplus or deficit in a manner that is unrepresentative of the underlying hedging transactions.

In search of a solution, the Board has followed the work of the IPSASB.

The IPSASB developed a new model that includes a hedging option and was designed for the public sector. PSAB believes this standard would resolve the hedge accounting issues identified in Canada. We are considering the use of this standard.

Fair value considered

PSAB also considered stakeholder concerns about the volatility that will be introduced to the net debt of governments by recording derivative instruments at their fair value each reporting period.

Recording financial instruments at fair value is not within the scope of investigating a hedge accounting option. If PSAB’s stakeholders are in favour of the IPSASB proposal, the Board will consider the implications for net debt in finalizing the hedge accounting requirements for inclusion in the PSA Handbook.

Review the update on the PSAB's website.

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