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PSAB - Financial Instruments – Narrow Scope Amendments [Completed]

Effective date(s):

This project was completed in 3 phases. See below for the effective dates of the amendments to the PSA Handbook of each phase

Last up­dated:

June 2021



In con­junc­tion with the de­ci­sion to move for­ward with Sec­tion PS 3450, Fi­nan­cial In­stru­ments, the Pub­lic Sec­tor Ac­count­ing Board (PSAB) in­ves­ti­gated an number of ac­count­ing is­sues brought for­ward by stake­hold­ers dur­ing re­cent con­sul­ta­tions. The project is being carried out in several phases.

Phase I

The initial phase of this project was to de­velop op­tions for PSAB to ad­dress the fol­low­ing: (i) the ac­count­ing treat­ment of a bond re­pur­chase; (ii) certain application issues; and (iii) im­prove­ments to the tran­si­tional pro­vi­sions.

On Jan­u­ary 31, 2019, the PSAB re­leased an Ex­po­sure Draft that pro­posed, sub­ject to com­ments re­ceived fol­low­ing ex­po­sure, to amend Sec­tion PS 3450, "Fi­nan­cial In­stru­ments". The Ba­sis for Con­clu­sions, which ac­com­pa­nied the Ex­po­sure Draft, ad­dresses al­ter­na­tive views and the Board po­si­tion, with its rea­sons. Com­ments were re­quested by May 1, 2019.

The PSAB approved the necessary amendments to Section 3450 at its meeting on December 12-13, 2019.

On April 1, 2020, the amendments to Section 3450 were issued to the PSA Handbook. In summary, the amendments are as follows:

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 set out in paragraph PS 3450.043 (legally discharged) or paragraph PS 3450.048 (exchange of debt).

Section application

The following amendments have been made: (i) clarification that Section PS 3450 does not apply unless a contractual right or a contractual obligation underlies a receivable or payable; (ii) clarification on how a transfer of collateral pursuant to a credit risk management mechanism in a derivative contract is accounted for; and (iii) addition of application guidance confirming that 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: (i) 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; (ii) any unamortized discount, premium, or transaction costs associated with a financial asset or financial liability in the cost or amortized cost category should be included in the item's opening carrying value; and (iii) in cases where derivatives were not recognized or were not 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 are effective for fiscal years beginning on or after April 1, 2021, with earlier application permitted.

Phase II

Phase II deals with the Scope ex­clu­sion of cer­tain ac­tiv­i­ties by the Fed­eral gov­ern­ment. Sec­tion PS 2601, For­eign Cur­rency Trans­la­tion, ex­cludes for­eign ex­change bal­ances “in­tended to sus­tain for­eign ex­change re­serves and or­derly con­di­tions in the for­eign ex­change mar­ket for the Cana­dian dol­lar or to pro­vide as­sis­tance to for­eign coun­tries.” PSAB in­ves­ti­gated whether de­riv­a­tives that are used as part of such ac­tiv­i­ties should be ex­cluded from the scope.

On Jan­u­ary 3, 2020, the PSAB re­leased an Ex­po­sure Draft that pro­poses a spe­cific amend­ment to per­mit the Fed­eral gov­ern­ment of Canada to pre­sent for­eign ex­change gains or losses di­rectly in the state­ment of op­er­a­tions for those fi­nan­cial in­stru­ments as­so­ci­ated with Canada’s for­eign re­serves. Com­ments were re­quested by March 4, 2020.

At its meeting on July 3, 2020, the PSAB approved the Phase II proposals. The amendments permit the federal government to present exchange gains and losses related to its foreign reserves, including the associated derivatives, directly in the statement of operations.

On October 1, 2020, these amendments to Sections PS 1201, PS 2601 and PS  3450 were issued to the PSA Handbook.

Phase III

Phase III consists of two proposals, as follows:

  • A proposal to clarify the presentation of derivatives, namely that public sector entities may present the remeasurement impact of derivatives separately on the statement of change in net debt. Other minor presentation clarifications have also been included.
  • A proposal to allow all public sector entities to 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.

For further details refer to our news item dated July 30, 2020. Comments on the Exposure Drafts are requested by October 28, 2020.

At its meeting on December 9, 2020, the PSAB approved the narrow-scope amendments to the PSA Handbook in respect of its two proposals re Phase III of the project. The amendments will be effective for fiscal years beginning on or after April 1, 2022 and will be reflected in the PSA Handbook in the Spring of 2021.

On April 1, 2021, these amendments to Sections PS 1201, PS 2601 and PS  3450 were issued to the PSA Handbook. The amendments are effective for fiscal years beginning on or after April 1, 2022, with earlier application permitted. Transitional provisions have also been introduced in Section PS 2601.


Other de­vel­op­ments

April 2021

On April 1, 2021, the amendments to Sections PS 1201, PS 2601 and PS 3450 in respect of Phase III were issued to the PSA Handbook.

October 2020

On October 1, 2020, the amend­ments to Sec­tions PS 1201, PS 2601 and PS 3450 in re­spect of Phase II were is­sued to the PSA Hand­book.

July 2020

On July 30, 2020, the PSAB issued two Exposure Drafts on the presentation of derivatives and recognizing exchange gains and losses.

April 1, 2020

On April 1, 2020, the amendments to Section PS 3450 in respect of Phase I were issued to the PSA Handbook.

March 2020

On March 31, 2020, the PSAB released the Basis for Conclusion, which describes the Board’s amendments to Section PS 3450, Financial instruments. This includes changes to the accounting treatment of bond repurchase transactions, clarification of transitional provisions, and other minor improvements.

January 2020

On January 3, 2020, the PSAB released an Exposure Draft that proposes a specific amendment to permit the Federal government of Canada to present foreign exchange gains or losses directly in the statement of operations for those financial instruments associated with Canada’s foreign reserves. Comments are requested by March 4, 2020.

January 2019

On January 31, 2019, the PSAB released an Exposure Draft that proposes, subject to comments received following exposure, to amend Section PS 3450, "Financial Instruments". The Basis for Conclusions, which accompanies the Exposure Draft, addresses alternative views and the Board position, with its reasons. Comments are requested by May 1, 2019.

August 2018

In August, 2018, the staff of the PSAB up­dated the in­for­ma­tion in re­spect of this pro­ject to ad­vise that the PSAB ex­pects to is­sue an Ex­po­sure Draft in Q1/2019.


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