Overview

As a result of stakeholder feedback received, PSAB was asked to revisit the validity of the prohibition against recognizing purchased intangibles in public sector financial statements.

Key stakeholder feedback includes:

• At its April 26, 2019 Public Sector Accounting Discussion Group (PSA DG) meeting, PSA DG members suggested that PSAB consider a narrow scope amendment.
• Input received in response to the 2018 conceptual framework and reporting model documents for comment supported PSAB relocating the recognition prohibitions from the conceptual framework to the standards level. Some urged PSAB to remove them entirely.
• Input received at the 2018 AFOA conference told PSAB how significant this issue is for Indigenous governments and how the prohibition was distorting their financial position. For example, these governments may finance the purchase of commercial fishing (and other) licenses with debt but cannot currently recognize the licenses as assets.
• PSAB stakeholders have asked why purchased intangibles acquired through an exchange transaction cannot be recognized in public sector financial statements as they are measurable at the price in the transaction.

The PSAB approved the project at its June 2019 meeting.

On November 29, 2019, the PSAB released an Exposure Draft that proposes to remove the prohibition against recognizing intangibles purchased in an exchange transaction in public sector financial statements. The Exposure Draft proposes to remove the exclusion in the conceptual framework prohibiting recognition of purchased intangibles in financial statements. The proposal is limited to intangibles purchased through an exchange transaction. i.c., sector entities that purchase intangibles. Like the current situation for purchased Crown lands and purchased natural resources, no guidance on how to account for purchased intangibles is proposed in this Exposure Draft. For now, reference to the asset definition, the general recognition criteria and the GAAP hierarchy is expected. Accounting for these items may be the subject of future PSAB projects.

On November 1, 2020, the PSAB issued the amendments to the PSA Handbook in respect of this project, which include:

• A new Guideline PSG-8 which explains the scope of the intangibles allowed to be recognized in financial statements and examples of items that are not purchased intangibles.
• Section PS 1000 being amended to allow for recognition of purchased intangibles in financial statements;
• Section PS 1201 (and archived Section PS 1200) being amended to remove disclosure requirements for unrecognized purchased intangibles.

The amendments are effective for fiscal years beginning on or after April 1, 2023, with earlier application permitted. Retroactive or prospective application is allowed.

Other de­vel­op­ments

November 2020

On November 1, 2020, the PSAB issued the amendments to the PSA Handbook in respect of this project.  

May 2020

During May 2020, the PSAB staff updated the status of this project to advise that the PSAB is deliberating the feedback received on the Exposure Draft and will consider next steps in the project at its June and September 2020 meetings.

November 2019

On November 29, 2019, the PSAB released an Exposure Draft that proposes to remove the prohibition against recognizing intangibles purchased in an exchange transaction in public sector financial statements.

June 2019

At its meeting in June 2019, the PSAB approved a project to consider this issue.