Update to Public Sector Accounting Standards
Updates to Public Sector Accounting Standards Effective for March 31, 2027 Financial Statements and Beyond
What has Changed?
How Will it Impact First Nation Governments?
Impacts
One of the key impacts of the new Conceptual Framework will be a change in First Nation financial statements due to updated presentation concepts. These changes are detailed in the section, Financial Statement Presentation. While there may not be a change in how the transactions are recorded, it will change what the financial statements look like and how they are organized. Because financial statements show both the current year and prior year balances, the prior year balances will need to be restated to be shown in the new presentation.
There may also be an impact if the First Nation has an entity-specific accounting policy. This is a policy that is established when there is no specific Public Sector Accounting Standard that deals with the type of transaction. If an entity-specific accounting policy exists, then the First Nation needs to ensure that the policy is in-line with the new framework and standard or is otherwise updated to be in-line.
Finally, there will also be an indirect impact when future accounting standards are introduced, as they will be written and updated to be in-line with the new framework.
Implementation
The implementation of this change depends on who is preparing the financial statements. If the First Nation prepares its own financial statements, software and templates will need to be updated in order to be able to prepare the statements with the new presentation. If the First Nation obtains assistance from its accountants to prepare its financial statements, then the implementation is more limited in scope as the accountant is the one that will need to update the software and templates.
Part of the change in standard is a new classification for liabilities as financial or non-financial. This is discussed further in the section on Overview of the Standards. As part of the implementation, the First Nation will need to assess whether any of its liabilities should be classified as non-financial. If the First Nation obtains assistance in preparing its financial statements, then it will need to discuss the classification with its accountants.
Overview of the Standards
Below is a brief overview of the new framework and changes to the financial statement presentation.
The Conceptual Framework
The Conceptual Framework is not itself a new accounting standard. Rather it is a foundation on which standards are developed and professional judgement is applied.
The Conceptual Framework includes 10 chapters outlining various key concepts. Below is an overview of what is included in each of the chapters of the framework.
| Chapter | Title | Overview |
|---|---|---|
| 1 | Introduction | Defines the conceptual framework as a foundational set of concepts underlying the standards. Determines the purpose of the framework to be to create consistent standards. |
| 2 | Characteristics of Public Sector Entities |
Determines the types of public sector entities:
Identifies the key characteristic of public sector entities as inherent public accountability. Other characteristics include:
|
| 3 | Financial Reporting Objective | Determines the objective of financial reporting by the public sector entity to be to satisfy its accountability by providing financial information, which helps determine the capacity of the entity to serve the public. |
| 4 | Role of Financial Statements | Determines the role of the financial statements to be a fundamental component of financial reporting that helps fulfill a public sector entity’s duty to be publicly accountable. |
| 5 | Financial Statement Foundations |
Determines the financial statement foundations to be:
|
| 6 | Financial Statement Objectives |
Identifies 6 objectives:
|
| 7 | Financial Statement Information |
Outlines the qualitative characteristics of financial statement information and related considerations.
Qualitative characteristics:
|
| 8 | Elements of Financial Statements |
Identifies the elements of financial statements:
|
| 9 | Recognition and Measurement |
Defines recognition as determining the inclusion of an item in the financial statements and establishes general recognition criteria:
|
| 10 | Presentation Concepts |
Defines presentation as how an entity communicates information in its financial statements, with an objective of maximizing accountability.
Concepts include:
|
Financial Statement Presentation
PS 1202
The standard for Financial Statement Presentation has been updated to be in-line with the new Conceptual Framework. The changes in this standard will have a significant impact on how the financial statements look.
Below is a summary of the changes for each of the required financial statements.
| Statement | Change |
|---|---|
| Statement of Financial Position |
Change to how the statement is structured. An example has been provided below.
Introduction of financial and non-financial liabilities.
Previously: Financial assets − liabilities = net debt Net debt + non-financial assets = accumulated surplus Now: Financial + non-financial assets = total assets Financial + non-financial liabilities = total liabilities Total assets − total liabilities = net assets |
| Statement of Net Financial Assets |
New statement calculating “net financial assets”.
This was previously called “net debt” and was calculated on the Statement of Financial Position.
It is now calculated on this new statement as:
Financial assets − financial liabilities = net financial assets Previously there was a Statement of Changes in Net Debt. This presentation of changes is now optional on this new statement. |
| Statement of Operations |
No changes to revenue and expense presentation.
There is a change if a budget has not been prepared or approved, in which case a note is now required on this statement. |
| Statement of Changes in Net Assets |
New statement showcasing the change in the different net asset categories, including:
|
| Statement of Cash Flows | Change to the structure to include a subtotal of net cash before financing transactions. |
| Notes and Schedules | Updates required to wording of notes due to changes in the names of statements. During the year of implementation, there will need to be a note added for the impact of the change in accounting standards. |
Financial and Non-Financial Elements
One of the new elements included in this updated accounting standard is the idea of financial and non-financial liabilities. Previously, all liabilities were included in the calculation of net debt. Now they are broken out, according to how the liability is expected to be settled. The definitions for financial and non-financial assets have also been updated. These updates ensure a better calculation of net financial assets (the new term for net debt).
| Term | Definition |
|---|---|
| Financial Assets | Assets that could be used to discharge existing liabilities or finance future operations and are not for consumption in the normal course of operations. |
| Non-Financial Assets | Assets normally employed to deliver government services and consumed through the normal course of operations. |
| Financial Liabilities | Liabilities that will require the future sacrifice of financial assets. |
| Non-Financial Liabilities | Liabilities that will require the future sacrifice of non-financial assets or the future delivery of goods and services. |
Example Statement of Financial Position
Below is a visual example of the differences between the old and new Statement of Financial Position.
Old: New:
| Statement of Financial Position as at March 31 | 2027 | 2026 |
|---|---|---|
| Financial assets | ||
| Cash | $0 | $0 |
| $0 | $0 | |
| Liabilities | ||
| Accounts payable | $0 | $0 |
| Obligation | $0 | $0 |
| $0 | $0 | |
| Net financial assets | $0 | $0 |
| Non-financial assets | ||
| Tangible capital assets | $0 | $0 |
| $0 | $0 | |
| Accumulated surplus | $0 | $0 |
| Accumulated surplus consists of | ||
| Accumulated operating surplus | $0 | $0 |
| Accumulated remeasurement gains and losses | $0 | $0 |
| $0 | $0 | |
| Statement of Financial Position as at March 31 | 2027 | 2026 |
|---|---|---|
| Assets | ||
| Financial assets | ||
| Cash | $0 | $0 |
| Non-financial assets | ||
| Tangible capital assets | $0 | $0 |
| $0 | $0 | |
| Liabilities | ||
| Financial liabilities | ||
| Accounts payable | $0 | $0 |
| Non-financial liabilities | ||
| Obligation | $0 | $0 |
| $0 | $0 | |
| Net assets | $0 | $0 |
| Net assets components | ||
| Accumulated surplus | $0 | $0 |
| Accumulated remeasurements | $0 | $0 |
| Accumulated other | $0 | $0 |
| $0 | $0 | |
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