2013-11 Assets, Contingent Assets, Contractual Rights RESPONSES

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November 29, 2013 Assets, Contingent Assets and Contractual Rights Statement of Principles
PSAB welcomes comments on all aspects of the Statement of Principles. This form is not intended to constrain your response. Each text box will accommodate your full comments. You are able to save and forward this form to others in your organization for review prior to submission.
Name: Organization: E-mail:
Greg MacBeth Office of the Auditor General - Manitoba greg.macbeth@oag.mb.ca
General comments: I am replying on behalf of the Office of the Auditor General - Manitoba. My comments are from the perspective of the public sector within our jurisdiction. Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. No.
Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? It is useful.
2. Yes.
Do you agree with how PSAB has dealt with service potential in paragraph .052?
3. Yes
Do you agree with the proposed disclosure requirements?
Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes
2.
Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?
Yes
3. Yes
4. No
Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized?
5. Yes
In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? Yes
2. Yes
Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered?
3. Yes
Armand Capisciolto, National Accounting Standards Partner BDO Canada LLP acapisciolto@bdo.ca
General comments: We do not have any general comments that were not addressed below.
Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. We have addressed implications in our responses below.
Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? Yes, the proposed guidance relating to the definition of assets is useful. However, it is clear from the definition that intangible assets would meet the definition of an asset. We believe the scope of the proposals should be expanded to address recognition of intangible assets in public sector financial statements. 2. Do you agree with how PSAB has dealt with service potential in paragraph .052?
Yes, we agree with how PSAB has dealt with service potential in paragraph .052.
3.
We agree with the proposed disclosure requirements. However, we believe an important improvement to the PSA Handbook is being missed in regards to this proposed standard. Paragraph .067(b) of the proposed assets standard
requires disclosure of economic resources that may meet the definition of an asset but are prohibited from being recognized by other Sections of the PSA handbook. This would include intangible assets which are currently prohibited from being recognized by PS 1000.58. The disclosure requirements of paragraph .067(b) appear to require a public sector entity to go through the process of identifying all of its intangible assets in order to provide disclosure about them. This would require a substantial amount of work for many entities. We believe that if all of this work is going to be required for disclosure purposes, it would be more valuable for the new assets standard to specifically address recognition and measurement of intangible assets so that these important assets could be recognized in a public sector entity's financial statements. We believe the scope of the proposed standard should be expanded to address intangible assets. We also believe the concept of materiality needs to be introduced in the disclosure requirements. The definition of an asset is very broad and as a result, a significant number of items could meet the definition of an asset, yet not be recognized in an entity's financial statements. If the disclosure requirements do not include a concept of what is material or significant, all of these items would be required to be disclosed. Disclosure of non-significant items would not be useful to financial statement users. Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes, we agree with the proposed definition of a contingent asset.
2.
Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?
Yes, we find the proposed guidance on contingent assets useful. There are no other aspects we believe need to be considered at this time.
3.
Yes, we agree with the proposed disclosure requirements.
4.
No, we do not believe there is a threshold at which contingent assets should be recognized.
5.
In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
Although we do not want to overstate liabilities, we believe the criteria to recognize a contingent asset as part of a reduction to a contingent liability should be a higher threshold (i.e. virtual certainty) than the criteria required to recognize a contingent liability (i.e. likely). Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? No, we do not agree with the proposed definition of contractual rights. Entering into a contract is a past event; therefore, we believe some contractual rights do meet the definition of an asset.
2.
Any information could be considered useful, however, there is a need to balance the information provided in financial statements to avoid information overload for financial statement users. Due to this and the fact that no other standard setter has a standard on contractual rights, we feel that Board should reconsider the need for this proposed standard. 3. Do you agree with the proposed disclosure requirements?
If the Board believes it is appropriate to proceed with this standard, then the practical limits should be expanded to limit the disclosure of contractual rights to those that result in new or non-recurring sources of revenue. Users would typically assume normal revenue sources would continue unless they were told otherwise. If this is not done, users will receive a large amount of information on contractual rights, however, if the majority of the disclosures relate to regular recurring revenues sources what new information is actually being provided that users would not already know.
PO Box 187 1723 Hollis Street Halifax, NS B3J 2N3 (902) 424-2079 bourgere@gov.ns.ca
Department of Finance
Government Accounting
November 29, 2013
Tim Beauchamp Director, Public Sector Accounting 277 Wellington Street West Toronto, Ontario M5V 3H2
Dear Mr. Beauchamp, RE: Assets, Contingent Assets, and Contractual Rights Statement of Principles Thank you for the opportunity to provide comments on the Assets, Contingent Assets, and Contractual Rights Statement of Principles. Our thoughts on the proposed principles are below. Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. We believe there are other implications of the proposals that should be considered. These relate to potential impacts on PS 3410 Government Transfers and PS 3390 Contractual Obligations. They are explained in detail in the responses below. Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? We believe the proposed guidance relating to the definition of assets has the potential to be useful. However, we are concerned about how this guidance will interact with requirements for transferors in PS 3410. Specifically, PS 3410.12 and .13 state: .12 A government transfer should be recognized by a transferring government as an expense in the period the transfer is authorized and all eligibility criteria have been met by the recipient. [APRIL 2012] .13 Given the non-exchange nature of government transfers, a transferring government does not receive a direct economic benefit that it can control in exchange for a transfer, as is required by
the definition of an asset. As a result, the transferring government incurs an expense and does not acquire an asset by providing a transfer. An issue arises when a government has contracted with a service provider to deliver public service programs. Based on the existing guidance in the PSA Handbook, we have treated these payments as government transfers since the public, and not government, is the direct recipient of the economic benefit; the organization is simply acting as an intermediary between government and the ultimate recipients of the transfer. Given the guidance in PS 3410.13, we record an expense when funds are provided to these organizations, even if this is before the fiscal year in which the related programs are to be delivered. We feel the proposed Asset guidance, which does away with the concept of a direct benefit and focuses exclusively on control of an asset, may lead to ambiguity regarding how to treat such advance disbursements. Specifically, we feel it can be argued that they represent an asset controlled by government because government: (a) determines how the economic resource will be used (government sets the program objectives and targets to be achieved by the service provider); (b) benefits from the economic resource through the capacity to provide goods and services (government now has a prepaid capacity for delivering public services); (c) denies or regulates access to those benefits by others (government determines who is eligible for the programs in question and holds the service provider accountable for adhering to these standards; further, no one else can make use of the governments prepaid right to future service delivery); and (d) is exposed to the risks associated with the economic resource (the risk associated with the prepayment is that the service provider will not deliver the programs as required and will use the funds for other purposes; in this case government is still responsible for finding, and funding, an alternate service delivery mechanism). In light of the above, it would seem that payments made to contracted public service providers are government controlled assets. In this case, advances to such organizations would be set up as assets which would contradict the present guidance in PS 3410. PSAB could potentially scope these contracted service providers out of PS 3410 to alleviate the problem. However, this could create a situation where government consistently uses intermediaries to deliver its services in order to avoid the provisions of PS 3410. Before proceeding with the planned guidance on Assets, we feel PSAB should address the potential confusion and inconsistent application that could result from this issue. In particular, PSAB should determine what modifications are needed to PS 3410 in order to accommodate the asset definition and how these revisions will affect transfers to intermediaries who deliver government transfers on governments behalf. 2. Do you agree with how PSAB has dealt with service potential in paragraph .052? Yes, we agree with how PSAB has dealt with service potential in paragraph .052. It seems reasonable that a new definition not be introduced.
3. Do you agree with the proposed disclosure requirements? Yes, we agree with the proposed disclosure requirements.
Part II Contingent Assets
1. Do you agree with the proposed definition of contingent assets? We agree with the proposed definition of contingent assets but do not feel that it represents a material change to the existing definition. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered? We dont believe the proposed guidance on contingent assets is detrimental, but we also do not see what value it adds. From our perspective, accounting for contingent assets has never been a highly contentious issue. Most practitioners already have a good understanding of what a contingent asset is along with how it should be handled for financial reporting purposes. We dont believe a standard on this matter is needed, at least not in the form proposed, as it simply reiterates the existing treatment of contingent assets. The proposed guidance is either directly stated in, or can be easily inferred from, existing PSA guidance. That said, contingent asset guidance would be required should PSAB decide to proceed with our recommendations at questions 4 and 5 below. 3. Do you agree with the proposed disclosure requirements? We agree with the proposed disclosure requirements but do not feel that they represent a material change to existing requirements. 4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized? We do believe that contingent assets that are virtually certain should be recognized. There are circumstances under which recognition prior to the confirming future event would be appropriate. The example provided in the Statement of Principles, regarding the bridge construction, is a case in point. Here, it is virtually certain that the government is entitled to a recovery of its grant. At year-end, the grant recipient has failed to meet the conditions of the grant because it is not realistically possible for them to comply with the terms. As a result, the past event giving government control of the benefit has already occurred. In this case, it seems clear that the definition of an asset has been met and a receivable should be accrued at the yearend date. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only? It seems inconsistent to allow the recognition of contingent assets that are tied to contingent liabilities but to prohibit the recognition of all other types of contingent assets. It is not clear on what basis the first type of contingent asset is more likely to be realized than the second type. Presumably, the two items would, in substance, have the same economic characteristics, so we question the theoretical rationale for the distinction. In line with our comments at question 4, we
recommend that contingent assets linked to contingent liabilities only be recorded when their realization is virtually certain. Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? We agree, for the most part, with the proposed definition of contractual rights but question the last part which states in either the same period or different periods. We believe the concept is sufficiently conveyed by stating: Contractual rights are rights to assets and revenue arising from legally enforceable contracts or agreements that will, when the terms of those contracts or agreements are met, become assets and revenue. It is not clear what the extraneous words are for and they seem to complicate the definition. In reading the proposed definition of contractual rights, it occurred to us that users could benefit from a similar definition regarding contractual obligations. The guidance at PS 3390.03 does not seem as robust as the proposed definition of contractual rights. As a result, we recommend an amendment to the definition of contractual obligations so that it mirrors the proposed guidance on contractual rights. 2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered? We find the proposed guidance on contractual rights useful as there is a strong theoretical basis for presenting a balanced view of a governments future revenues and expenditures. However, we believe there needs to be a clear limit on the scope of the contractual rights to be reported. We are concerned that the cost of compiling the information will quickly outweigh the benefit if the scope is not sufficiently narrow. At present, the standard proposes to let the concept of materiality dictate the number of items reported. Materiality is determined through the use of professional judgment and is susceptible to widely different interpretations. The problem is compounded because we most often assess materiality within the context of one fiscal period. Contracts, of course, often extend over numerous periods. As a result, a long-term contract, by its nature, could easily approach and surpass a materiality level established by reference to one fiscal year. We believe the concept of materiality, as it applies to an extended-term contract, needs to be different than what would be viewed as material in a stand-alone fiscal period. To address this issue, we believe a final standard should require that contracts be viewed as material only when they: 1) have an average annual impact (rather than total impact) that is material; or 2) have material single year outflows
This will prevent entities from disclosing contracts that would not be viewed as material in any one year of their existence. This guidance should be applicable to both contractual rights and contractual obligations. 3. Do you agree with the proposed disclosure requirements? We agree with the proposed disclosure requirements. The need to report nature, extent and timing seems reasonable and is consistent with what is required for contractual obligations. Other comments: The SOP proposes to create three new sections for all the items discussed (Assets, Contingent Assets, and Contractual Rights). We dont believe stand-alone standards are needed for the last two items. Guidance on these matters would fit logically within existing sections PS 3300 Contingent Liabilities and PS 3390 Contractual Obligations. The relevant guidance could be incorporated into sections retitled Contingencies and Contractual Rights and Obligations, respectively. While we appreciate the efforts put forth in the development of this SOP, we question whether this is the best use of PSABs limited resources. There are critical matters currently facing public sector entities with respect to government transfers, financial instruments, and the conceptual framework for financial reporting. While much of the guidance in this SOP is useful to a certain degree, we feel PSABs time would be better spent resolving the issues that are of most importance to its stakeholders. This concludes our thoughts on the Assets, Contingent Assets, and Contractual Rights Statement of Principles. We would be pleased to discuss any questions or comments you may have with respect to this letter. To do so, please contact Jill Devanney (devannjl@gov.ns.ca) or the undersigned.
Regards,
Robert Bourgeois, CA Director - Financial Accounting, Government Accounting Nova Scotia Department of Finance
Montral, le 29 novembre 2013
Tim Beauchamp, directeur Comptabilit du secteur public 277, rue Wellington Ouest Toronto (Ontario) M5V 3H2
Monsieur, Vous trouverez ci-joint les commentaires du Groupe de travail technique Secteur public Comptabilit dans le secteur public de lOrdre des comptables professionnels agrs du Qubec concernant lnonc de principes Actifs, actifs ventuels et droits contractuels . Nous vous serions reconnaissants de nous faire parvenir une copie de la traduction anglaise de nos commentaires. Veuillez prendre note que ni lOrdre des comptables professionnels agrs du Qubec, ni quelque personne que ce soit ayant particip la prparation des commentaires ne peuvent tre tenus responsables relativement leur utilisation et ils ne sont tenus aucune garantie de quelque nature que ce soit dcoulant de ces commentaires, comme dcrit dans le dni de responsabilit joint la prsente. Veuillez agrer, Monsieur Beauchamp, lexpression de mes sentiments distingus.
Reprsentante du Groupe de travail technique Secteur public Comptabilit dans le secteur public,
Annie Smargiassi CPA, CA
p. j.
Dni de responsabilit et commentaires
DNI DE RESPONSABILIT
Les documents prpars par le Groupe de travail technique Secteur public Comptabilit dans le secteur public de lOrdre des comptables professionnels agrs du Qubec (Ordre) ci-aprs appels les commentaires , sont fournis selon les conditions dcrites dans la prsente, pour faire connatre leur opinion sur des noncs de principes, des documents de consultation, des exposs-sondages prliminaires ainsi que des exposs-sondages publis par le Conseil des normes comptables, le Conseil des normes daudit et de certification, le Conseil sur la comptabilit dans le secteur public, le Conseil sur la gestion des risques et la gouvernance et dautres organismes.
Les commentaires fournis par ce comit ne doivent pas tre utiliss comme substitut des missions confies des professionnels spcialiss. Il est important de noter que les lois, les normes et les rgles sur lesquelles sont mis les commentaires peuvent changer en tout temps et que, dans certains cas, les commentaires crits peuvent tre sujets controverse.
Ni lOrdre, ni quelque personne que ce soit ayant particip la prparation des commentaires ne peuvent tre tenus responsables relativement lutilisation de ces commentaires et ils ne sont tenus aucune garantie de quelque nature que ce soit dcoulant de ces commentaires. Les commentaires donns ne lient pas, par ailleurs, les membres du Groupe de travail technique Secteur public Comptabilit dans le secteur public, lOrdre ou, de faon plus particulire, le Bureau du syndic de lOrdre.
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COMMENTAIRES DU GROUPE DE TRAVAIL TECHNIQUE SECTEUR PUBLIC COMPTABILIT DANS LE SECTEUR PUBLIC DE LORDRE DES COMPTABLES PROFESSIONNELS AGRS DU QUBEC RELATIFS AU DEUXIME EXPOS-SONDAGE ACTIFS, ACTIFS VENTUELS ET DROITS CONTRACTUELS MANDAT DU GROUPE DE TRAVAIL Le Groupe de travail technique Secteur public Comptabilit dans le secteur public de l'Ordre des comptables professionnels agrs du Qubec a comme mandat notamment de recueillir et de canaliser le point de vue des praticiens exerant en cabinet et de membres uvrant dans les affaires, dans les services gouvernementaux, dans l'industrie et dans l'enseignement ainsi que le point de vue dautres personnes concernes uvrant dans des domaines dexpertise connexes.
Pour chaque expos-sondage ou autre document tudi, les membres du Groupe de travail technique mettent leurs analyses en commun. Les commentaires ci-dessous refltent les points de vue exprims et, sauf indication contraire, ces commentaires ont fait l'objet d'un consensus parmi les membres du Groupe de travail ayant particip cette analyse.
Les commentaires formuls par le Groupe de travail ne font l'objet d'aucune sanction de l'Ordre. Ils n'engagent pas la responsabilit de celui-ci.
COMMENTAIRES GNRAUX
Les membres sont davis que le CCSP devrait tenir compte des actifs incorporels dans ses propositions concernant les actifs, les actifs ventuels et les droits contractuels. Ils constatent que les organismes sans but lucratif (OSBL) du secteur public, entre autres, comptabilisent les actifs incorporels qui rpondent certains critres prcis, et que ces critres pourraient tre appliqus facilement par les autres entits du secteur public. Plusieurs actifs incorporels rsultent de droits contractuels et il leur apparat incohrent de ne pas les comptabiliser dans les autres entits du secteur.
Ils souhaiteraient que la dfinition dactif propose dans lnonc de principes Actifs, actifs ventuels et droits contractuels soit harmonise avec celle qui est incluse dans lnonc de principes Amlioration des normes pour les OSBL . Ils sexpliquent mal les diffrences dans les dfinitions au niveau conceptuel.
Les membres ont indiqu que le CCSP devrait rgler des problmatiques plus urgentes avant de finaliser le projet sur les actifs. Notamment, les lments qui sont exclus de lnonc de principes au paragraphe .04, taient, selon eux, des questions plus importantes rgler, car plusieurs de ces lments ne sont actuellement pas comptabiliss dans le bilan, situation quon tente dviter en gnral dans les autres rfrentiels comptables canadiens. Ils sont davis que les lments qui font lobjet de lnonc de principes ne causent pas de problmes actuellement en pratique, et ils sexpliquent mal la ncessit dune nouvelle norme sur ces lments.
Les membres croient que le projet devrait traiter galement des critres de comptabilisation et ils ne comprennent pas lexclusion totale de telles exigences dans lnonc de principes. Ils proposent au CCSP dattendre avant la publication dun expos-sondage de considrer lensemble des questions, sans exclusion.
Questions du CCSP
Analyse des incidences 1. Les propositions ont-elles dautres incidences qui devraient tre prises en considration? Dans laffirmative, veuillez fournir une explication dtaille. Les membres ont relev des diffrences dans certaines dfinitions par rapport au cadre conceptuel actuellement en vigueur et ont indiqu que ceci pourrait avoir des impacts sur des interprtations en pratique. Ils ont dtaill ces diffrences dans leurs commentaires sur la partie III ci-dessous.
Partie I Actifs 1. Les indications proposes relativement la dfinition des actifs sont-elles utiles? Y a-t-il dautres aspects qui devraient tre pris en considration? Les membres sont davis que les propositions ne changent pas lapplication des concepts actuels. Ils ne croient pas que les indications seront trs utiles, en regard de leur pratique. Selon eux, des indications sur les lments exclus au paragraphe .04 auraient t plus utiles.
Certains membres ont not que la prsence demphytoses est importante dans les municipalits du Qubec. Ces types de contrats semblent tre couverts par la question des droits contractuels, mais ils croient que ceci devrait tre clarifi dans les propositions.
2. tes-vous daccord avec le traitement propos au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service? Oui, les membres sont daccord avec les propositions du paragraphe .052. 3. tes-vous daccord avec les obligations dinformation proposes? Oui, les membres sont daccord avec les obligations dinformation proposes.
Partie II Actifs ventuels 1. tes-vous daccord avec la dfinition des actifs ventuels propose? Oui, les membres sont daccord avec la dfinition des actifs ventuels proposs. 2. votre avis, les indications proposes au sujet des actifs ventuels sont-elles utiles? Y a-til dautres aspects qui devraient tre pris en considration? Oui, les membres sont davis que les indications sont adquates et nont pas propos dautres aspects prendre en considration. 3. tes-vous daccord avec les obligations dinformation proposes? Oui, les membres sont daccord avec les obligations dinformation proposes. 4. Estimez-vous que les actifs ventuels devraient tre constats partir dun certain seuil (c.-d. la quasi-certitude)? Les membres taient partags sur la question. Certains membres estiment que les actifs ventuels devraient tre constats partir du moment quil existe une quasi-certitude de ralisation. Certains membres croient que non, car ils sont davis quun actif ne peut tre contrl partiellement. Plusieurs membres croient que les libells actuels portent confusion, ils indiquent qu partir du moment o un lment est comptabilis, il ne devrait pas tre considr comme ventuel. Consquemment, ces membres sont davis que llment en cause rpondrait la dfinition dun actif lorsquun seuil de quasi-certitude quant la ralisation est atteint, de sorte quun actif ventuel ne serait jamais constat. 5. Dans certains cas, des actifs ventuels probables peuvent tre constats titre de rduction dun passif ventuel (voir le paragraphe .111). tes-vous daccord pour que la constatation des actifs ventuels soit limite cette situation seulement?
Oui, les membres sont daccord avec les propositions. Ils prcisent que les cas les plus frquents concernent les remboursements dassurance. Partie III Droits contractuels 1. tes-vous daccord avec la dfinition des droits contractuels propose?
Oui, les membres sont daccord avec la dfinition propose lexception de llment dcrit dans le paragraphe ci-dessous. Les membres se questionnent sur lexpression juridiquement excutoire incluse dans la dfinition des droits contractuels. Cette expression nest pas incluse, entre autres, dans la dfinition des passifs dans le cadre conceptuel du chapitre SP 1000, et ils ne comprennent pas pourquoi elle est ajoute la dfinition des actifs. Pour eux, un accord contractuel est, de toute faon, juridiquement excutoire, autant quun accord verbal pourrait ltre. Ils proposent de retirer cette expression de la dfinition, car elle risque de causer des difficults dinterprtation en pratique. 2. votre avis, les indications proposes au sujet des droits contractuels sont-elles utiles? Y a-t-il dautres aspects qui devraient tre pris en considration? Oui, les membres sont davis que les indications proposes au sujet des droits contractuels seront utiles et ils nont pas propos dautres aspects prendre en considration. 3. tes-vous daccord avec les obligations dinformation proposes? Oui, les membres sont daccord avec les obligations dinformation proposes.
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Formulaire de rponse
Pour tre pris en considration, les commentaires devront tre reus le 29 novembre 2013 au plus tard.
Actifs, actifs ventuels et droits contractuels nonc de principes

Le CCSP invite les intresss formuler des commentaires sur tous les aspects des principes proposs dans l'nonc de principes. Ce formulaire ne vise pas restreindre votre rponse. Chaque bote de texte acceptera l'intgralit de vos commentaires. Vous pouvez sauvegarder le formulaire et l'envoyer, pour examen, d'autres personnes de votre organisation avant de le soumettre. Nom : Organisation : Courriel : Vronique Harvey Socit de Transport de Montral (STM) veronique.harvey@stm.info
Commentaires gnraux : Nous croyons que la publication de ces trois nouveaux chapitres permettrait de mieux reprsenter la ralit des organismes du secteur public et permettrait de fournir des informations supplmentaires importantes aux utilisateurs des tats financiers. Analyse des incidences 1. Les propositions ont-elles d'autres incidences qui devraient tre prises en considration? Dans l'affirmative, veuillez fournir une explication dtaille. Non
Partie I - Actifs 1. Les indications proposes relativement la dfinition des actifs sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration? Oui, les indications proposes relativement la dfinition des actifs sont utiles puisqu'elles sont plus explicites et axes sur la ralit des organismes du secteur public. Les indications permettent de faire le lien avec les objectifs des organismes qui sont diffrents des entreprises du secteur priv. Il y a beaucoup d'exemples concrets qui permettent de mieux comprendre les notions. Au paragraphe .061, on mentionne que les avantages conomiques futurs peuvent galement prendre la forme d'une capacit de rduire les sorties de trsorerie. Il aurait t intressant d'expliquer la diffrence entre la constatation titre d'actifs ou titre de diminution de passifs dans le cas o l'avantage est une rduction de sortie de trsorerie. 2. tes-vous d'accord avec le traitement propos au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service?
Oui, il est plus facile de dterminer le traitement comptable appropri quand les notions sont clairement dfinies.
3.
tes-vous d'accord avec les obligations d'information proposes?
Oui, puisqu'il y aurait des informations sur la nature des actifs non constats et la raison de la non-constatation. Des actifs importants peuvent tre dtenus par un organisme et ne pas tre mentionns puisque les normes ne permettent pas leur constatation. Cette norme permettra d'inclure des informations afin que l'utilisateur des tats financiers soit inform de ce que dtient en totalit l'organisme. De plus, les informations fournir permettraient d'informer le lecteur des actifs dont une norme empche leur constatation, par exemple dans le cas du SP 3410 - Paiements de transfert, o les diffrentes interprtations divergent. Il faudrait par contre tre plus explicite sur le type d'informations fournir. Il serait intressant de mentionner l'impact qu'il y aurait sur les tats financiers dans le cas o l'actif aurait t constat. Partie II - Actifs ventuels 1. tes-vous d'accord avec la dfinition des actifs ventuels propose?
Oui, l'accent est mis sur l'incertitude et permet de bien distinguer la diffrence entre un actif et un actif ventuel.
2.
votre avis, les indications proposes au sujet des actifs ventuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Oui, les indications permettent une meilleure comprhension de la dfinition puisqu'elles viennent clarifier les termes et les notions utiliss. Les aspects importants nous semblent avoir t pris en considration. 3. tes-vous d'accord avec les obligations d'information proposes?
Oui, puisque ces informations aident les utilisateurs valuer les ressources conomiques qui pourront devenir disponibles. Parfois, la limite est faible entre un actif et un actif ventuel puisque la probabilit que lvnement futur survienne est quasi assure. Les informations permettront l'utilisateur d'valuer plus adquatement les chiffres au rapport financier. Il est intressant de constater qu'un paragraphe a t ajout pour les informations de nature dlicate. 4. Estimez-vous que les actifs ventuels devraient tre constats partir d'un certain seuil (c.--d. la quasi-certitude)?
Non puisque tout est question de jugement professionnel. Le jugement professionnel peut diffrer d'une personne l'autre et donc la comparaison entre les diffrents organismes pourrait tre biaise. 5. Dans certains cas, des actifs ventuels probables peuvent tre constats titre de rduction d'un passif ventuel (voir le paragraphe .111). tes-vous d'accord pour que la constatation des actifs ventuels soit limite cette situation seulement?
Oui, parce que dans ce cas-ci, il y a un lien direct avec le passif ventuel, qui lui ce doit d'tre constat. Dans les faits, c'est le passif ventuel qui est moindre. Il rsulte donc en une meilleure estimation du passif ventuel.
Partie III - Droits contractuels 1. tes-vous d'accord avec la dfinition des droits contractuels propose?
Oui. En limitant les droits contractuels aux droits qui deviendront des actifs et donneront lieu des revenus, ceci vite un surplus d'informations moins pertinent pour le lecteur. 2. votre avis, les indications proposes au sujet des droits contractuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Les indications proposes sont utiles et il y a une diffrenciation entre les dfinitions d'actifs, d'actifs ventuels et de droits contractuels. Les diffrences sont clairement mises en lumire ce qui favorise la comprhension. Les aspects importants nous semblent avoir t pris en considration. 3. tes-vous d'accord avec les obligations d'information proposes?
Oui, le fait de donner de l'information sur les droits contractuels permet de se coller la ralit des organismes du secteur public. Les organismes tant fortement financs en vertu d'entente de partage de frais, les utilisateurs doivent tre informs sur les entres futures de ressources conomiques dont l'organisme disposera pour honorer ses obligations futures. Toutefois, l'nonc parle peu du type d'information qui serait fournir. Il faudrait clarifier pour mentionner le type d'information demand. Dans le principe 4 on mentionne qu'il est question de l'ampleur des droits, mais est-ce que ceci signifie que les montants devront tre prsents? Dans plusieurs ententes de partage des cots, il est entendu que le gouvernement cdant partagera le cot des actifs pays par le gouvernement bnficiaire, toutefois les montants ne sont pas clairement identifis puisque les sommes n'ont pas encore t dpenses. Dans un cas comme celui-ci, il serait pertinent de savoir de quelle faon l'information doit tre prsente.
Wayne Morgan Office of the Auditor General of Alberta Edmonton, Alberta
November 29, 2013
Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario
Dear Mr. Beauchamp, Our response to PSAB Statement of Principles Assets, Contingent Assets and Contractual Rights is below. Given that PSAS is based on primarily on an asset/liability view, and that it is from the definition of an asset that other elements are derived, this is an important project.
Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. There are several other implications that should be considered. PSAS should consider whether the distinction between financial and non-financial assets is still worthwhile, given there is nothing inherent in the definition or concept of asset that leads to the distinction. Correspondingly, while developing guidance for assets/contingent assets/contractual rights that is more consistent with the existing treatment for liabilities, we encourage PSAB to consider whether changes also should be made to the presentation of liabilities. The replacement of PS 3410 has introduced a new nature of liability into PSAB an obligation to use an asset for a restricted purpose, such that revenue is recognized over the life of the asset, and this liability settles with use of the asset. The presumption in PSAS (see PS 1100.28) is that net debt represents financing of past transactions/events that require future revenues to pay for, but no financial assets will be needed or used to settle the PS3410 liability. This creates an accounting inconsistency and distorts the net debt indicator because the asset that will be used to settle the PS3410 liability is classified as a non-financial asset. So, if the distinction between financial and non-financial assets can be demonstrated to flow from the definition of an asset and remains part of PSAS, PSAB should consider including a distinction between financial and non-financial liabilities with the latter representing
liabilities that will be settled through the use of non-financial assets (i.e. will require no financial assets to settle). It may be that the underlying issue is the use of the net debt indicator itself, and that there is little justification for the financial/non-financial distinction of assets if there is not a similar distinction for liabilities. A new asset standard should explain whether appropriations by government components meet the definition of an asset, and when they would meet the definition. For example, a government may approve, via legislation passed before the financial statement date, a components appropriation for a current or subsequent year(s). It is not clear whether this authority to spend is an intangible asset, or tangible in the same sense as, for example, accounts receivable. More broadly, we strongly encourage PSAB to include intangible assets and assets acquired by right of the Crown as part of the project. These are substantial resources of governments. Further study and working through the details of the issues involved in recognition, measurement and reporting of these may improve the overall asset standard.
Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? We see potential confusion in applying the guidance on control of the asset, particularly in reconciling the strong definition of control in paragraph .036 with the exception that external restrictions do not negate control (paragraph .038). PSAB should explain why such restrictions on the use of an economic resource do not negate the public sector entitys control of the economic resource (.038) when the purpose of restrictions is to limit how the entity can determine how the economic resources will be used. The statement of principles could better explain why control is a necessary characteristic of an asset, rather than simply that evidence exists that the public sector entity will receive future benefit from the economic resource. Control may be seen as making this benefit more likely to occur, but this makes the characteristic of control really an implicit threshold criterion, something that helps determine likelihood and length and nature of the benefit. The essential characteristic is future benefit to the entity. Under the current definition, it is necessary to work around what the recipient is not allowed to do with a transferred resource to still come to a conclusion that the recipient controls the resource. Instead, it may be more useful to focus on what the entity has the right to do with the resource, and how the entity is expected to benefit, on the presumption that it will comply with all restrictions and stipulations. This may be made clearer in the statement of principles, if this is indeed the basis of recording assets that have restrictions that impede control. Another alternative is an approach that says that some of the rights are unrestricted (and therefore qualify as assets because control is met) and other rights are restricted (and therefore do not qualify as assets). This, however, leads to measurement difficulties, but .039 seems to support this approach to evaluating control over individual
rights instead of to the asset as a whole. In our view, the statement of principles should more clearly distinguish among which of these concepts are appropriate. Some specific examples may be added in the statement of principles to help clarify this issue. For example, consider an entity given cash to build a variety of tangible assets. The cash is subject to another entity monitoring its use, approving specific projects, and requiring the cash to be returned if no projects are approved. Another example is transfers provided with conditions that they be distributed to others the flow through arrangements excluded from PS3410. PSAB could explain what principles determine whether the cash is an asset (with a corresponding liability under PS3100), or not an asset of the entity at all, when control is uncertain or is more administrative in nature. The statement of principles could add discussion of assets that have liabilities associated with them. One example is asset retirement obligations; another example is an entity receiving an asset, but there are substantial ongoing operating costs associated with the asset. The issue is whether the entity actually has an asset when the closely related expected future costs are more than the value of the asset. This is a complex issue but could be explored in more detail in this project. Further guidance may be provided for assets held in trust where the public sector entity is the beneficiary. Paragraph .042 correctly excludes trusts held by the public sector entity on behalf of external beneficiaries, with a strong implication that the trust is an asset if the public sector entity is both trustee and beneficiary. But it is less clear how to account for externally administered trust funds where the public sector entity is the sole beneficiary. For example, if there is a trust on behalf of a public sector entity where the trustee must approve all projects for use of the funds at the entity but cannot fund any other entity, how would this fit into the definition of an asset? The statement of principles could expand upon the concept of amortization or other valuation allowances attached to assets. Should amortization reflect the attaching of costs to a period in which services are provided (the revenue-expense view) or reflect a decline in capacity to provide goods and services between periodic revaluations of the asset (the asset-liability view)? Why should some asset revaluation changes flow directly through income, while others (i.e. portfolio investment at fair value) are accumulated as remeasurement gains/losses? Are valuation allowances only measurement related, to reflect assets at their recoverable value, or in the context of public sector entities are they also somehow related to recognition as well, and to concepts such as decline in capacity to provide goods and services, as may be the case with accumulated amortization, for example? To what extent is accumulated amortization the recognition and measurement of a counter-asset, or something else such as a liability given that it is a credit outside the net debt model? 2. Do you agree with how PSAB has dealt with service potential in paragraph .052? Yes. We prefer guidance applying existing terminology over establishing new terms.
3. Do you agree with the proposed disclosure requirements? We agree. However, as noted, we believe PSAB should consider recognition and measurement of intangibles, Crown rights, etc.
Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes, as it is consistent with that already followed for contingent liabilities. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered? The guidance is useful because identifying the concept of contingent assets may help resolve whether an entity has an asset, or only a contingent asset. 3. Do you agree with the proposed disclosure requirements? No. We do not support disclosure of contingent assets. It is unclear what decision a user should make should they be considered part of net debt or not, partially considered, etc. The most important argument is in .108 of the statement of principles: because there is a bias in effect/impact/consequences of having a liability you didnt know about versus having an asset you didnt know about, the bias is acceptable. PSAB should preserve the principle of conservatism, even if it must be relabeled prudence. We note that the thresholds, if they are retained, are somewhat unclear. To be useful, categories should be mutually exclusive, but these are not. For example, not determinable may mean the space between slight and likely. Unknown % is not determinable. But 45%, for example, is determinable, but neither likely nor slight. A more logical approach is to use mutually exclusive categories, such as likely, not likely, and not determinable. Or the fix may be as simple as describing not determinable as not determinable to be either high or slight. PS3300 could be similarly improved. 4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized? No. Conservatism remains one of the qualitative characteristics of financial statements under PSAS. There is no certainty in the sense of knowing the future with respect to all asset recognition, which is based on evidence available today. But the problem with virtual certainty is that it is not certainty. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
Yes. In these cases, these clearly arise from contractual rights, for example, and are factors in evaluating the overall likelihood and impact of loss for the entity. Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? Yes. The nature of exchange contracts is that virtually all contractual obligations also give rise to some form of contractual rights. Narrowing the focus to rights that become assets and revenue provides specific information about future revenues that will be available to fund the net debt or future operations of government. PSAB may consider whether the definition should include not only and revenue but also or reductions of expenses. A simple example may be a contract whereby a third party takes over some cost of service delivery. This is not revenue but instead a reduction of cost, but the economic result seems similar so treatment should be similar. In several places the statement of principles is balancing what already exists for liabilities. Some additional language may clarify whether constructive assets may or may be recognized, similar to constructive liabilities meriting recognition in particular circumstances, or should not be recognized, because of uncertainty regarding future benefit, for example.
2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered? The statement of principles suggests that signing of a contract does not create an asset; some transaction or event must occur. Paragraph .143 clearly indicates that contractual rights are not assets. It could be better explained why this is the case and what principle this is based on. Further, it should be explained, rather than simply asserted in paragraph .142, why contractual rights to cash under derivatives meet the definition of an asset on commitment date rather than settlement date. It is unclear how a derivative meets any of the characteristics of an asset, and it is unclear in what sense derivatives are existing assets and liabilities at the commitment date or financial statement date when a derivative asset is unrealized. It would be a substantial effort to reopen PS3450, but if existing standards contradict clear concepts that emerge from this study, then consequential adjustments should be made to those standards. Derivatives may meet the definition of a contingent asset; there is no certainty or even virtual certainty that the entity will receive the cash. Derivatives may be disclosed as contractual rights and obligations. It is not explained why derivatives are singled out as an exception in paragraph .142 is this the only exception, or are there others? A more general exception may be appropriatefor example, stating that where an existing standard establishes recognition and measurement and/or disclosure, then that standard applies, as in paragraph .150. But this considerably weakens the general principles. It should also be made clear whether
exceptions in other standards would also include application of alternate sources of GAAP under PS1150. 3. Do you agree with the proposed disclosure requirements? Yes, as the requirements are similar to the disclosures required for contractual obligations. Thank you for the opportunity to comment. Sincerely,
Wayne Morgan, PhD, CA, CISA
PSAB welcomes comments on all aspects of the Statement of Principles. This form is not intended to constrain your response. Each text box will accommodate your full comments. You are able to save and forward this form to others in your organization for review prior to submission. Megan Cimaglia, CA, CFE, Senior Manager Professional Practices & Danielle Costello, CA Manager Professional Practices Office of the Auditor General of British Columbia, Professional Practices mcimaglia@bcauditor.com dcostello@bcauditor.com
General comments: Overall, we do not have any significant concerns with the proposals outlined in this SOP. We believe the additional guidance will contribute to better consistency and comparability in financial reporting. However, while these proposals do not address the recognition of intangibles, inherited Crown Lands and art and historical treasures, which in all respects likely meet the definition of an asset, we encourage PSAB to revisit in the near future the appropriateness of these exclusions. Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. None.
Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? We do not see other significant implications of the proposals beyond those already outlined in the SOP. However, we note that this guidance does raise the issue as to the appropriateness of not recognizing intangible assets and inherited Crown lands as noted above in our general comments. 2. Do you agree with how PSAB has dealt with service potential in paragraph .052?
As the term service potential already exists in the PSA Handbook (PS 3150 Tangible Capital Assets) which has a definition slightly more specific from the currently proposed capacity to provide goods and services, we agree with PSAS instead clearly explaining what is meant by such capacity in the proposed standard. 3. Do you agree with the proposed disclosure requirements?
We support the disclosure of currently unrecognizable assets (i.e. intangibles). This produces more relevant information for financial statement users and contributes to improved understanding of the full extent of economic resources available to the public sector entity. Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? We agree with the proposed definition of contingent assets. Using this definition will result in improved representation of the substance underlying transactions and will provide users with more balanced information. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?
We found that the proposed guidance on contingent assets further elaborating on the meaning of existing condition or situation and confirming future event to be useful. In particular, we are pleased with the additional guidance that a contingent asset usually arises from an unplanned or other unexpected event. This guidance is necessary to distinguish between contingent assets characterized by uncertainty as to the existence of an asset versus an asset characterized by uncertainty with respect to measurement. We could not think of any other aspects to consider.
3.
We agree with the proposed disclosure requirements. Making the financial statements relevant means they should be less conservative and more neutral and disclosing contingent assets as well as contingent liabilities in the financial statements helps achieve this goal. 4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized?
Given the few expected circumstances where there would be a virtually certain contingent asset occurring at year end date and the limited additional benefit that recognition of the contingent asset would offer over disclosure of the existence of the contingent asset, we do not feel the benefits of recognition outweigh the risks/costs. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
We agree with limiting the recognition of contingent assets to the situation addressed by PS 3300.25 described above despite the fact that it is inconsistent with the proposed reporting of contingent assets. The situation in PS 3300.25 is very specific and in this situation there exists strong evidence related to likelihood of recovery. Recognition in this situation is more balanced and is auditable. Recognition of contingent assets in other situations will not provide significant incremental benefit over simply disclosing the existence of the contingent asset. Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? We agree with the proposed definition of contractual rights. The specific definition limiting contractual rights to those rights to assets and revenue arising from contracts is an appropriate boundary to set to make the disclosures cost effective and auditable. 2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered?
Guidance on contractual rights, specifically the definition limiting contractual rights to those that will result in revenue, is useful. However, we think additional practical examples of contractual rights should be provided. Also, we found the one example provided, a prepaid lease in paragraph.139, to be somewhat confusing. In this respect, we offer the following
wording changes to this example to enhance its clarity: In other cases, such as when cash is received in advance for a multi-year lease arrangement (prepaid lease), a transaction may give rise to a recognized asset, but 3. Do you agree with the proposed disclosure requirements?
We dont agree with the proposed disclosure requirements because, while they would provide more balanced information, we feel the cost of providing such information exceeds the benefits. The argument could be put forward that having this information in the audited financial statements increases the credibility associated with the information; however, the definition of contractual rights limits the disclosure to legal contracts resulting in assets/revenue. Future revenue of public sector organizations that is subject to judgment and estimation where it would be beneficial to have audit assurance (i.e. tax revenue, royalty revenue, premium or fee revenue) is excluded from disclosure requirements. Auditability is also a concern given the number of material contracts public sector entities often have. Such limited disclosure (revenue from contracts) wouldnt provide significant further information for users beyond what they would find by reviewing future oriented financial information already provided by public sector entities (i.e. in service or business plans).

Le CCSP invite les intresss formuler des commentaires sur tous les aspects des principes proposs dans l'nonc de principes. Ce formulaire ne vise pas restreindre votre rponse. Chaque bote de texte acceptera l'intgralit de vos commentaires. Vous pouvez sauvegarder le formulaire et l'envoyer, pour examen, d'autres personnes de votre organisation avant de le soumettre. Nom : Organisation : Courriel : Vicky Lizotte, CPA, CA Contrleur des finances - Qubec vicky.lizotte@cf.gouv.qc.ca
Commentaires gnraux :
Analyse des incidences 1. Les propositions ont-elles d'autres incidences qui devraient tre prises en considration? Dans l'affirmative, veuillez fournir une explication dtaille. Bien quil soit prcis lnonc de principes que la comptabilisation des actifs incorporels, des ressources naturelles, des terres du domaine public dvolues ltat et des uvres dart et trsors historiques constitue une question distincte qui doit faire lobjet dune tude approfondie , nous sommes davis que ceux-ci auraient d tre trait dans le cadre de cet nonc de principe puisque ce sont des actifs importants pour les gouvernements. Partie I - Actifs 1. Les indications proposes relativement la dfinition des actifs sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration? Oui, les indications fournies permettent de prciser les termes importants inclus dans la dfinition dun actif. Ces indications seront utiles pour valuer si un actif doit tre comptabilis ou non lorsquil ny a pas de directives dans les chapitres particuliers. Toutefois, nous sommes davis que lnonc de principes aurait galement d traiter de la dvaluation des actifs. Cest un aspect important qui nest pas couvert adquatement par les directives du Manuel de comptabilit de CPA Canada pour le secteur public. 2. tes-vous d'accord avec le traitement propos au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service?
Nous sommes en accord avec le traitement propos, savoir dexpliquer clairement ce quon entend par potentiel de service avec des indications relatives aux avantages conomiques futurs. De plus les indications proposes aux paragraphes .056 .062 portant sur la contribution la fourniture de biens ou de services, la gnration des rentres de
trsorerie nettes futures ou la rduction des sorties de trsorerie aident comprendre les concepts lis aux avantages conomiques futurs ainsi quau potentiel de service. 3. tes-vous d'accord avec les obligations d'information proposes?
Il est utile que les utilisateurs connaissent les actifs qui ne sont pas constats par les entits du secteur public afin de connatre toutes les ressources conomiques sa disposition, comme par exemple les terres du domaine public dvolues ltat, les uvres dart ou les trsors historiques. Toutefois, compte tenu de lampleur des travaux qui pourrait tre importante et de la difficult possible de recenser lintgralit des actifs non constats, nous sommes davis que la recommandation devrait plutt tre leffet quil est souhaitable de prsenter cette information. Partie II - Actifs ventuels 1. tes-vous d'accord avec la dfinition des actifs ventuels propose?
Nous sommes en accord avec la dfinition propose.
2.
votre avis, les indications proposes au sujet des actifs ventuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Les indications proposes sont utiles et permettent dvaluer si lentit du secteur public est en prsence ou non dun actif ventuel, et sil est ncessaire d'en divulguer de linformation ou non.
3.
Oui, nous sommes en accord que seuls les actifs ventuels probables soient divulgus et ce, selon l'tendue de l'information demande. 4. Estimez-vous que les actifs ventuels devraient tre constats partir d'un certain seuil (c.--d. la quasi-certitude)?
Non, nous sommes davis quil est difficile de comptabiliser un actif ventuel puisquil ne rencontre pas lensemble des critres pour rpondre la dfinition dun actif. Bien que certains puissent juger que la mme argumentation soit valable pour les passifs ventuels, les tats financiers doivent reflter la prudence du prparateur. Par ailleurs, la constatation d'un actif ventuel lorsqu'il y a quasi-certitude exige lvaluation des seuils qui est subjective. En effet, il est difficile de diffrencier si la probabilit dun vnement est probable ou quasi-certaine. 5. Dans certains cas, des actifs ventuels probables peuvent tre constats titre de rduction d'un passif ventuel (voir le paragraphe .111). tes-vous d'accord pour que la constatation des actifs ventuels soit limite cette situation seulement?
Non, nous sommes en dsaccord puisque cela va lencontre des directives proposes dans ce projet qui ne permettent pas de comptabiliser un actif ventuel, mme probable. Par contre, nous croyons que la compensation dun passif ventuel avec les lments qui rpondent la dfinition dun actif est acceptable. Partie III - Droits contractuels 1. tes-vous d'accord avec la dfinition des droits contractuels propose?
Nous sommes en accord avec la dfinition propose.
2.
votre avis, les indications proposes au sujet des droits contractuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Oui, les indications proposes sont utiles et compltes.
3.
Non. Nous sommes davis que les droits contractuels devraient tre prsents aux tats financiers dans certaines circonstances particulires, tout comme les obligations contractuelles. Le CCSP devrait dailleurs sinspirer de ces caractristiques pour prciser quelles obligations contractuelles devraient tre prsentes, et ce, afin de ne pas surcharger dinformation les utilisateurs des tats financiers.
Finance
Comptrollers Division
Comptrollers Office 715 401 York Avenue Winnipeg, Manitoba R3C 0P8 Phone: (204) 945-4919 Fax: 948-3539 E-mail: betty-anne.pratt@gov.mb.ca
November 29, 2013
Mr. Tim Beauchamp, Director Public Sector Accounting 277 Wellington Street West Toronto, Ontario M5V 3H2
Dear Mr. Beauchamp: Re: Statement of Principles: Assets, Contingent Assets and Contractual Rights Thank you for the opportunity to comment on the Statement of Principles (SOP): Assets, Contingent Assets and Contractual Rights. The Province has included responses to the specific questions in the attachment. The Province is quite supportive of the SOP in general and especially supportive of the proposed improvements in the definition of an asset. Currently PS1000.38 describes that: For an asset to be a government's asset, that government must control the future economic benefit associated with the asset to the extent that it can benefit directly from the asset and generally can deny or regulate access to that benefit by others. The phrase it can benefit directly misrepresents the nature of assets in the public sector. Governments do not receive direct benefits from many of their tangible capital assets. The nature of most tangible capital assets in the public sector is to provide goods and services (Section .058 of the SOP). Conceptually, the inclusion of the phrase benefit directly could be interpreted to exclude many of the Provinces tangible capital assets. The current description of assets is more appropriate to the private sector of which the principal objective is profit. The definition of an asset has to place greater focus on control of an asset which is the ability to or regulate access to those benefits. Guidance on what is control over an asset should include the concept of risk of loss to the government as well as the expected benefits. IPSASBs description of assets (section .033 of the SOP) is more appropriate to the public sector than PSABs current definition. Canadian Public Sector Accounting (PSA) has never viewed legal
ownership as an indicator of control, however PS1300 and PSG-2 does include the concepts of risk of loss and benefits of ownership. As an example, the Province of Manitoba has constructed many water and sewage treatment facilities and distribution networks in unincorporated local communities. The Province is responsible for the maintenance and replacement of the infrastructure. The Province does not question the fact that it is the local community that benefits directly from the Provinces investment in the infrastructure. But it is the Province that controls the access to the services and sets the rates for service. The future net cash flows are insufficient to cover the full cost of providing the services. The provision of goods and services to the community is the primary objective. Therefore the infrastructure should be viewed as assets of the Province. We appreciate the opportunity to comment on the SOP. If you have any questions or concerns related to these comments please contact the undersigned.
Yours truly, Betty-Anne Pratt, CA Provincial Comptroller Province of Manitoba
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Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. No. We did not consider any other implications of the proposals other than those described in paragraphs .009 to .011 Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? Yes. We agree with the proposed changes relating to the definition of an asset. We agree with the improvements to PS1000.36 and the deletion of PS1000.37 and .38. PS1000.37 does not add value. PS1000.38 misrepresents the nature of many of the Provinces tangible capital assets. 2. Do you agree with how PSAB has dealt with service potential in paragraph .052? Yes. We believe that the phrase provides goods and services is more appropriate for the public sector than the term service potential. 3. Do you agree with the proposed disclosure requirements? Yes, we agree that the PSA Handbook should provide general disclosure for all unrecognized assets. Unrecognized assets are not capable of being recognized in the financial statements because an appropriate basis of measurement and a reasonable estimate of the amount cannot be made; or sections of the PSA Handbook prohibit its recognition. This would be consistent with the general disclosure requirement for all unrecognized liabilities in PS3200 We agree with the disclosure of unrecognized assets along with the reasons why a reasonable estimate cannot be made in accordance with Principle 1. Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes, we agree with the proposed definition of a contingent asset. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered? Yes. The proposed guidance (.075 to .078) is useful in understanding the nature of a contingent asset. 3. Do you agree with the proposed disclosure requirements? Yes. When the confirming future event is likely, information on a contingent asset should be disclosed in the notes and schedules in accordance with Principles 2 and 3.
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4. Do you believe that there is some threshold (i.e., virtual certainty) at which contingent assets should be recognized? No. Contingent assets should not be recognized as the public sector entity does yet have control over the asset. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only? Yes. We agree with limiting the recognition of contingent assets to this situation only. It is conceptually inconsistent to use a contingent asset to reduce a recognized contingent liability when contingent assets, which are viewed as likely, should only be disclosed in the notes or schedules to the financial statements. However, recoveries such as counterclaims and insurance are often elements of contingent liabilities. The recovery is not a separate transaction distinct from the occurrence of the obligation. The recovery should be recognized provided it is likely. Reducing the amount of the contingent liability by the contingent asset better presents the public sector entitys exposure. Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? Yes. We agree with the proposed definition of contractual rights. Contractual rights should be limited to legally enforceable contracts or agreements that will become assets and revenues when the terms are met. 2. Do you find the proposed guidance on the contractual rights useful? Are there other aspects that should be considered? Yes. We find the proposed guidance on contractual rights useful (sections .137 to .142). We did not consider any other aspects. 3. Do you agree with the proposed disclosure requirements? Yes. We agree the proposed disclosure requirements for contractual rights as disclosed in Principle 4.
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Darwin Bozek Alberta Treasury Board and Finance - Office of the Controller Darwin.Bozek@gov.ab.ca
General comments: Thank you for the opportunity to comment We agree that the proposed additional guidance on the three elements of financial statements would potentially enhance the quality of financial reporting. We are, however, concerned that due to the potential inconsistencies of some of the definitions with the eventual outcome of the "Concepts Underlying Financial Performance" Project, these proposals may have to be revised shortly after completion. The potential inconsistencies may also create an element of uncertainty and ambiguity in the interim period. Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. The transitional impact and the volume of additional work may be of some concern. As these issues were traditionally not addressed in the governments' financial statements, there may be some communication issues with the stakeholders. The Task Force has to demonstrate clearly that the expected benefits of additional disclosure exceed the additional costs involved. Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? Yes. - We agree that removal of the term "direct" from the current definition of control prevents potential confusion as in many situations it is the members of the public - and not the public sector entity concerned - who are considered to benefit directly from the services provided. - In .036, it should be clarified whether benefiting from economic resources and ability to deny access to others should be enjoyed by the public sector entity to the total exclusion of others or does this apply to a significant or a major portion of such rights.
- In .038, in the discussion about economic resources that are subject to certain external restrictions, some reference to implications of PS 3100 - restricted assets and revenues may be helpful. - s .043 - .050 under Past Transactions or Events - some of the proposed characteristics of assets have some common features with the notion of "deferred outflow" element as discussed in the Consultation Paper 2 - Measuring Financial Performance in Public Sector Financial Statements. A discussion of deferred outflows in the SOP may be helpful. The SOP should not be discussed in isolation and without considering its interactions with the Concepts Underlying Financial Performance Project. We are not convinced about the efficacy or relevance of the term "future" in the definition of assets in paragraph .012 access to economic benefits implies both current and future periods.
The use of the term expected in .013 definition, if it is used with its general meaning, as used in .56 of PS 1000 FINANCIAL STATEMENTS CONCEPTS, i.e. that which can reasonably be anticipated, contemplated or believed on the basis of available evidence or logic but is neither certain nor proved introduces an element of uncertainty. Consideration should be given if use of the term expected is meaningful and relevant in this context. GASB in its Concept Statement No 4, has defined "assets" as follows by avoiding the terms "future" and "expected": Assets are resources with present service capacity that the government presently controls.
2.
Yes. The proposed guidance better explains what is meant by "future economic benefits" in the context of public sector entities. However, see our comments on the use of terms "expected" and "future" in 1 above. 3. Do you agree with the proposed disclosure requirements?
Yes. It is noted, however, that the disclosure of unrecognized assets is limited to their "nature". It is not clear what is exactly meant by this term. This may create some inconsistency among public sector entities. in some cases, the unrecognized assets of some governments may be significant. Therefore, it may be useful, within the realm of cost/benefit constraints, that some additional information could be provided about the scale and significance of such assets. Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes. However, there appears to be opportunities to further condense the definition while achieving the same objectives as follows: 1. The term " possible resources that may result in future economic benefits" could be replaced with the term "possible assets". 2. The meaning of the last sentence "the resolution of the uncertainty will confirm the existence or nonexistence of an asset." is already reflected in the previous sentence. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?
Yes. We agree that a threshold approach is more practical, provided that all the available evidence - as suggested in .093 - is taken into consideration.
3.
Yes.
4.
No. Introductory of a threshold may create an element of arbitrariness. If an inflow of economic benefits is "virtually certain", then the related asset is not "contingent" on the occurrence of an event and, therefore it should be recognized in the financial statements. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
Yes. There appears to be another example of this in .62 of PS 3260 - Liability for contaminated sites.
Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? No. We question the use of the term "revenue"? In our view, based on the current conceptual framework, revenue would entail change in assets. Therefore, it appears that the term "revenues" is redundant.
2.
It appears that contractual rights and obligations equally exist in all exchange type executory contracts. Under executory contracts each party equally fulfills its obligations and any difference is represented by asset and liability balances between the parties involved. Therefore, there should be an equal balance of contractual rights for all contractual obligations under exchange type contracts. The same may not be true for non-exchange agreements, for example multi-year grant agreements from the perspective of recipient public sector entities. Also, because public sector entities currently do not recognize or record their natural resources, contractual rights under royalty agreements are not necessarily represented by contractual obligations. Therefore, disclosing contractual assets under such agreements may not provide a balanced view of a public sector entity's future revenue and expense. 3. Do you agree with the proposed disclosure requirements?
Subject to our comments under 2 above, we agree with the proposed disclosure requirements for certain types of nonexchange contracts.
Terry Paton, Provincial Comptroller Province of Saskatchewan Terry.Paton@gov.sk.ca
General comments: None
Effects Analysis 1. Are there other implications of the proposals that should be considered? If so, please provide a detailed explanation. We appreciate that accounting for intangibles, as referenced in paragraph .004, is a complex issue. However, it seems inappropriate that a group of items that meets the definition of an asset are excluded from the standard. Certain purchased intangibles have a basis of measurement even if inherited intangibles do not. We encourage PSAB to undertake a project to address the accounting for intangible assets. Part I Assets 1. Is the proposed guidance relating to the definition of assets useful? Are there other aspects that should be considered? Yes, the proposed definition of an asset is useful to PSE financial statement preparers due to the additional clarity provided.
2.
Yes, we agree with the concept of "service provision" and believe that the terminology used to describe this is less important. PSAB has appropriately dealt with this issue.
3.
Yes, we agree with the proposed disclosure requirement; however, note our concern about intangibles as explained in our response to question one.
Part II Contingent Assets 1. Do you agree with the proposed definition of contingent assets? Yes, we agree with the definition of contingent assets. However, it would be useful to have specific examples of contingent assets, and not just examples of what are not contingent assets. 2. Do you find the proposed guidance on the contingent assets useful? Are there other aspects that should be considered?
We acknowledge the issue raised in paragraph .105 regarding control. However, the standard for contingent assets is more conservative than neutral when considering the treatment of contingent liabilities. We recommend that the task force further consider whether this is an appropriate bias in the accounting treatment of contingencies. 3. Do you agree with the proposed disclosure requirements?
Yes, we agree with the proposed disclosure requirements, noting our comments under question two. However, we recommend that PSAB expand upon and clarify the reason for the wording "Except when covered by another section...." It is not clear why this wording is required nor how it would be applied.
4.
Noting our comments under question two, it is possible that it may be appropriate to recognize contingent assets that are virtually certain. This would result in accounting standards for contingent assets and contingent liabilities that would be slightly more neutral. However, we recommend that the PSAB Task Force further consider the potential impact on other accounting standards (i.e. Taxes and Government Transfers) if such a change were made. 5. In some cases, likely contingent assets may be recognized as part of a reduction to a contingent liability (refer to paragraph .111). Do you agree with limiting the recognition of contingent assets to this situation only?
We view the recognition of contingent assets as an offset to a contingent liability as part of the measurement of a contingent liability. Noting our comments under question two, at this point we agree with the reduction of a contingent liability for likely recoveries from a counterclaim or claim against a third party. Part III Contractual Rights 1. Do you agree with the proposed definition of contractual rights? Yes, we agree with the proposed definition.
2.
We would appreciate more specific examples of contractual rights. In addition, we note that the Decision Tree in Appendix A as presented indicates that disclosure would be required for those economic resources from which future benefits are to be obtained are not yet controlled, even if they do not result from legally enforceable contracts or agreements. That would include items that are collected through legislation, such as royalties and taxes. We recommend that an additional decision box be added to the Decision Tree. This would be placed under the "No" arrow that follows the box that asks "Do you control the economic resource as a result of a past transition or event?" and would read "Does the economic resource result
from a legally enforceable contract or agreement?" Only if the response is yes, would this lead to disclosure.
3.
We suggest PSAB expand upon and clarify the reason for the wording "Except when covered by another section...." It is not clear why this wording is required nor how it would be applied.

Le CCSP invite les intresss formuler des commentaires sur tous les aspects des principes proposs dans l'nonc de principes. Ce formulaire ne vise pas restreindre votre rponse. Chaque bote de texte acceptera l'intgralit de vos commentaires. Vous pouvez sauvegarder le formulaire et l'envoyer, pour examen, d'autres personnes de votre organisation avant de le soumettre. Nom : Organisation : Courriel : Michel Samson, vrificateur gnral par intrim Vrificateur gnral du Qubec michel.samson@vgq.qc.ca
Commentaires gnraux : En gnral, nous n'avons pas de problme particulier avec l'nonc de principes, sauf pour les lments de rponse la notion d'actif ventuel (voir notre rponse la Partie II - Actifs ventuels, question 1). De plus, nous considrons que les incidences directes et indirectes de ce projet sont difficiles valuer. Analyse des incidences 1. Les propositions ont-elles d'autres incidences qui devraient tre prises en considration? Dans l'affirmative, veuillez fournir une explication dtaille. Il est difficile d'identifier les incidences des modifications proposes particulirement celles relies la dfinition d'un actif. Nous aimerions obtenir des exemples d'lments d'actifs qui ne rpondraient plus la dfinition d'actifs avec les modifications proposes. Partie I - Actifs 1. Les indications proposes relativement la dfinition des actifs sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration? Oui, les indications proposes relativement la dfinition des actifs sont utiles en tenant pour acquis que toutes les indications proposes feront partie intgrante de la norme. Aucun autre aspect n'a t identifi. 2. tes-vous d'accord avec le traitement propos au paragraphe .052 par le CCSP en ce qui concerne le potentiel de service?
Nous sommes en accord avec le traitement propos au paragraphe .052 par le CCSP, car il est sans incidence sur la dfinition d'actif du paragraphe .36 du chapitre SP 1000. De plus, la notion de potentiel de service est traite dans le SP 3150 Immobilisations corporelles. 3. tes-vous d'accord avec les obligations d'information proposes?
Oui
Partie II - Actifs ventuels 1. tes-vous d'accord avec la dfinition des actifs ventuels propose?
Nous sommes en accord avec la dfinition des actifs ventuels, mais nous avons certaines prcisions ajouter. Nous sommes d'avis que nous ne pouvons pas avoir d'actifs ventuels si l'autre partie la transaction (gouvernement cdant) ne considre pas avoir un passif ventuel. Il faut baser l'apprciation de la probabilit de l'actif ventuel en fonction des lments probants disponibles par rapport l'autre partie la transaction (paragraphe .92). Nous faisons donc rfrence ici la symtrie des transactions en fonction du SP 3300 Passifs ventuels. Nous considrons qu'il y a un risque qu'une partie considre qu'elle possde un actif ventuel probable alors que l'autre partie (cdant) n'a pas considr le passif ventuel comme tant probable. Cela est vrai particulirement dans le contexte d'entits faisant partie du mme primtre comptable ou qui sont dans le secteur public selon des paliers de gouvernements diffrents. En effet, il ne serait pas logique qu'un gouvernement municipal prsente en note ses tats financiers un actif ventuel qui provient d'un gouvernement provincial alors que ce dernier dans ses propres tats financiers ne comptabiliserait pas le passif ventuel affrent. Nous sommes d'avis que le CCSP ne peut aller de l'avant avec ce projet d'nonc de principes si au pralable il n'y a pas de lien entre le SP 3410 Transferts et le SP 3300 Passifs ventuels. En effet, il faudra des indications en lien avec le chapitre sur les transferts SP 3410 pour savoir quel moment un bnficiaire de subvention prsente un actif ventuel en notes aux tats financiers ou comptabilise un actif. Il y a dj des enjeux l'gard de la comptabilisation de l'actif par le bnficiaire quant au moment de l'autorisation du transfert rgler au pralable avant de continuer ce projet. De plus, on invite le CCSP porter une attention particulire la cohrence de cette dfinition avec le chapitre sur les recettes fiscales particulirement dans les cas de l'valuation initiale (SP 3510.23). L'information additionnelle obtenue par suite d'vnement comme les vrifications, les appels ou les dcisions judiciaires sont alors comptabiliss comme des rvisions d'estimations comptables. En effet, il faudrait dterminer s'il s'agit d'un actif ou d'un actif ventuel compte tenu du paragraphe .078 de cet nonc de principe et de la dfinition d'un actif ventuel propos. 2. votre avis, les indications proposes au sujet des actifs ventuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Les indications proposes au sujet des actifs ventuels sont utiles, mais elles peuvent engendrer un autre problme si l'on ne rgle pas le problme de symtrie de la transaction mentionn la rponse prcdente.
3.
Oui, nous sommes d'accord avec les obligations d'information proposes.
4.
Estimez-vous que les actifs ventuels devraient tre constats partir d'un certain seuil (c.--d. la quasi-certitude)?
Non, par mesure de prudence et en fonction du cadre conceptuel nous sommes d'accord avec la prise de position du CCSP. La comptabilisation des actifs ventuels pourrait amener un biais de la direction des entits. 5. Dans certains cas, des actifs ventuels probables peuvent tre constats titre de rduction d'un passif ventuel (voir le paragraphe .111). tes-vous d'accord pour que la constatation des actifs ventuels soit limite cette situation seulement?
Oui . C'est dj prvu dans le SP 3300 Passifs ventuels et nous sommes d'accord ce que la constatation des actifs ventuels soit limite cette situation seulement.
Partie III - Droits contractuels 1. tes-vous d'accord avec la dfinition des droits contractuels propose?
Nous sommes en accord avec la dfinition des droits contractuels propose. Il s'agit d'une obligation contractuelle pour l'une des parties, il devrait donc s'agir d'un droit contractuel pour l'autre. Cette information serait donc utile aux utilisateurs des tats financiers. 2. votre avis, les indications proposes au sujet des droits contractuels sont-elles utiles? Y a-t-il d'autres aspects qui devraient tre pris en considration?
Oui, nous considrons que les indications proposes au sujet des droits contractuels sont utiles. Nous ne croyons pas qu'il y est d'autres aspects prendre en considration. 3. tes-vous d'accord avec les obligations d'information proposes?
Oui, nous sommes en accord avec les obligations d'informations proposes.

2013-11 Assets, Contingent Assets, Contractual Rights RESPONSES

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Greg MacBeth Office of the Auditor General - Manitoba greg.macbeth@oag.mb.ca

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November 29, 2013

Part II Contingent Assets

Montral, le 29 novembre 2013

Annie Smargiassi CPA, CA

Dni de responsabilit et commentaires

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Actifs, actifs ventuels et droits contractuels nonc de principes

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Wayne Morgan Office of the Auditor General of Alberta Edmonton, Alberta

November 29, 2013

Wayne Morgan, PhD, CA, CISA

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Actifs, actifs ventuels et droits contractuels nonc de principes

Nous sommes en accord avec la dfinition propose.

tes-vous d'accord avec les obligations d'information proposes?

Nous sommes en accord avec la dfinition propose.

Oui, les indications proposes sont utiles et compltes.

tes-vous d'accord avec les obligations d'information proposes?

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November 29, 2013

Yours truly, Betty-Anne Pratt, CA Provincial Comptroller Province of Manitoba

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Terry Paton, Provincial Comptroller Province of Saskatchewan Terry.Paton@gov.sk.ca

General comments: None

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Actifs, actifs ventuels et droits contractuels nonc de principes

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