Standards digest — January 2018

Canadian stakeholders can help influence guidance in the public sector accounting board. Here’s how.

The Public Sector Accounting Board (PSAB) is seeking stakeholder feedback on its recently issued document for comment “Employment Benefits: Discount Rate Guidance in Section PS 3250.”


In November 2016, PSAB issued its first document for comment on its employment benefits project that addressed the deferral provisions in the employment benefits standards. In this second document for comment, PSAB is considering the appropriate discount rate guidance that should be provided in its employment benefits standard.


In practice, the expected return on plan assets is usually used to determine the benefit obligation of fully or partially funded benefit plans in the public sector. The cost of borrowing is often used to determine the benefit obligation of unfunded benefit plans.


Some stakeholders have raised concerns about the discount rates used in practice. For example, other publicly accountable enterprises in Canada are required to use market yields of high-quality corporate bonds to estimate their benefit obligations. Under the current low-interest-rate environment, the expected return on plan assets is often higher than the yields of high-quality bonds. The higher discount rates have resulted in public sector entities reporting a more positive financial position.


Employment benefit obligations are often incurred years before benefit payments are due. Many agree that the benefit obligation reported in the financial statements should reflect the present value of the estimated future benefit payments at the reporting date. However, there is widespread disagreement about which discount rate would best reflect the time value of money in determining the benefit obligation.


The choice of discount rate could have significant effects on the benefit obligation reported by entities. The longer the benefit accrual and payment periods, the more sensitive the valuation of benefit obligation would be to the discount rate assumption. For example, a 1% difference in the discount rate may mean a 12% to 18% difference in the benefit obligation.


Issuing this document serves to seek stakeholder input early in the standard-development process so PSAB can consider their views in developing its preliminary positions on the issues. The deadline to comment on this document is March 9.


To learn more on this project, register for the webinar (January 16 in English and January 17 in French) and read the Document for Comment and related articles at


Get your voice heard!

Respond to these open documents for comment today:

IFRS® Standards — AcSB Exposure Draft — Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8) — Due January 15


IFRS® Standards — AcSB Exposure Draft — Definition of Material (Proposed amendments to IAS1 and IAS 8) — Due January 15


Standards for Private Enterprises — AcSB Exposure Draft — Accounting for Related Party Financial Instruments and Signification Risk Disclosure (Proposed amendments to Financial Instruments, Section 3856) — Due January 29


Standards for Private Enterprises — AcSB Exposure Draft — Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (Proposed amendments to Sections 1591, 3251 and 3856) — Due January 15