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Increasing the accountability value of public sector financial statements

Financial statements are a tool for holding public sector entities accountable for the use of taxpayer dollars. As such, financial statements need to be understandable and meaningful for accountability purposes.

On January 11, 2021, the Public Sector Accounting Board (PSAB) released two significant documents for comment:

Once finalized, these proposals will affect public sector accounting standards for years to come.

The proposals update the foundations on which Canadian public sector entities prepare and present their financial position and results. The proposals were developed through an accountability lens, focused on improving accountability to the public and its elected representatives. They aim to respond to the need for understandable financial statements.

Creating greater understandability

With the public interest in mind, PSAB proposes the following changes to improve understandability and as a result, increase the accountability value of public sector financial statements:

  • Relocating the net debt indicator to its own statement, providing the opportunity to better explain it.
  • Separating liabilities into two categories: financial and non-financial. This would remove the liabilities that were muddying up the net debt indicator from the calculation and return the indicator to its original meaning – future financial resource requirements.
  • Restructuring the statement of financial position to have a more familiar look to the public, reporting all assets together and all liabilities together.
  • Removing the statement of change in net debt as a required statement, as it’s not well understood. 
  • Allowing the option to present the change in net debt along with the calculation of net debt if it provides good accountability information and can be made understandable. An explanation of what net debt means is also required.
  • Requiring the budget amounts on the financial statements to be presented using the same basis of accounting, same accounting principles, for the same scope of activities, and using the same classifications as the actual amounts. 
  • Requiring that the reconciliation of the budget numbers reported on the operating statement with the approved budget, be understandable, if the actual and budget numbers are not prepared using the same basis of accounting, same accounting principles, for the same scope of activities, and using the same classifications. 

PSAB also introduced new presentation concepts to promote the preparation of understandable financial statements, including:

  • presenting complex items, transactions and other events as simply as possible
  • demonstrating the relationship between different pieces of information
  • evaluating presentation choices based on whether they add to or support the accountability value of the financial statements
  • giving higher profile to matters of importance
  • providing information at the appropriate level of detail


Finalizing these exposure drafts is a collaborative effort. We want to hear from you by May 12, 2021 if our proposals work.

Participate in finalizing the new conceptual framework and reporting model by:


Watch the following recorded webinars in English and French to learn more about the key proposals in the exposure drafts:


Antonella Risi, CPA, CA
Principal, Public Sector Accounting Board
Tel: (416) 204-3484
Email: [email protected]

Martha Jones Denning, CPA, CA
Principal, Public Sector Accounting Board
Tel: (416) 204-3288
Email: [email protected]