Landmark Government Reporting Model Issued

Worth A Look, Public Sector, Frontier Centre

TORONTO, Feb. 10 /CNW/ – The Canadian Institute of Chartered Accountants'(CICA) Public Sector Accounting Board (PSAB) has released a new Government Reporting Model that will see federal, provincial and territorial governments move to a full accrual system of accounting and a more comprehensive set of financial statements that places less emphasis on the annual surplus or deficit number.

“The new reporting model will eliminate the one-dimensional focus on a
government’s annual deficit or surplus number by requiring a more
comprehensive set of indicators to be used in compiling the financial
statements, numbers that will be much more useful to the public and anyone who has a stake in making sense of the numbers,” said Daryl Wilson, PSAB chair and the Auditor General for the Province of New Brunswick.

The new reporting model prescribes five indicators or “messages” that
should be included in government financial statements: net debt; accumulated surplus/deficit; annual surplus/deficit; change in net debt in the year; and cash flow in the year. It was approved in Fall, 2002, issued in January of this year, and will come into effect in April 2005, though some governments have indicated their intention to apply the new model sooner.

The new model, expected to reach full compliance among the senior
governments, will also change the treatment of capital assets, such as roads, waterworks and buildings. One benefit will be that governments will gain a better understanding of the nature and extent of their capital resources so that they can plan for their maintenance and replacement.

“Governments use these assets to deliver services over the course of many years,” said Wilson. “With this new model, governments will no longer show the cost of an asset as a one-time charge against annual results when they purchase it. In many jurisdictions, this treatment ensured that capital costs were out of sight and out of mind in years after the acquisition. Instead, governments will now keep track of their capital property as assets and charge results with the cost of using the assets over many years.”

Wilson said the new rules won’t make it easier for governments to go on a capital spending spree. “A change in how a government measures its annual results doesn’t generate cash or open up spending room,” he said. “The landscape has remained the same, but the picture is being taken from a different perspective. The new model makes certain that capital spending is still highlighted and compared to the capital plans in a government’s budget, and the cash outflows related to capital purchases are also clearly identified on the new cash flow statement. This new model allows us to look at a government’s debt and the sources and uses of its cash in addition to its annual results. This will serve to enhance government accountability to taxpayers.”

The Public Sector Accounting Board comprises eleven volunteer members
drawn from senior levels of government, including federal and provincial auditors general, such as the Auditor General of Canada, Sheila Fraser, controllers, and deputy ministers, as well as municipal finance officials.

The Canadian Institute of Chartered Accountants (CICA) together with the provincial and territorial institutes of chartered accountants, represents a membership of approximately 68,000 CAs and 8,000 students in Canada and Bermuda. The CICA conducts research into current business issues and sets accounting and assurance standards for business, not-for-profit organizations and government. It issues guidance on control and governance, publishes professional literature, develops continuing education programs and represents the CA profession nationally and internationally.


Information about the new Government Reporting Model