Canadian public sector entities that report under Public Sector Accounting Standards (PSAS) are about to see their most significant presentation change in years. The Public Sector Accounting Board’s effective dates page confirms that both The Conceptual Framework for Financial Reporting in the Public Sector and Section PS 1202, Financial Statement Presentation, apply to fiscal years beginning on or after 1 April 2026. Early adoption of PS 1202 is permitted only if the Conceptual Framework is adopted at the same time.
For entities with an April 1 year start, that is the fiscal year now beginning. For those with a January 1 year start, it is the fiscal year beginning in 2027.
What is changing
PSAB’s In Brief on the reporting model explains the main differences between the current model and PS 1202.
From net debt to net financial assets or liabilities
The familiar “net debt” indicator is renamed net financial liabilities (or net financial assets when positive). It is calculated as financial assets minus financial liabilities. Non-financial liabilities are no longer part of the calculation.
Financial versus non-financial liabilities
Liabilities are now separated into financial liabilities, which will be settled with financial assets, and non-financial liabilities. Classifying some items will require judgment, as BDO notes. Deferred revenue and certain obligations deserve careful review.
A new statement of net financial assets or net financial liabilities
This indicator gets its own statement rather than appearing only as a subtotal in the statement of financial position.
A new statement of changes in net assets or net liabilities
This statement reconciles each component of net assets from opening to closing balance. A third component, “accumulated other,” is introduced alongside accumulated surplus or deficit and accumulated remeasurement gains and losses.
Budget comparisons
Budget figures presented in the financial statements must use the same basis of accounting, scope and classifications as actual results. Where the approved budget differs, the restated amounts must be identified and reconciled.
Comparatives
Prior-period comparatives are restated to conform to the new presentation, according to PSAB’s In Brief.
What this means for municipalities and school boards
For a municipality or a school board, the changes reach beyond the finance office:
- Council and board reporting. Elected officials and trustees are used to “net debt.” They will need a short explanation of the new indicator and why the number may differ.
- Budget process. If your budget is prepared on a different basis from your financial statements, you will need a documented reconciliation. Some organizations may choose to align budget formats with the new presentation.
- Accounting systems. Your chart of accounts and reporting templates must support the financial and non-financial liability split and the new statements.
- Provincial reporting. Check whether provincial ministries have updated their data collection templates or guidance to reflect the new model.
A preparation plan
- Read the Conceptual Framework. PSAB provides reporting model resources. The framework underpins the judgments you will make.
- Classify your liabilities. Go through each liability account and decide whether it is financial or non-financial. Document the reasoning.
- Build pro forma statements. Restate the most recent year in the new format to see the effect on your key indicators and to prepare comparatives.
- Update templates and systems. Revise your financial statement templates and confirm your software can produce them.
- Align the budget. Decide how you will present the budget and prepare reconciliations.
- Communicate early. Brief council, the board, the audit committee and your auditors before the first set of statements is drafted.
How we can help: KW Consulting supports public sector finance teams with system and template changes, and our upcoming financial audit division helps accounting firms prepare audit files from clients’ accounting data. See our PSAS page, our financial audit offering, ASPE and ASNPO resources for related entities, or contact us.
Sources
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