Share and view ideas: Proposed Changes to Reporting of Gains and Losses in the Government’s Financial Results

From: Department of Finance Canada

Current status: Closed

Opened on March 6, 2020 and closed on June 12, 2020.

The government is seeking public feedback on changing the way that actuarial gains and losses are reported in the government's financial results, including the merits of incorporating the operating balance measurement concept in the federal financial reporting framework.

Join in: how to participate

The Department of Finance may make public some or all of the comments received or may provide summaries in its public documents. Stakeholders providing comments are asked to indicate clearly the name of the individual or the organization that should be identified as having made the submission.

In order to respect privacy and confidentiality, please advise when providing your comments whether you:

• consent to the disclosure of your comments in whole or in part;
• request that your identity and any personal identifiers be removed prior to publication; or
• wish that any portions of your comments be kept confidential (if so, clearly identify the confidential portions).

Information received through this comment process is subject to the Access to Information Act and the Privacy Act. Should you express an intention that your comments, or any portions thereof, be considered confidential; the Department of Finance will make all reasonable efforts to protect this information.

Who is the focus of this consultation?

The Government of Canada will engage with all Canadians.

Key questions for discussion

Full accrual accounting is recognized globally as the most sophisticated and comprehensive basis of financial measurement, as it records expenses when they are incurred, regardless of when the cash payment is made, and records revenues when earned, regardless of when the cash is received. At the same time, to value various assets and liabilities, this accounting basis requires the extensive use of estimates and assumptions about future events and circumstances, such as interest rates, inflation and mortality.

One area that is most subject to uncertainty and volatility relates to the valuation of public sector pensions and other future benefits owed to veterans and government employees. This volatility has increased in recent years, with the introduction of a new discount rate methodology in the 2018 Public Accounts of Canada for valuing unfunded pension and other future benefit obligations.

While these adjustments and revaluations are an important part of providing an accurate picture of the Government’s balance sheet (i.e. Statement of Financial Position) at any given time, they can also result in large swings in the budgetary balance, which have the potential to obscure underlying trends in government spending—including the true contribution government spending is making to economic growth—and can make fiscal management more challenging.

While interest rate volatility (and economists’ ability to forecast that volatility) are not new challenges, in an environment of heightened economic uncertainty, which is often reflected in fluctuations in government bond yields, it is important to consider new ways to communicate the impact of these economic forces on the government’s financial results.

Your ideas and input are sought around 2 themes exploring a potential option to improve the presentation of the government’s budget and financial reporting:

• Impact of Changes in Actuarial Assumptions on the Budgetary Balance
• Potential Adjustments to the Government’s Financial Reporting Framework

The input gathered through this process will be used to advise on the government’s Financial Reporting Framework.

Consultation document

• Proposed Changes to Reporting of Gains and Losses in the Government’s Financial Results

Contact us

Director General
Fiscal Policy Division
Economic and Fiscal Policy Branch
Department of Finance Canada
James Michael Flaherty Building
90 Elgin Street
Ottawa ON K1A 0G5
E-mail: fin.fc-cf.fin@canada.ca