What are the core requirements of PS 3450, Financial Instruments?

Effective April 1, 2022, PS 3450 Financial Instruments introduce comprehensive reporting requirements for all financial instruments. Each and every financial instrument a government holds will require classification, based on its properties. That classification will determine how the financial instrument will be measured and re-measured.

The biggest impact for public sector entities in Canada will occur with those financial instruments that fall under the fair value category. This represents a change in accounting practice for many governments and public sector organizations across Canada. Financial instruments such as listed equities and derivatives are required to be measured at their fair value (i.e. marked-to-market each reporting period). The resulting changes in fair value will be presented in a new Statement of Re-measurement Gains and Losses.

In addition to this, there are several new disclosure requirements related to financial instruments and the risks associated with these instruments. Depending on the extent of financial instruments held by the public sector entity, do not underestimate the efforts required to implement these disclosure requirements.