When PS 1201, Financial Statement Presentation becomes effective in 2022, what will it mean to public sector financial statements?
PSAB had to modify its presentation and reporting model in order to accommodate the new suite of financial instruments standards. Most of the presentation requirements in PS 1201 are largely the same as the previous standard on financial statement presentation. The major change is the introduction of a new (fifth) financial statement - the Statement of Re-measurement gains and losses.
As PSAB's new financial instruments standards require certain financial instruments to be measured at fair value, each period there will be changes to fair value (i.e. stock prices will go up and go down from the initial purchase price). These changes in fair value are to be reported in a separate statement called the Statement of Re-measurement Gains and Losses. This is because fair value changes not within management's control, so the new statement has been introduced to remove these fluctuations from the core Statement of Operations which contains revenues and expenditures (items that the public sector entity is accountable for).
The fair value of financial instruments will also impact the entity's balance sheet and its Net Debt. PS 1201 also permits an entity to present its re-measurement gains and losses separate in its Statement of Change in Net Debt to illustrate how much Net Debt changed as a result of changes in fair value, as opposed to other changes such as the annual surplus and deficit.