August 2021

Canadian public sector accounting standards: Exposure draft on the new standard for employee benefits

At the end of July, the Public Sector Accounting Board (PSAB) published a first exposure draft on PS 3251, the new standard for employee benefits that will apply to Canadian public sector entities. This standard would replace PS 3250 (retirement benefits) and PS 3255 (post-employment benefits, compensated absences and termination benefits). In this exposure draft, the PSAB is seeking comments on deferral provisions (deferred recognition of actuarial gains and losses) and discount rate guidance.

This publication is of particular interest to people taking part in the preparation of public sector financial statements, especially municipal organizations.

This standard uses principles from the International Public Sector Accounting Standard (IPSAS 39, Employment Benefits). It would be effective for fiscal years beginning on or after April 1, 2026 (therefore as of 2027 for municipal organizations). Early adoption would be permitted.


Here are the key changes proposed in this exposure draft:

  • No deferred recognition of gains or losses on assets and benefit obligation
    • Elimination of the use of the deferral and amortization method.
    • Immediate recognition of revaluations of the net defined asset (liability) within net assets for most plans. These revaluations are made up of, among other things, gains and losses on assets and benefit obligation, and would not be reclassified to surplus or deficit in a subsequent period (no recognition in the expense recognized in the statement of operations). The recognition approach proposed by the PSAB is similar to the one followed by private-sector entities applying international standards (IFRS).
    • Assets would be measured according to market value (no smoothing possible).
  • Discount rate depending on the assessment of the plan’s funding status
    • The plan’s funding status would be assessed by comparing the projected value of the assets with the projected benefit payments for each subsequent fiscal year. Other elements would need to be considered in this process, including the characteristics and circumstances specific to each plan.
    • Fully funded plans: Expected market rate of return on the plan’s assets
    • Unfunded plans: Market rate of return on provincial bonds
    • Partially funded plans: Single rate of return based on the expected market return on the plan’s assets for “funded” fiscal years and on the market return on provincial bonds for the remaining fiscal years
  • Other proposed changes
    • Net interest would be calculated by multiplying the net defined liability (asset) by the discount rate used to determine the benefit obligation.
    • Certain additional disclosures would be required, including a sensitivity analysis of the benefit obligation for each significant actuarial assumption.
    • Minor changes have been made to clarify existing instructions on how to deal with joint defined benefit pension plans, which should be recognized in the same way as multi-employer plans.

This exposure draft is the first component of the new work plan that was published in 2020. The subsequent components will deal with, among other things, risk-sharing plans and other non-traditional plans.


These changes are significant and the impact on financial statements will require in-depth analyses. For several public organizations, the effects of recognition on taxation will have to be studied and discussed. Normandin Beaudry will be commenting on the matter. We will also support some organizations working in the public and accounting standards sectors in formulating their own comments, through the participation of our consultants on various advisory committees.

For additional information or to comment on this exposure draft, consult the PSAB’s website. You have until November 25, 2021, to submit comments.

Would you like more information on this topic? Contact your Normandin Beaudry consultant or email us.