PSAB was established in 1981, to improve and harmonize public sector accounting in Canada. Its creation followed extensive consultation with governments and auditors and an in-depth study of their financial reporting practices.
The study found wide disparities in government reporting practices. Financial statement presentation varied, the statements were fragmented and did not provide an overview of the government as a whole. Similar transactions and events were being recorded differently and significant information about items such as liabilities and capital assets was missing.
This made it difficult to compare one government's financial performance to another or the financial results of the same government from one period to the next.
The purpose of financial statements is the communication of information. They provide evidence of accountability and report information to help others make judgments concerning government financial operations and management. To meet this need effectively, in a manner that maximizes their usefulness, information in financial statements must possess the basic qualities of relevance, reliability, comparability and understandability. PSAB was formed to issue standards based on these qualitative characteristics.