Which statement is true regarding the public sector's definition of a derivative?

The statement that the public sector has adopted the private-sector definition of a derivative is correct because, in recent years, there has been a concerted effort to align public sector accounting practices with those established in the private sector. This alignment is part of a broader movement towards improving the consistency and transparency of financial reporting across different sectors.

The Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) have often recognized the definitions and the guidance provided for derivatives from the private sector accounting standards, particularly those defined under Generally Accepted Accounting Principles (GAAP). This adoption ensures that the accounting for derivatives in the public sector reflects the same underlying principles and risk management practices found in the private sector, which enhances comparability and stakeholder understanding.

Therefore, the public sector's acknowledgment and incorporation of the private sector's definitions is a key aspect of its financial reporting framework, allowing for a more cohesive and understandable approach to accounting for financial instruments like derivatives.