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International Public Sector Accounting Standards Board (IPSASB)

Background

The International Public Sector Accounting Standards Board (IPSASB) - formerly the Public Sector Committee - of the International Federation of Accountants focuses on the accounting, auditing, and financial reporting needs of national, regional, and local governments, related governmental agencies, and the constituencies they serve. It addresses these needs by issuing and promoting benchmark guidance, conducting educational and research programs, and facilitating the exchange of information among accountants and those that work in the public sector or rely on its work.

IPSASB activities

The IPSASB's current activities are focused on the development of International Public Sector Accounting Standards (IPSAS) for financial reporting by governments and other public sector entities (the Standards Project).

The IPSASB's Standards Project was established in late 1996. The objectives of the initial stage of the project were to develop by the end of November 2001:

  • a background paper identifying current practices and issues in public sector financial reporting
  • a core set of IPSAS based (to the extent appropriate) on the International Accounting Standards in place as at August 1997
  • an IPSAS on the cash basis of accounting
  • guidance on the transition from the cash to the accrual basis of accounting.

The Preface to International Financial Reporting Standards issued by the International Accounting Standards Board explains that International Financial Reporting Standards (IFRSs) are designed to apply to the general purpose financial statements of all profit-oriented entities. Government Business Enterprises (GBEs) as defined by the IPSASB are profit-oriented entities. Accordingly, they are required to comply with IFRS.

A GBE:

  • is an entity with the power to contract in its own name
  • has been assigned the financial and operational authority to carry on a business
  • sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery
  • is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm's length)
  • is controlled by a public sector entity.

 

Convergence with IFRSs

The IPSASB develops accrual-based International Public Sector Accounting Standards (IPSAS) to address public sector financial reporting issues in two different ways:

  • By addressing public sector financial reporting issues (a) that have not been comprehensively or appropriately dealt with in existing International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB), or (b) for which there is no related IFRS; and
  • By developing IPSAS that are converged with IFRSs by adapting them to the public sector context.

In October the IPSASB adopted a set of procedures by which it considers IASB documents for convergence. The IPSASB will use the analysis resulting from this process to determine whether identified public sector issues warrant departures from the IASB document when developing the related IPSASB document. Click to download the IPSASB's Process for Reviewing and Modifying IASB Documents (October 2008) (PDF 78k).

     

     

    Standards Issued to Date Based on IFRSs

    To date, the IPSASB has issued the following final IPSAS:

    Accrual basis standards

    • IPSAS 1, Presentation of Financial Statements, sets out the overall considerations for the presentation of financial statements, guidance for the structure of those statements and minimum requirements for their content under the accrual basis of accounting.
    • IPSAS 2, Cash Flow Statements, requires the provision of information about the changes in cash and cash equivalents during the period from operating, investing and financing activities.
    • IPSAS 3, Net Surplus or Deficit for the Period, Fundamental Errors and Changes in Accounting Policies, specifies the accounting treatment for changes in accounting estimates, changes in accounting policies and the correction of fundamental errors, defines extraordinary items and requires the separate disclosure of certain items in the financial statements.
    • IPSAS 4, The Effects of Changes in Foreign Exchange Rates, deals with accounting for foreign currency transactions and foreign operations. IPSAS 4 sets out the requirements for determining which exchange rate to use for the recognition of certain transactions and balances and how to recognise in the financial statements the financial effect of changes in exchange rates.
    • IPSAS 5, Borrowing Costs, prescribes the accounting treatment for borrowing costs and requires either the immediate expensing of borrowing costs or, as an allowed alternative treatment, the capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.
    • IPSAS 6, Consolidated Financial Statements and Accounting for Controlled Entities, requires all controlling entities to prepare consolidated financial statements which consolidate all controlled entities on a line by line basis. The Standard also contains a detailed discussion of the concept of control as it applies in the public sector and guidance on determining whether control exists for financial reporting purposes.
    • IPSAS 7, Accounting for Investments in Associates, requires all investments in associate to be accounted for in the consolidated financial statements using the equity method of accounting, except when the investment is acquired and held exclusively with a view to its disposal in the near future in which case the cost method is required.
    • IPSAS 8, Financial Reporting of Interests in Joint Ventures, requires proportionate consolidation to be adopted as the benchmark treatment for accounting for such joint venturers entered into by public sector entities. However, IPSAS 8 also permits - as an allowed alternative - joint ventures to be accounted for using the equity method of accounting.
    • IPSAS 9, Revenue from Exchange Transactions, establishes requirements for the accounting treatment of revenue from exchange transactions. Non-exchange revenue, such as taxation, is not addressed in this standard. Non-exchange revenue is to be dealt with as a separate project.
    • IPSAS 10, Financial Reporting in Hyperinflationary Economies, describes characteristics of an economy that indicate whether it is experiencing a period of hyperinflation and provides guidance on restating the financial statements in a hyperinflationary environment to ensure useful information is provided.
    • IPSAS 11, Construction Contracts, deals with both commercial and non-commercial contracts and provides guidance on the allocation of contract costs and, where applicable, contract revenue to the reporting periods in which construction work is performed.
    • IPSAS 12, Inventories, establishes the accounting treatment of inventories held by public sector entities and deals with inventories held for sale in an exchange transaction and certain inventories held for distribution at no or nominal charge. The IPSAS excludes from its scope work-in progress of services to be provided at no or nominal charge from recipients because they are not dealt with by IAS 2 Inventories and because they involve public sector specific issues which require further consideration.
    • IPSAS 13, Leases. This IPSAS is based on IAS 17 Leases. The IPSAS establishes requirements for financial reporting of leases and sale and leaseback transactions by public sector entities, whether as lessee or lessor. The PSC decided that because the IPSAS on Leases and the proposed IPSAS on Property, Plant and Equipment are closely related, it was preferable that the two IPSASs be released at the same time. Accordingly, the release of this IPSAS has been deferred to later in 2001. (See the section on Work in Progress below for a report on progress on the IPSAS on Property, Plant and Equipment.)
    • IPSAS 14, Events After the Reporting Date. The IPSAS is based on IAS 10, Events After the Balance Sheet Date (revised 1999) but has been amended where necessary to reflect the public sector operating environment. The Standard establishes criteria for deciding whether the financial statements should be adjusted for an event occurring after the reporting date. It distinguishes between adjustable events (those that provide evidence of conditions that existed at the reporting date) and non-adjustable events (those that are indicative of conditions that arose after the reporting date.
    • IPSAS 15, Financial Instruments: Disclosure and Presentation. The IPSAS is based on IAS 32 Financial Instruments: Disclosure and Presentation (Revised 1998). The Standard includes requirements for disclosures about both on-balance sheet and off-balance sheet (statement of financial position) instruments, and the classification of financial instruments as financial assets, liabilities or equity. Some respondents noted that the IPSAS would have only limited application for public sector entities which did not hold financial assets, liabilities or equity. The PSC has included as an appendix to the IPSAS a guide to assist entities in identifying the requirements of the Standard that will apply to them.
    • IPSAS 16, Investment Property. IPSAS 16 Investment Property is based on IAS 40 Investment Property (issued 2000) and provides guidance on identifying investment properties in the public sector. The Standard:
      • requires that investment property initially be recognised at cost and explains that where an asset is acquired at no or nominal cost, its cost is its fair value as at the date it is first recognised in the financial statements;
      • requires that subsequent to initial recognition investment property be measured consistent with either the fair value model or the cost model; and
      • includes transitional provisions for the initial adoption of the IPSAS.
    • IPSAS 17, Property, Plant and Equipment. IPSAS 17 Property, Plant and Equipment, establishes the accounting treatment for property, plant and equipment, including the basis and timing of their initial recognition, and the determination of their ongoing carrying amounts and related depreciation. It does not require or prohibit the recognition of heritage assets.
    • IPSAS 18, Segment Reporting. Establishes principles for reporting financial information about distinguishable activities of a government or other public sector entity appropriate for evaluating the entity's past performance in achieving its objectives and for making decisions about the future allocation of resources.
    • IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets. This Standard defines provisions, contingent liabilities and contingent assets; and identifies the circumstances in which provisions should be recognised, how they should be measured and the disclosures that should be made about them. The Standard also requires that certain information be disclosed about contingent liabilities and contingent assets in the notes to the financial statements to enable users to understand their nature, timing, and amount.
    • IPSAS 20, Related Party Disclosures. IPSAS 20 requires the disclosure of the existence of related party relationships where control exists and the disclosure of information about transactions between the entity and its related parties in certain circumstances. This information is required for accountability purposes and to facilitate a better understanding of the financial position and performance of the reporting entity. The principal issues in disclosing information about related parties are identifying which parties control or significantly influence the reporting entity and determining what information should be disclosed about transactions with those parties.
    • IPSAS 21, Impairment of Non-Cash-Generating Assets IPSAS 20 prescribes the procedures that an entity applies to determine whether a non-cash-generating asset is impaired and to ensure that impairment losses are recognised. The standard also specifies when an entity would reverse an impairment loss and prescribes disclosures.
    • IPSAS 22, Disclosure of Financial Information about the General Government Sector IPSAS 22 establishes requirements for governments that choose to disclose information about the general government sector and that prepare their financial statements under the accrual basis of accounting.
    • IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers). IPSAS 23 addresses:
      • Recognition and measurement of revenue from taxes
      • Recognition of revenue from transfers, which include grants from other governments and international organisations, gifts and donations
      • How conditions and restrictions on the use of transferred resources are to be reflected in the financial statements
    • IPSAS 24, Presentation of Budget Information in Financial Statements. IPSAS 24 applies to entities that adopt the accrual basis of financial reporting. It identifies disclosures to be made by governments and other public sector entities that make their approved budgets publicly available. Also, it requires public sector entities to include a comparison of budget and actual amounts in the financial reports and an explanation of any material differences between budget and actual amounts.
    • IPSAS 25 Employee Benefits. IPSAS 25 sets out the reporting requirements for the four categories of employee benefits dealt with in the IASB's IAS 19 Employee Benefits. These are short-term employee benefits, such as wages and social security contributions; post-employment benefits, including pensions and other retirement benefits; other long-term employee benefits; and termination benefits. The new IPSAS also deals with specific issues for the public sector, including the discount rate related to post-employment benefits, treatment of post-employment benefits provided through composite social security programs, and long-term disability benefits. IPSAS 25 is effective for reporting periods beginning on or after 1 January 2011.
    • IPSAS 26 Impairment of Cash-Generating Assets. Some public sector entities (other than government business enterprises, which would already be using full IFRSs) may operate assets with the main purpose of generating a commercial return (rather than providing a public service). IPSAS 26, which is based on IAS 36 Impairment of Assets, applies to such assets. It sets out the procedures for a public sector entity to determine whether a cash-generating asset has lost future economic benefit or service potential and to ensure that impairment losses are recognised in its financial reports. Non cash-generating assets, those used primarily for service delivery, are addressed separately in IPSAS 21 Impairment of Non-Cash-Generating Assets. IPSAS 26 is effective for reporting periods beginning on or after 1 April 2009.
    • IPSAS 27 Agriculture. IPSAS 27 prescribes the accounting treatment and disclosures related to agricultural activity, a matter not covered in other standards. Agricultural activity is the management by an entity of the biological transformation of living animals or plants (biological assets) for sale, or for distribution at no charge or for a nominal charge or for conversion into agricultural produce or into additional biological assets. IPSAS 27 is primarily drawn from the IASB's IAS 41 Agriculture, with limited changes dealing with public sector-specific issues. For example, IPSAS 27 addresses biological assets held for transfer or distribution at no charge or for a nominal charge to other public sector bodies or to not-for-profit organisations. IPSAS 27 also includes disclosure requirements that are aimed at enhancing consistency with the statistical basis of accounting that governs the Government Finance Statistics Manual. IPSAS 27 is effective for annual financial statements covering periods beginning on or after 1 April 2011, with earlier application encouraged.
    • IPSAS 28 Financial Instruments: Presentation. IPSAS 28 draws primarily on IAS 32 and establishes principles for presenting financial instruments as liabilities or equity, and for offsetting financial assets and financial liabilities.
    • IPSAS 29 Financial Instruments: Recognition and Measurement. IPSAS 29 draws primarily on IAS 39, establishing principles for recognising and measuring financial assets, financial liabilities, and some contracts to buy or sell non-financial items.
    • IPSAS 30 Financial Instruments: Disclosures. IPSAS 30 draws on IFRS 7 and requires disclosures for the types of loans described in IPSAS 29. It enables users to evaluate: the significance of the financial instruments in the entity's financial position and performance; the nature and extent of risks arising from financial instruments to which the entity is exposed; and how those risks are managed.
    • IPSAS 31 Intangible Assets. IPSAS 31 covers the accounting for and disclosure of intangible assets. It is primarily drawn from IAS 38 Intangible Assets. It also contains extracts from the SIC 32 Intangible Assets-Web Site Costs, adding application guidance and illustrations that have not yet been incorporated into the IAS. At this point, IPSAS 31 does not deal with uniquely public sector issues, such as powers and rights conferred by legislation, a constitution, or by equivalent means; the IPSASB will reconsider the applicability of the standard to these powers and rights in the context of its conceptual framework project, which is currently in progress.
    • IPSAS 32 Service Concession Arrangements: Grantor. IPSAS 32 provides for the recognition, measurement, and disclosure of service concession assets and related liabilities, revenues, and expenses by the grantor. The criteria in IFRIC 12 Service Concession Arrangements for determining whether the operator controlled the asset used in a service concession arrangement are also used in IPSAS 32 to assess whether the grantor controlled the asset. IPSAS 32 also creates symmetry with IFRIC 12 on relevant accounting issues (i.e. liabilities, revenues, and expenses) from the grantor's point of view. In addition, IPSAS 32 is consistent with SIC-29 Service Concession Arrangements: Disclosures.

     

    Guidelines

    • No. 1. Withdrawn
    • No. 2 Applicability of International Standards on Auditing to the Audits of Financial Statements of Government Business Enterprises.

     

    Cash basis standards

    • Financial Reporting Under the Cash Basis of Accounting. (Unnumbered, January 2003). It establishes requirements for the preparation and presentation of a statement of cash receipts and payments and supporting accounting policy notes. It also includes encouraged disclosures that enhance the cash basis report.

    Contact details

    Public Sector Accounting Standards Board
    International Federation of Accountants
    14th Floor
    545 Fifth Avenue
    New York NY 10017

    Telephone: +1 212 286-9344
    Fax: +1 212 286-9570
    Stephanie Fox, IPSASB Technical Director (sfox @ ifac.org)
    IPSASB Website: www.ifac.org/PublicSector/

    Related news

    • IPSASB issues proposals in final phase of its public sector conceptual framework project

    • Apr 18, 2013

    • The International Public Sector Accounting Standards Board (IPSASB) has published a further exposure draft in its multi-phase Conceptual Framework project. The latest exposure draft deals with the concept of 'presentation' in general purpose financial reports (GPFRs), including general purpose financial statements of governments and other public sector entities, but also extending to additional information and reports that enhance, complement, and supplement the financial statements.

    • Conclusions on governance and strategy review of IFAC member bodies

    • Apr 02, 2013

    • The Monitoring Group and Public Interest Oversight Board (PIOB) have published documents in response to their March 2012 consultation documents on the governance of various organisations operating under the auspices of the International Federation of Accountants (IFAC). The reports outline a number of recommendations in relation to the governance and strategy of the various IFAC bodies, but does not make any recommendations on the governance of the International Public Sector Accounting Standards Board (IPSASB). The Monitoring Group has formally taken the question of IPSASB oversight onto its agenda, noting "its [own] composition and that of the PIOB currently are not appropriate to the needs of stakeholders in public sector accounting standards".

    • Eurostat report on the suitability of IPSAS for EU Member States

    • Mar 07, 2013

    • The European Commission has issued a report assessing the suitability of the International Public Sector Accounting Standards (IPSAS) for the Member States of the EU. The report concludes that, “even if IPSAS cannot easily be implemented in EU Member States as it stands currently, the IPSAS standards represent an indisputable reference for potential development of European Public Sector Accounting Standards (EPSAS), based on a strong EU governance system.”

    • New Australian budgetary disclosure requirements

    • Mar 06, 2013

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    • ACCA outlines policy positions on public sector reporting

    • Feb 14, 2013

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    • Report from recent IFASS meeting released

    • Jan 17, 2013

    • A report has been issued summarising the discussions at a meeting of the International Forum of Accounting Standard Setters (IFASS, formerly the NSS) held in Zurich on 22-23 October 2012. The meeting covered a broad range of topics, including the future relationships between the IASB and regional and national standard setters, topical issues in financial reporting, reports from regional groups and administrative matters.

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    • Dec 03, 2012

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    • IPSASB issues exposure drafts in two phases of its conceptual framework project

    • Nov 09, 2012

    • The International Public Sector Accounting Standards Board (IPSASB) has published two exposure drafts as part of its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. The exposure drafts cover the elements and recognition in financial statements, and the measurement of assets and liabilities in financial statements. In contrast to the IASB's Conceptual Framework, the IPSASB's framework proposes additional elements of financial statements including 'deferred inflows', 'deferred outflows', 'ownership contributions', and 'ownership distributions', but does not include a definition of 'ownership interests'.

    • IPSASB releases consultation paper on government reporting

    • Oct 19, 2012

    • The International Public Sector Accounting Standards Board (IPSASB) has published a Consultation Paper which aims to help reduce differences between Government Finance Statistics (GFS) reporting guidelines and International Public Sector Accounting Standards (IPSASs).

    • Public and private sector accounting standard differences highlighted

    • Sep 18, 2012

    • The New Zealand Accounting Standard Board (NZASB) has recently released an exposure draft which explores the practical difficulties in dealing with differences between public sector and private sector accounting standards being set by the IASB and IPSASB. The NZASB acknowledges "there is a risk that the two Boards will develop separate standards that treat like transactions in similar circumstances in quite different ways", which is a significant challenge in maintaining a credible differential reporting framework for various entities.

    • The future for public sector accounting standards

    • Sep 13, 2012

    • Ken Warren, a board member of the International Public Sector Accounting Standards Board (IPSASB) and the New Zealand External Reporting Board (XRB), has written an article providing some insights into the future direction of International Public Sector Accounting Standards (IPSAS). The article, entitled 'IPSASs through the looking glass' and recently published on the website of the New Zealand Institute of Chartered Accountants (NZICA), discusses conceptual differences between IFRS and IPSAS and likely developments in public sector accounting.

    • IFAC announces 2012 editions of various handbooks

    • Jul 04, 2012

    • The International Federation of Accountants (IFAC) has announced the availability of the 2012 editions of the handbooks from the International Auditing and Assurance Standards Board (IAASB), International Ethics Standards Board for Accountants (IESBA), and International Public Sector Accounting Standards Board (IPSASB).

    • IPSASB consults on work program

    • Jul 04, 2012

    • The International Public Sector Accounting Standards Board (IPSASB) has released for comment a Consultation Paper, 'Consultation on IPSASB Work Program 2013–2014', representing the first time the IPSASB has consulted on its work program. The document outlines current public sector standard setting environment considerations, identifies the development of the public sector conceptual framework as the IPSASB's most important project, sets out other projects commenced or committed to, and seeks input on other projects that should be considered.

    • New Zealand exposure drafts propose IPSAS adoption for certain public sector entities

    • Jun 28, 2012

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    • IPSASB consults on public sector combinations

    • Jun 26, 2012

    • The International Public Sector Accounting Standards Board (IPSASB) has released a Consultation Paper 'Public Sector Combinations'. The Consultation Paper is the result of the IPSASB's project on on accounting for public sector combinations and aims to present a principles-based approach to developing guidance for public sector entities accounting for such combinations. Some of the possible accounting approaches outlined in the paper are significantly different to those prescribed under IFRSs.

    • Report from recent IFASS meeting released

    • Jun 04, 2012

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    • Deloitte member firms comment on European IPSAS proposal

    • May 22, 2012

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