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International Public Sector Accounting Standards Board Activities
The IPSASB's current activities are focussed on the development of International Public Sector Accounting Standards (IPSASs) 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; and
- 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:
- (a) is an entity with the power to contract in its own name;
- (b) has been assigned the financial and operational authority to carry on a business;
- (c) sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery;
- (d) is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm's length); and
- (e) is controlled by a public sector entity.
Strategy and Operational Plan 2007-2009
In April 2007, the IPSASB published its Strategy and Operational Plan 2007-2009 (PDF 218k). The four long-term strategic themes adopted are:
- Public sector conceptual framework
- Public sector specific projects including convergence with statistical bases where appropriate
- IFRS convergence
- Promotion and communication
With regard to IFRS convergence, the IPSASB's strategy states:
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What is the IPSASB proposing as an appropriate IFRS Convergence Strategy?
Based on consideration of these issues and the discussions held throughout the March
2007 meeting, the IPSASB came to the conclusion that the most appropriate IFRS
convergence strategy is one that reflects a 'review and adapt' approach. The IPSASB's
obligation to its constituents is best met through an IFRS strategy that identifies projects
based on the IASB workplan and standards and which specifically considers whether
there are public sector specific reasons for departing from those standards. The standards
are then adapted to reflect public sector differences where appropriate.
Fundamental to this approach is the need to consider the 'rules of the road' that would
contribute to the discussion of when an IFRS would be adapted for the public sector.
There is a belief that a more rigorous process needs to be established to help the IPSASB
assess when a departure is necessary. To this end, while the IPSASB generally agreed on
this 'review and adapt' approach, they saw it as inextricably linked to a project that
would set out the criteria or 'rules of the road' for IFRS convergence. This has been
added to the workplan as a specific project to be initiated and undertaken immediately.
Ultimately what this means is that this is not a 'one size fits all' approach to standard-setting.
Nor does the IPSASB think that departures from IFRSs should be routine.
Rather, each IFRS would be analyzed on a case by case basis to determine what
amendments, if any, are necessary. Consideration of wording changes to 'public
sectorize' the standards would be undertaken for all IFRSs. A technical evaluation would
be required that considers issues in the context of both the private sector and the public
sector. This will help to identify any public sector specific reasons for departing as well
as any particular interpretations that might be needed to add value for the public sector
constituents. The rules of the road project will establish the parameters to identify those
situations that might be result in a decision to develop a different standard. These
guidelines will help in narrowing the debate and ensuring consistency in application.
The IPSASB believes that this approach is the approach that will result in quality
standards for the public sector that build on the technical expertise already embedded in
the IFRSs. In this regard, it is the approach that best reflects the IPSASB's mandate and
obligation to its constituents using the resources available. This approach will achieve
IPSASB's mission to serve the public interest by developing high-quality accounting
standards.
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Standards Issued to Date Based on IFRSs
To date, the IPSASB has issued the following final IPSASs:
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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 recognize 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 capitalization 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.
- PSAS 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 recognized 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 recognized, 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 recognized. 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 organizations, 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.
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.
Download the Standards
Full text of the standards can be downloaded without charge from IFAC's Website.
Translations Available from IPSASB
Deloitte Publication Summarising IPSASs
Deloitte has published a booklet summarising the provisions of all International Public Sector Accounting Standards (IPSAS) issued as of 1 November 2007, namely IPSASs 1 to 24. These summaries are intended as general information and are not a substitute for reading the entire Standard. IPSASs are developed by IFAC's International Public Sector Accounting Standards Board (IPSASB). The booklet also includes summaries of two outstanding exposure drafts from the IPSASB. Click to download Deloitte's 2007 IPSAS Summary Booklet (PDF 507k).
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The IPSASs represent the first set of authoritative international financial reporting standards for governments. They are available for downloading on the IFAC Website (see below). IPSASB exposure drafts and discussion documents are also available for downloading.
Study on Transition to Accrual Accounting
In April 2002, the International Public Sector Accounting Standards Board published its Study 14: Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities. The main purpose of the Study is to help entities intending to move to the accrual basis of accounting and comply with the accrual-based IPSASs. The Study also includes discussion of certain topics not addressed by current IPSASs or Exposure Drafts.
International Public Sector Accounting Standards Board Update Newsletters
*Issue numbers restarted at #1 when the former PSC was reorganised into the IPSASB.
Spanish and French versions of the newsletter may be found on the IPSASB's Website.
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