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IPSAS 34-38, Accounting for Interests in Other Entities [Completed]

Effective date:

Annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged.

Transitional provisions:

Annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged.

Last updated:

January 2015


A key part of the IPSASB’s strategy to develop high-quality public sector financial reporting standards is to maintain existing IPSASs. IPSASs 6, 7, and 8 are based on International Financial Reporting Standards (IFRSs). Because the underlying IFRSs have changed, the IPSASB has developed IPSASs 34-38 so that convergence with the related IFRSs is maintained to the extent appropriate. These IPSASs also incorporate important guidance to make them appropriate for application in the public sector.

The following highlights particular aspects of each IPSAS:

The requirements for separate financial statements in IPSAS 34 are very similar to the current requirements for separate financial statements in IPSAS 6.

IPSAS 35 supersedes the requirements in IPSAS 6 regarding consolidated financial statements. IPSAS 35 still requires that control be assessed having regard to benefits and power, but the definition of control has changed and the standard now provides considerably more guidance on assessing control. The definition of control focuses on an entity’s ability to influence the nature and amount of benefits through its power over another entity. This new definition of control may impact previous assessments of control, and therefore whether certain entities should be consolidated. IPSAS 35 also introduces the concept of “investment entities,” which may be applicable to some sovereign wealth funds. Generally, an investment entity measures its investments in controlled entities at fair value through surplus or deficit. After thorough consultation, the IPSASB decided, for public sector specific reasons, that an entity which controls an investment entity should retain this method of accounting for an investment entity’s investments in its consolidated financial statements, regardless of whether it is itself an investment entity. In contrast with IPSAS 6, IPSAS 35 no longer permits an exemption from consolidation for temporarily controlled entities. Consistent with the IPSASB’s policy of reducing unnecessary differences between IPSASs and Government Finance Statistics reporting guidelines, the IPSASB has aligned the principles in IPSAS 35 with the Government Finance Statistics Manual 2014 (pre-publication draft) where feasible.

IPSAS 36 explains the application of the equity method of accounting, which is used to account for investments in associates and joint ventures. The requirements are very similar to the current guidance in IPSAS 7. Because equity accounting must now be used when accounting for joint ventures, the title of the standard now also refers to joint ventures. In contrast with IPSAS 7, IPSAS 36 does not permit a different accounting treatment for temporary investments.

IPSAS 37 establishes requirements for classifying joint arrangements and accounting for those different types of joint arrangements. Joint arrangements are classified as either joint operations or joint ventures. In a joint operation, the parties to the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. In a joint venture, the parties to the arrangement have rights to the net assets of the arrangement. These classifications differ from IPSAS 8, which referred to three types of arrangements (jointly controlled entities, jointly controlled operations, and jointly controlled assets). IPSAS 37 requires that an entity account for its interest in a joint operation by recognizing its share of the assets, liabilities, revenue, and expenses of the joint arrangement. It also requires that joint ventures be accounted for using the equity method. Previously, IPSAS 8 permitted jointly controlled entities to be accounted for using either the equity method or proportionate consolidation.

IPSAS 38 brings together the disclosures previously included in IPSASs 6–8. It also introduces new disclosure requirements, including those related to structured entities that are not consolidated and controlling interests acquired with the intention of disposal.

Recent activities

January 2015

On January 30, 2015, the IPSASB issued five new accounting standards relating to accounting for interests in other entities, as follows: IPSAS 34, Separate Financial Statements; IPSAS 35, Consolidated Financial Statements; IPSAS 36, Investments in Associates and Joint Ventures; IPSAS 37, Joint Arrangements; and IPSAS 38, Disclosure of Interests in Other Entities. These five standards will replace the current requirements in IPSAS 6, Consolidated and Separate Financial Statements; IPSAS 7, Investments in Associates; and IPSAS 8, Interests in Joint Ventures.

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