The future for public sector accounting standards

  • IPSASB (International Public Sector Accounting Standards Board) (mid gray) Image

13 Sep, 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.

The article is couched in terms of  the IPSASB's current project to rewrite its conceptual framework to better reflect public sector needs.  The article draws out conceptual differences between the IASB and IPSASB due to underlying differences between for-profit private sector entities and public sector entities, and provides Mr Warren's insights into what those differences might mean in terms of IPSAS set on the basis of decisions reached to date in the IPSASB's project.

Mr Warren discusses how the wider group of users of public sector financial statements extends beyond the focus of the IASB's framework on resource allocation decision making by capital providers.  This then leads to likelihood, in Mr Warren's view, of matters such as a stronger focus on 'flows' rather than 'stocks' in financial reporting, emphases on budgets/forecasts and longer term sustainability, a move to service reporting, and guidance on public sector specific issues such as non-exchange revenues, controlled and regulated assets.

However, Mr Warren also notes that where public sector specific issues do not arise, then IASB requirements can be used:

... if the identified key characteristics are not in play, my speculation is that there is no reason for the IPASAB to amend the IASB requirements on a particular topic. Not only does the use of the IASB approach in such circumstances significantly free up IPSASB time to focus on the more critical expectations of its constituents, but also there are positive benefits in terms of understandability and cost-reduction if similar transactions and events have similar measurement and recognition requirements in IPSAS and IFRS.

The future direction of IPSAS is of critical importance in the New Zealand context, as New Zealand's evolving differential reporting framework proposes to use IPSAS as the basis for public sector accounting standards.  Exposure drafts proposing to implement IPSAS-based requirements were released in June 2012 and are open for consultation until mid-December 2012.

Click for access to the article (link to NZICA website).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.