IPSASB publishes preliminary preface to forthcoming public sector conceptual framework

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02 Aug 2013

The International Public Sector Accounting Standards Board (IPSASB) has released a preliminary version of a Preface to its forthcoming Conceptual Framework for the public sector. The purpose of the Preface is to highlight characteristics of the public sector that underpin the development of International Public Sector Accounting Standards (IPSAS) and Recommended Practice Guidelines (RPGs), including the identification of areas where departures from private sector approaches to financial reporting are likely.

The document, entitled Preliminary Board View: Preface to the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities, identifies that the primary objective of most public sector entities is to deliver services to the public, rather than to make profits and generate a return on equity to investors.

The preface notes discusses the following characteristics of public sector entities:

  • The volume and financial significance of non-exchange transactions including involuntary transfers such as the collection of taxation, increasing the importance of the accountability objective of financial reporting
  • The importance of the approved budget and information to compare actual spending, revenues and the resulting surplus or deficit with budget estimates
  • The nature and purpose of assets in the public sector, which are primarily held to provide services rather than to generate cash flows. In addition, such assets may contribute to the historical and cultural character of a nation or region, or represent areas of natural significance
  • The longevity of the public sector and the nature of public sector programs, making the going concern concept difficult to interpret in the public sector context, and resulting in an increased need for information about the long term sustainability of an entity's finances
  • The regulatory role of public sector entities, including entities operating in certain sectors of the economy, to address market failures, or to regulate themselves
  • Relationship to statistical reporting, and the commonalities and differences between general purpose financial statements (GPFS) and government finance statistics (GFS).

The preliminary preface follows an earlier exposure draft which was issued in April 2011, and will not be finalised until the IPSASB finalises its conceptual framework during 2014. The IPSASB is not formally calling for constituent comment on the preliminary preface, but considered its publication important "because of the importance of the characteristics identified to the future development of IPSASs and RPGs".

Click for access to the preliminary preface (link to IFAC website).

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