IPSAS Explained E-Book

Thomas Muller-Marques Berger

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 592

Veröffentlichungsjahr: 2018

Beschreibung

A succinct, yet highly informative guide to IPSAS and their application IPSAS Explained provides a concise summary of the International Public Sector Accounting Standards for practitioners needing to maintain compliance with ever-changing practices. Comprehensively updated to align with newly-accepted standards in key subject areas and including the latest iteration of the framework and improvement projects, this guide distills each standard into a useful and accessible format. Coverage of each IPSAS includes a brief overview of the basic principles behind it, as well as charts, graphs and tables that provide information at a glance. Updated material includes discussion of the new IPSASB governance structure, including the Public Interest Committee and Consultative Advisory Group, as well as information on the current Exposure Drafts and the changes forthcoming from the Improvements Project. New sections on First-Time Adoption of Accrual Basis IPSAS, new consolidation standards and Service Performance Reporting bring practitioners completely up to date to help ensure full compliance. * Locate relevant IPSAS quickly and easily * Get up to date on newly adopted standards * Deepen conceptual understanding with graphical representations * Understand the operations of the IPSASB, as well as new and ongoing projects The International Public Sector Accounting Standards Board is engaged in the ongoing process of bringing public sector accounting in line with the IPSAS, which largely align with the IFRS model: where an IFRS exists, it is either adopted directly or adjusted to be suitable for the public sector; where no relevant IFRS exists, the IPSASB issues an IPSAS. IPSAS Explained condenses and clarifies each IPSAS, providing context, background and practical guidance to help practitioners find the answers they need to comply.

Leseprobe

IPSAS Explained

A Summary of International Public Sector Accounting Standards

Third Edition

Thomas Müller-Marqués Berger Ernst & Young

Authors:

Alexi Colyvas, EY South Africa

Huma Ghaffar, EY United Arab Emirates

Jens Heiling, EY Germany

Georges Ortmann, EY Belgium

Sonja Mosati, EY Germany

Thomas Müller-Marqués Berger, EY Germany

Serene Seah-Tan, EY Australia

This edition first published by John Wiley & Sons Ltd in 2018 © 2018 EYGM Limited.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

Disclaimer

This publication “IPSAS Explained: A Summary of International Public Sector Accounting Standards, Third Edition” includes excerpts from the International Public Sector Accounting Standards™ (IPSAS™) and other pronouncements of the International Public Sector Accounting Standards Board® (IPSASB®), published by the International Federation of Accountants® (IFAC®), and used with permission of IFAC. Any views or opinions that may be included in this publication are solely those of the authors, and do not express the views and opinions of IFAC or any independent standard setting board supported by IFAC.

Research resources utilized in Chapter II included a review of publically available online articles and pronouncements, IFAC Status of Membership Organizations (SMO) reports, and internal research through EY's offices in the region. Although reasonable effort was made to obtain the most accurate and up-to-date information for the countries and regions mentioned in this chapter, there is a possibility that some information may be outdated and it is therefore recommended that anyone wanting to rely on this information for political, business or academic research purposes should confirm the latest status directly with the office of the Accountant-General and/or the Ministry of Finance in the country of interest.

Foreword

Dear reader,

Five years have elapsed since we published the second edition of IPSAS Explained. During this period, the transition of public sector accounting toward a resource-oriented, accrual-based accounting and reporting framework has gained significant momentum. Consequently, the relevance of and appreciation for International Public Sector Accounting Standards (IPSASs) as the only globally-accepted accounting framework for the public sector has grown considerably in recent years.

Nonetheless, the form and content of public sector accounting is still highly diversified across and within countries. In times of strongly-linked economies, this heterogeneity is definitely an obstacle for the achievement of the key objectives of public management, which include both improving public services and reducing bureaucracy, as well as achieving comparable standards in terms of accountability and transparency. Debates in the aftermath of the sovereign debt crisis and corresponding developments, such as the European Public Sector Accounting Standards (EPSASs) project in the European Union, have shown that the IPSASs are a suitable means for harmonizing and aligning public sector accounting.

As a global organization with a strong focus on the public sector, EY has been actively contributing to the further development and harmonization of public sector accounting since more than a decade. We are convinced, now more than ever, that the global use of IPSASs will enhance transparency and accountability, which are both urgently needed to overcome the current crisis of trust in governments’ finances. The aim of the third edition of this publication is to provide decision-makers in the public sector with an overview of the IPSASs and the activities of the International Public Sector Accounting Standards Board (IPSASB). Each IPSAS is presented briefly, focusing on the core content of the relevant standard. In the interest of readability, we decided in the majority of cases not to focus on the – often extensive – disclosures in the notes required by the IPSASs. In order to also provide decision-makers with insights into current accounting reform activities, we have worked on broadening these background chapters in this edition.

This book is based on the IPSASs, Recommended Practice Guidelines (RPGs), Exposure Drafts (EDs) and Consultation Papers (CPs) as of 30 August 2017. As a result, this new edition of IPSAS Explained includes new standards such as those on public sector combinations or employee benefits, the ED on financial instruments as well as the CPs on revenue and non-exchange expenses and social benefits. Once again, we have enriched the chapters with graphs, figures and tables which will help the readers gain a better understanding of the sometimes complex and inapprehensible standards.

If you have any comments or suggestions, we would be happy to consider them for a fourth edition of this publication. Please send an e-mail to [email protected]. I would like to thank everyone who has contributed to this publication for their valuable support. A special thank you goes to the great IPSAS authors team consisting of Alexi Colyvas, Huma Ghaffar, Dr. Jens Heiling, Georges Ortmann, Serene Seah-Tan and Sonja Mosati. As for the previous editions, however, this publication would not have been possible without Dr. Jens Heiling, to whom I am again deeply grateful for his outstanding level of commitment.

Thomas Müller-Marqués Berger, Stuttgart, September 2017

Contents

I. Introduction: General information about IPSASs and the IPSASB

1 The International Public Sector Accounting Standards Board

2 International accounting standards for the public sector

3 IPSASB's Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities

II. Costs versus benefits of implementing accrual accounting in the public sector

1 Cost-benefit assessments for implementation

2 Summary of expected benefits and positive impacts of implementing IPSASs

3 Expected costs of implementing IPSASs

4 Expected challenges of IPSAS implementation

III. International developments in public sector accounting

1 Africa

2 Europe

3 Latin America and the Caribbean

IV. Overview of accrual basis IPSASs

IPSAS 1: Presentation of Financial Statements

IPSAS 2: Cash Flow Statement

IPSAS 3: Accounting Policies, Changes in Accounting Estimates and Errors

IPSAS 4: The Effects of Changes in Foreign Exchange Rates

IPSAS 5: Borrowing Costs

IPSAS 6: Consolidated and Separate Financial Statements

IPSAS 7: Investments in Associates

IPSAS 8: Interests in Joint Ventures

IPSAS 9: Revenue from Exchange Transactions

IPSAS 10: Financial Reporting in Hyperinflationary Economies

IPSAS 11: Construction Contracts

IPSAS 12: Inventories

IPSAS 13: Leases

IPSAS 14: Events after the Reporting Date

IPSAS 15: Financial Instruments: Disclosure and Presentation

IPSAS 16: Investment Property

IPSAS 17: Property, Plant and Equipment

IPSAS 18: Segment Reporting

IPSAS 19: Provisions, Contingent Liabilities and Contingent Assets

IPSAS 20: Related Party Disclosures

IPSAS 21: Impairment of Non-Cash-Generating Assets

IPSAS 22: Disclosure of Information About the General Government Sector

IPSAS 23: Revenue from Non-Exchange Transactions (Taxes and Transfers)

IPSAS 24: Presentation of Budget Information in Financial Statements

IPSAS 25: Employee Benefits

IPSAS 26: Impairment of Cash-Generating Assets

IPSAS 27: Agriculture

IPSAS 28: Financial Instruments: Presentation

IPSAS 29: Financial Instruments: Recognition and Measurement

IPSAS 30: Financial Instruments: Disclosures

IPSAS 31: Intangible Assets

IPSAS 32: Service Concession Arrangements: Grantor

IPSAS 33: First-time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSASs)

IPSAS 34: Separate Financial Statements

IPSAS 35: Consolidated Financial Statements

IPSAS 36: Investments in Associates and Joint Ventures

IPSAS 37: Joint Arrangements

IPSAS 38: Disclosure of Interests in Other Entities

IPSAS 39: Employee Benefits

IPSAS 40: Public Sector Combinations

Cash Basis IPSAS: Financial Reporting Under the Cash Basis of Accounting

V. Recommended Practice Guidelines (RPGs)

RPG 1: Long-Term Sustainability of an Entity's Finances

RPG 2: Financial Statement Discussion and Analysis

RPG 3: Reporting Service Performance Information

VI. Exposure Drafts and Consultation Papers

1 Exposure Drafts

2 Consultation Papers

Further reading

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List of Tables

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Abbreviations

ADB

Asian Development Bank

AG

Application Guidance

ASB

Accounting Standards Board, South Africa

AU

African Union

BC

Basis for Conclusion

Bn

Billion

CAG

Consultative Advisory Group

CEMAC

Community of Central Africa

CF

Conceptual Framework

CNC-CI

National de la Comptabilitié-Côte d'Ivoire

CNCP

Comissão de Normalização Contabilística (Committee for Public Sector Accounting)

CP

Consultation Paper

CPA

Canada Chartered Professional Accountants of Canada

CPCC

Conseil Permanent de la Comptabilité au Congo

DP

Discussion Paper

EAC

East African Community

EC

European Commission

ECB

European Central Bank

ECOWAS

Economic Community of West African States

ED

Exposure Draft

EDP

Excessive Deficit Procedure

EFSM

European Financial Stability Mechanism

EFSF

European Financial Stability Facility

e.g.

exempli gratia, for example

EPSAS

European Public Sector Accounting Standard(s)

ESA

European Space Agency

ESA 95

European System of Accounts 1995

ESAAG

Eastern and Southern African Association of Accountants-General

et al.

et alia

, and others

et seq.

et sequens/et sequentes

, and the following one(s)

ETS

Emmissions Trading Scheme

EU

European Union

Eumetsat

European Organisation for the Exploitation of Meteorological Satellites

EUR

Euro

FIFO

First-in, first-out inventory valuation method

FOCAL

Foro de Contadurías Gubernamentales de América

FSDA

Financial Statement Discussion and Analysis

FTI

First-time Implementation

GBE

Government Business Enterprises

GBP

British Pound

GDP

Gross Domestic Product

GFS

Government Finance Statistics

GFSM 2001/2008

Government Finance Statistics Manual 2001/2008

GGS

General government sector

GPFR

General Purpose Financial Report

GPFS

General Purpose Financial Statement

GRAP

Standards of Generally Recognised Accounting Practice, South Africa

GRG

Governance Review Group

IAS

International Accounting Standard

IASB

International Accounting Standards Board, London

i.e.

id est

, that is

IFAC

International Federation of Accountants

IFMS

Integrated Financial Management System

IFRIC

International Financial Reporting Interpretations Committee

IFRS

International Financial Reporting Standard

ICAG

Institute of Chartered Accountants Ghana

IMF

International Monetary Fund

INTOSAI

International Organization of Supreme Audit

IPSAS

IInntsetirtnuatitoionnsal Public Sector Accounting Standard

IPSASB

International Public Sector Accounting Standards Board

LAC

Latin-American and Carribean

MoU

Memorandum of Understanding

MS

Member State

n/a

not applicable

NATO

North Atlantic Treaty Organization

NCI

Non-controlling interest

OBS

Opening Balance Sheet

OECD

Organisation for Economic Co-operation and Development

OHADA

Organisation for the Harmonisation of Business Law in Africa

p.

Page

para.

Paragraph

PEFA

Public Expenditure and Financial Accountability

PFCS

Public Financial Corporations Sector

PFM

Public Financial Management

PIC

Public Interest Committee

PNFCS

Public Non-Financial Corporations Sector

POCP

Plano Oficial de Contabilidade Pública/Official Plan of Public Accounting

PP&E

Property, Plant, and Equipment

PSASB

Public Sector Accounting Standards Board, Kenya

PSC

Public Sector Committee

QC

Qualitative Characteristic

ROSC

Reports on the Observance of Standards and Codes

RPG

Recommended Practice Guideline

SADC

Southern African Development Community

SDR

Special Drawing Rights

SIC

Standing Interpretations Committee

SMCs

Specific Matters for Comment

SNA 2008

System of National Accounts 2008

TBG

Task-based Group

TF

Task Force

ToR

Terms of Reference

UK

United Kingdom

UK ASB

United Kingdom Accounting Standards Board

UN

United Nations

UNDP

United Nations Development Program

UNESCO

United Nations Educational, Scientific and Cultural Organization

UNICEF

United Nation International Children Emergency Fund

US

United States of America

USD

United States Dollar

WAEMU

West African Economic and Monetary Union

WFP

World Food Program

WG

Working Group

XRB

(New Zealand) External Reporting Board

I.Introduction: General information about IPSASs and the IPSASB

1 The International Public Sector Accounting Standards Board

1.1 General information

The International Public Sector Accounting Standards Board (IPSASB) is the only global accounting standard setter for the public sector. The structures and processes that support the IPSASB's operations are facilitated and supported by the International Federation of Accountants (IFAC).

International Public Sector Accounting Standards, or IPSASs for short, govern the accounting by public sector entities. IPSASs are developed by the International Public Sector Accounting Standards Board (IPSASB). The IPSASB communicates in its pronouncement “The Applicability of IPSAS” (published in April 2016) as well as in the revised “Preface to International Public Sector Accounting Standards” which types of public sector entities it considers when developing an IPSAS or a Recommended Practice Guideline (RPG). The IPSASB is an independent board founded on the basis of the former Public Sector Committee (PSC) by the International Federation of Accountants (IFAC) to develop and publish the IPSASs.

The IFAC is a global organization for the accountancy profession. IFAC is comprised of over 175 members and associates in over 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce. It was founded in 1977 and is domiciled in New York. IFAC facilitates the work of the IPSASB, and the other independent standard-setting boards, both by contributions to the IPSASB's budget and by providing support in areas such as finance, human resources, and intellectual capital.

According to the bylaws of the International Federation of Accountants, its mission is as follows: “to serve the public interest by contributing to the development, adoption and implementation of high-quality international standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants; promoting the value of professional accountants worldwide; and speaking out on public interest issues where the accountancy profession's expertise is most relevant.”

The IFAC did not have this in mind when it established the PSC in 1986 as a standing technical committee. The PSC initially focused on preparing and publishing studies and research reports on (international) public sector accounting. In 2004, the PSC was renamed IPSASB. In November 2011, the Terms of Reference (ToR) of the IPSASB were extended. Henceforth, the IPSASB's purpose is not only to set standards for general purpose financial statements (GPFSs), but also to take care of general purpose financial reports (GPFRs). GPFRs refer to all financial reports which are intended to meet the information needs of users who are unable to request the preparation of financial reports tailored to meet their specific information needs. The IPSASB now develops and issues, in the public interest and under its own authority, high-quality accounting standards and other publications for use by public sector entities around the world in the preparation of GPFRs. Since 2015, the adherence to public interest is monitored by the Public Interest Committee (PIC), which has been supported by the Consultative Advisory Group (CAG) since January 2016.

On 22 November 2011, the International Accounting Standards Board (IASB) and the IFAC announced an agreement to strengthen their cooperation in developing private and public sector accounting standards. The mutual agreement between the IASB and IFAC, in the form of a Memorandum of Understanding (MoU), reflects the IASB's and IFAC's view that “high-quality financial reporting standards contribute significantly to the effective functioning of capital markets and sound economic growth.”

The agreement intends to strengthen the cooperation between the two boards, with the aim of committing to enhance initiatives of common and mutual interest. The IPSASB and IASB continue to hold regular liaison meetings, to update each Board on their respective work programs and to highlight financial reporting issues where alignment between the requirements of the IASB and the requirements of the IPSASB is necessary.

The IASB has observer status at the IPSASB meetings. The IASB also continues to provide input to specific IPSASB technical projects. In the medium to longer term, IASB and IFAC will mutually consult on projects where both parties are likely to benefit from consideration of both private sector and public sector perspectives.

1.2 Structure and organization of IPSASB

Members of the IPSASB can be nominated by any stakeholder, including IFAC member bodies and IPSASB members, IFAC's Forum of Firms, international organizations, government institutions, and the general public. The members of the IPSASB are nominated based on recommendations by the IFAC Nominating Committee. Based on these nominations, the appointments are then made by the IFAC Board, considering technical and professional criteria, as well as a geographic and gender balance.

The aim of RPGs is to provide guidance which represents good practice that public sector entities are encouraged to follow. However, entities can claim full compliance with IPSAS (standards) even if they do not follow the guidance of one or more RPGs. Studies shall provide advice on financial reporting issues in the public sector (e.g., Study 14 on “Transition to the Accrual Basis of Accounting: Guidance for Public Sector Entities”). They are based on research of best practices and most effective methods for dealing with accounting issues being addressed. In 2015 and 2016, staff of the IPSASB issued short non-authoritative papers on the treatment of Sovereign Debt Restructurings under IPSASs and on accounting aspects of the grant of a right to the operator model in IPSAS 32, Service Concession Arrangements: Grantor. Staff also issued a background paper on Emissions Trading Schemes following the decision to deactivate the project in light of IASB decisions on their related project on Pollutant Pricing Mechanisms.

The IPSASB may delegate responsibility for conducting the necessary research and drafting proposed standards and guidance to so-called Task-based Groups (TBGs), to individuals or to staff of the IPSASB. The TBGs are chaired by a member of the IPSASB. Depending on the topic, the sub-groups can also include non-members of the IPSASB or the IFAC (e.g., observers). In this case, the groups are called Task Forces (TFs). The work of the TBGs/TFs is usually focused on the creation of Consultation Papers (CPs) or Exposure Drafts (EDs), which are made available to the general public. The aim of TBGs and the TFs is to perform preparatory work for the board. Nevertheless, final responsibility for the projects lies with the IPSASB.

The publication of CPs and EDs is intended to give interested individuals, groups, public sector entities or their representatives the opportunity to submit comments (usually within a period of four to six months). This allows the groups affected by IPSASs to voice their opinion before the standards are approved and published by the IPSASB.

The observers of the IPSASB include organizations that have an interest in public sector financial reporting, such as the European Commission, Eurostat, the International Monetary Fund (IMF), the United Nations or the World Bank. Observers can ask for the right to speak, but they are not entitled to vote.

Besides financial and in-kind support from IFAC, the IPSASB also receives support (both direct financial and in-kind) from several external sources, such as the Asian Development Bank (ADB), the Chartered Professional Accountants of Canada (CPA Canada), the Accounting Standards Board of South Africa (ASB), the New Zealand External Reporting Board (XRB), the governments of Canada, New Zealand, and Switzerland as well as from the United Nations (UN) and the World Bank. Figure 1 shows the current structure and organization of the IPSASB.

Figure 1: Structure and organization of the IPSASB

Following a public consultation of the Governance Review Group, the Public Interest Committee (PIC) was created in 2015 to ensure that the public interest is served by the IPSASB in its standard-setting activities. In 2016, the IPSASB Consultative Advisory Group (CAG) was established as an integral and important part of the IPSASB's formal process of consultation. This new governance and oversight structure is explained in more detail in Chapter 1.4.

1.3 Objectives of the IPSASB

The objective of the IPSASB is to serve the public interest by setting high-quality public sector accounting standards, facilitating the adoption and implementation of these standards and enhancing the quality and consistency of practice throughout the world to strengthen the transparency and accountability of public sector finances. Public interest in the pronouncement of IPSASs may arise, for example, from a national or supranational need to harmonize financial reporting of public sector entities.

It is also in the public interest to continue developing public sector accounting by means of the IPSASB standardization projects.

The IPSASB achieves these goals by:

 Developing, setting and issuing International Public Sector Accounting Standards (IPSASs) for use by public sector entities, including national, regional, and local governments, and related governmental agencies;

 Publishing Recommended Practice Guidelines (RPGs) that represents good practice that public sector entities are encouraged to follow;

 Issuing studies to provide advice on financial reporting issues in the public sector based on best practices and most effective methods for dealing with the issues being addressed;

 Issuing other papers and research reports to provide information that contributes to the body of knowledge about public sector financial reporting issues and developments,

 Encouraging governments and national standard setters to engage in the development of its standards by commenting on the proposals set out in its Exposure Drafts and Consultation Papers;

 Encouraging the adoption of IPSASs and the harmonization of national requirements with IPSASs; and

 Promoting their acceptance and compliance on an international scale with these standards.

More details on the current strategy and work plan are decribed in chapter 1.6 below.

1.4 Governance and oversight of the IPSASB

The need for public interest oversight had been recognized as a gap in the IPSASB's institutional framework ever since it was identified in the 2003-2004 Likierman review of the former Public Sector Committee that led to the establishment of the IPSASB with its enhanced focus on standard setting.

Responding to this gap, a number of the IPSASB's most important constituents established the Governance Review Group (GRG) in 2013. Following a public consultation, the GRG published its recommendations report in March 2015. Following this report, the Public Interest Committee (PIC) was formed as the single governance body with the OECD, the World Bank Group, IMF, and INTOSAI as its founding members.

As one of its first major actions, the PIC approved the foundational documents of the IPSASB, PIC, and CAG under the new governance regime. These include the IPSASB's revised ToR, Due Process and Working Procedures, and the PIC's ToR.

Public Interest Committee (PIC)

The PIC oversees the governance and standard-setting activities of the IPSASB to ensure that they follow the due process and reflect public interest. The body also oversees the CAG's work.

The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting a high-quality and internationally-comparable financial function. It is currently co-chaired by the OECD and the World Bank. Members of the PIC have the right to attend, or be represented at, all meetings of the IPSASB and of the CAG.

Consultative Advisory Group (CAG)

The CAG was established in the first quarter of 2016. The IPSASB CAG is an integral and important part of the IPSASB's formal consultation process. The CAG provides advice on a range of areas relevant for setting standards in the public sector and provides a platform to facilitate the exchange of information between the IPSASB and specialists with detailed knowledge of the public sector, financial reporting and its requirements.

The CAG's objectives, scope of activities, membership and composition, and operating procedures are set out in its ToRs. The Chair of the IPSASB CAG may attend IPSASB meetings, or appoint a representative of a CAG member organization to attend. At the IPSASB meetings, the Chair of the IPSASB CAG, or an appointed representative, has the privilege of the floor at IPSASB meetings.

The CAG provides advice to the IPSASB on:

 The IPSASB's strategy, work program and agenda, including project priorities;

 Projects, including views on key technical issues or matters that may impede the adoption or effective implementation of IPSASs; and

 Other matters of relevance to the standard-setting activities of the IPSASB.

CAG's public interest perspective is particularly important. Rather than deliberate or re-deliberate technical matters, the CAG brings to the IPSASB's attention issues that might be overlooked as the IPSASB deals with complex technical issues. Particularly, the CAG may adress key matters of principle, such as the public interest rationale for fair value accounting for financial instruments or whether the recognition of heritage items is justifiable. The value of the CAG's contributions strongly depends on the variety of perspectives, experiences and backgrounds of its members. The CAG comprises currently 22 members representing heterogenous stakeholder and user groups with a strong focus on preparers. In order to be fully transparent, like the IPSASB publications and papers, all CAG meeting papers as well as the most current membership list can be accessed under the IPSASB website under the flag “CAG” (www.ipsasb.org/CAG).

1.5 Members of the IPSASB

The IPSASB consists of 18 members – both from IFAC member bodies and public members – with experience and expertise in public sector financial reporting. All members are voluntary with the exception of the Chair, who has been partly remunerated since January 1, 2016. In recent years, IPSASB members increasingly consisted of representatives from ministries of finance, government audit institutions, public practice, and academia. All IPSASB meetings that are conducted to develop IPSASs or approve their publication are public.

Chair and Deputy Chair of the IPSASB

The current Chair, Ian Carruthers, became IPSASB Chair in January 2016, having served as a member since 2010. The Chair may ordinarily serve consecutive terms of 3 years each (as Chair or as a member for one or more terms preceding the appointment as Chair), for up to an aggregate of nine years. In exceptional circumstances, to be specified by the Nominating Committee, the Chair may serve for one additional consecutive term, for an aggregate term of twelve years.

The appointment as IPSASB Deputy Chair is considered a leadership position in support of the Chair and does not imply that the individual concerned is the Chair-elect. In January 2017, Angela Ryan from New Zealand succeeded Jeanine Poggiolini from South Africa as IPSASB Deputy Chair. In the event of a vacancy, the Deputy Chair shall assume the duties of Chair as acting Chair, having full power, authority and responsibility of the role of the Chair to manage the Board's agenda and work program until the appointment of an interim or a new Chair. The current IPSASB Deputy Chair is Angela Ryan from New Zealand. Her term started in January 2017 and she succeeded Jeanine Poggiolini.

Table 1 shows the countries represented on the IPSASB:

Table 1: Countries represented at the IPSASB (as of January 2017)

 Australia

 Austria

 Brazil

 Canada

 China

 France

 Germany

 Italy

 Japan

 Nigeria

 New Zealand

 Panama

 Romania

 South Africa

 Switzerland

 United Kingdom

 United States of America

As outlined above, most of the members of the IPSASB are either from ministries of finance/treasuries or from auditors generals/courts of audit. Only two members of the IPSASB are currently from a private sector audit firm.

Technical Advisors

IPSASB members may be accompanied at meetings by a technical advisor. A technical advisor, with the consent of the IPSASB member he or she advises, has the privilege of the floor and may participate in projects. Technical advisors are expected to possess the technical skills to participate in IPSASB debates and attend IPSASB meetings regularly to maintain an understanding of current issues relevant to their role.

Table 2 shows the organizations that have observer status:

Table 2: Organiations that have observer status at IPSASB meetings (as of January 2017)

 Asian Development Bank (ADB)

 Chair of the IPSASB CAG

 European Commission (EC)

 Eurostat

 International Accounting Standards Board (IASB)

 International Monetary Fund (IMF)

 United Nations (UN)

 United Nations Development Programme (UNDP)

 World Bank

1.6 The strategy and work plan of the IPSASB

The IPSASB's current strategy has a single strategic objective of strengthening public financial management and knowledge globally through increasing adoption of accrual basis IPSASs by:

 Developing high-quality public sector financial reporting standards;

 Developing other publications for the public sector; and

 Raising awareness of IPSASs and the benefits of their adoption.

The strategy firmly positions the IPSASB's activities in the broader public financial management (PFM) landscape. The IPSASB is of the view that strong PFM leads to the efficient and effective delivery of public services. The aim of IPSASs is to facilitate credible and transparent financial reporting, which is in the public interest as it leads to improved public sector decision-making and facilitates citizens’ ability to hold governments to account.

The design of the IPSASB's current strategy and work plan, as a result of the first public consultation in 2014, is determined by the following factors:

 Significance for the public sector;

 Urgency of the issue;

 Gaps in standards;

 International Financial Reporting Standard (IFRS) convergence; and

 Avoiding unnecessary differences to Government Finance Statistics (GFS).

The IPSASB's current work program reflects a need to address public sector-specific issues while also to maintain convergence with IFRSs.

Tables 34 and 5 provide an overview of the completed, current and committed projects of the IPSASB:

Table 3: Completed projects of the IPSASB (from January 2014 to December 2016)

Completed projects of the IPSASB from January 2014 to December 2016

 Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities

 IPSAS 33, First-time Adoption of Accrual Basis IPSASs

 New suite of consolidation standards (IPSASs 34–38, Interests in Other Entities)

 RPG 3: Reporting Service Performance Information

 The Applicability of IPSASs

 IPSAS 39, Employee Benefits

 Impairment of Revalued Assets

 IPSAS 40, Public Sector Combinations

Table 4: Current projects of the IPSASB (as of August 2017)

Current projects of the IPSASB

 Cash Basis IPSAS – Limited Scope Review

 Financial Instruments Update Project: Update to IPSAS 28-30

 Heritage

 Leases

 Non-exchange Expenses

 Public Sector Measurement

 Public Sector Specific Financial Instruments

 Revenue

 Social benefits

 Strategy and Workplan Consultation

Table 5: Committed projects (as of August 2017)

Committed projects, not yet started

 Infrastructure Assets

The IPSASB is currently working on the development of its next strategy and work plan for the period from 2019 to 2023. The IPSASB intends to publish a Consultation Paper in the first quarter of 2018 and to finalize the strategy and workplan in the second half of 2018.

2 International accounting standards for the public sector

2.1 Overview of international accounting standards for the public sector

The IPSASB develops IPSASs for financial statements prepared on both the accrual basis of accounting as well as for financial statements prepared on the cash basis of accounting.

IPSASs govern the recognition, measurement, presentation and disclosure requirements in relation to transactions and events in GPFSs. Such financial statements are characterized by the fact that they are issued for users who are unable to request financial information to meet their specific information needs.

In accordance to the IPSASB Conceptual Framework, GPFRs are a central component of, and support and enhance, transparent financial reporting by governments and other public sector entities. GPFRs are characterized by the fact that they not only comprise GPFSs, but also refer to other financial reports intended to meet the information needs of users who are unable to request the preparation of financial reports tailored to meet their specific information needs. GPFRs may include information about the past, present, and the future that is useful to users – including financial and non-financial quantitative and qualitative information about the achievement of financial and service delivery objectives in the current reporting period, and anticipated future service delivery activities and resource needs. More insights and information about the scope and content of GPFRs is given in IPSASB's Conceptual Framework. Typical examples for GPFRs beyond GPFSs are those reports covered by IPSASB's Recommended Practice Guidelines (please see chapter IV for more details).

With respect to the development of accrual basis IPSASs, the IPSASB pursues the aim of convergence of IPSASs with IFRSs. In many cases, the International Financial Reporting Standards (IFRSs) are used as a starting point for developing new IPSASs. However, the IPSASB will adapt IFRSs only if the public sector has specific accounting requirements. Provided these specific requirements of the public sector are taken into account, the IPSASB seeks to retain the accounting treatment and original text of the IFRSs. The specific characteristics of the public sector, such as transactions without consideration (e.g., taxes and transfers), the provision of services as a public task and not for cash or profit-generating purposes, the requirements of Government Finance Statistics (GFS) or the importance of public budgeting, results in IPSASs dealing with accounting areas for which there is no corresponding IFRS. These IPSASs principally contain rules which are not covered, or only covered to a minor extent, by existing IFRSs.

In recent years, the alignment with GFS – in addition to to the convergence with IFRS – became a priority within IPSAS standard-setting. In 2014, the IPSASB defined the process for considering GFS reporting guidelines during the development of IPSASs and has issued a policy paper on that topic. The policy paper describes how the IPSASB considers the scope to reduce differences between IPSASs and GFS reporting guidelines during the development of its work plan, the development of new IPSASs, and revisions to existing IPSASs.

The year 2017 marks the twentieth anniversary of the IPSAS development program. Since 1997, the IPSASB has developed 40 IPSASs, as well as three RPGs, an IPSAS on reporting under the cash basis of accounting and, of course, the Conceptual Framework.

Table 6 provides an overview of the international accounting standards for the public sector (as of 31 August 2017) and the corresponding IFRSs:

Table 6: Overview of the International Public Sector Accounting Standards (as of 31 August 2017)

IPSAS

Title

Corresponding IFRS

IPSAS 1

Presentation of Financial Statements

IAS 1

IPSAS 2

Cash Flow Statements

IAS 7

IPSAS 3

Accounting Policies, Changes in Accounting Estimates and Errors

IAS 8

IPSAS 4

The Effects of Changes in Foreign Exchange Rates

IAS 21

IPSAS 5

Borrowing Costs

IAS 23

IPSAS 6

Consolidated and Separate Financial Statements (superseded by IPSASs 34-38)

IAS 27

IPSAS 7

Investments in Associates (superseded by IPSASs 34-38)

IAS 28

IPSAS 8

Interests in Joint Ventures (superseded by IPSASs 34-38)

IAS 31

IPSAS 9

Revenue from Exchange Transactions

IAS 18

IPSAS 10

Financial Reporting in Hyperinflationary Economies

IAS 29

IPSAS 11

Construction Contracts

IAS 11

IPSAS 12

Inventories

IAS 2

IPSAS 13

Leases

IAS 17

IPSAS 14

Events After the Reporting Date

IAS 10

IPSAS 15

Financial Instruments: Disclosure and Presentation (superseded by IPSASs 28-30)

IAS 32

IPSAS 16

Investment Property

IAS 40

IPSAS 17

Property, Plant and Equipment

IAS 16

IPSAS 18

Segment Reporting

IAS 14

IPSAS 19

Provisions, Contingent Liabilities and Contingent Assets

IAS 37

IPSAS 20

Related Party Disclosures

IAS 24

IPSAS 21

Impairment of Non-Cash-Generating Assets

No directly corresponding IFRS

IPSAS 22

Disclosure of Financial Information about the General Government Sector

No corresponding IFRS

IPSAS 23

Revenue from Non-Exchange Transactions (Taxes and Transfers)

No corresponding IFRS

IPSAS 24

Presentation of Budget Information in Financial Statements

No corresponding IFRS

IPSAS 25

Employee Benefits (will be superseded by IPSAS 39 by 1 January 2018)

IAS 19

IPSAS 26

Impairment of Cash-Generating Assets

IAS 36

IPSAS 27

Agriculture

IAS 41

IPSAS 28

Financial Instruments: Presentation

IAS 32/IFRIC 2

IPSAS 29

Financial Instruments: Recognition and Measurement

IAS 39/IFRIC 9/ IFRIC 16

IPSAS 30

Financial Instruments: Disclosures

IFRS 7

IPSAS 31

Intangible Assets

IAS 38/SIC 32

IPSAS 32

Service Concession Arrangements –Grantor

Mirror to SIC 12

IPSAS 33

First-time Adoption of Accrual Basis IPSASs

IFRS 1

IPSAS 34

Separate Financial Statements

IAS 27 (amended 2011)

IPSAS 35

Consolidated Financial Statements

IFRS 10

IPSAS 36

Investments in Associats and Joint Ventures

IAS 28 (amended 2011)

IPSAS 37

Joint Arrangements

IFRS 11

IPSAS 38

Disclosure of Interests in Other Entities

IFRS 12

IPSAS 39

Employee Benefits

IAS 19 (issued 2011)

IPSAS 40

Public Sector Combinations

IFRS 3

Cash Basis IPSAS

Cash Flow Statements

No corresponding IFRS

Table 7 provides an overview of the proposed IPSASs (Exposure Drafts -ED) as of end of August 2017:

Table 7: Overview of the Proposed IPSASs (Exposure Drafts) as of 31 August 2017

Exposure Draft (ED)

Title

Corresponding IAS/IFRS

ED 61

Amendments to Financial Reporting under the Cash Basis of Accounting

No corresponding IFRS

ED 62

Financial Instruments

IFRS 9

Table 8 provides an overview of the consultation papers (CPs) issued as of end of August 2017:

Table 8: Overview of the issued IPSAS CPs as of 31 August 2017

CP

Title

Corresponding IAS/IFRS

CP

Social Benefits

No corresponding IAS/IFRS

CP

Public Sector Specific Financial Instruments

No corresponding IAS/IFRS

CP

Financial Reporting for Heritage in the Public Sector

No corresponding IAS/IFRS

CP

Accounting for Revenue and Non-Exchange Expenses

IFRS 15

2.2 History of the International Public Sector Accounting Standards

The IPSASs are based on the work of the IFAC's PSC. This standing committee has been dealing with public sector accounting and audits since 1986. Its core tasks include the development of concepts to optimize the financial management and financial reporting of public authorities. In its early days, the PSC developed and promulgated a large number of guidelines, studies and research reports. However, these pronouncements did not play such an important role as IPSASs do today.

The standards project launched in 1997 marked a turning point in the work of the PSC. The purpose of the standards project was to formulate IPSASs aimed at improving the financial management and accounting of public authorities and harmonizing public accounting at international level. This project fundamentally changed the way the PSC saw itself; from then on it considered itself an independent committee for the standardization of public sector accounting and consequently changed its name to IPSASB in 2004.

The standard-setting activities started with converging IAS standards into the first 20 IPSASs, the core set of standards. In a second phase, the Board started dealing with public sector-specific issues and issued IPSAS 21 to IPSAS 24. The next phase was governed by the ambition to achieve convergence with IFRSs/IASs as of 31 December 2008, which was achieved with the approval of IPSAS 31, Intangible Assets at the end of 2009. In the following years, the IPSASB focused on the development of the Conceptual Framework, which was approved in September 2014. In parallel, important standards such as the one on “First Time Implementation” (IPSAS 33) and those dealing with consolidation (IPSASs 34-38; IPSAS 40) have been issued. Since then, the IPSASB focusses on closing major gaps in its literature, while maintaining IFRS convergence to the greatest extent possible.

The latest major step in the history of the IPSASB was made with the implementation of the new governance model of the IPSASB starting in 2015. The establishment of a new single-layer governance by incorporating the PIC in IPSASB's governance, and of an advisory framework by implementing the CAG, was a landmark achievement for the IPSASB and its global stakeholders.

2.3 Applicability of the International Public Sector Accounting Standards

IPSASs are currently intended to apply to GPFSs of public sector entities. The public sector entities have to meet all the following criteria:

 They are responsible for the delivery of services to benefit the public and/or to redistribute income and wealth;

 They mainly finance their activities, directly or indirectly, by means of taxes and/or transfers from other level of government, social contributions, debt or fees; and

 They do not have a primary objective of making profits.

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 for investors. Public sector entities generally include national and regional governments (e.g., state, provincial, territorial governments), local authorities (e.g., towns and cities) as well as related governmental entities (e.g., departments, programs, boards, commissions, agencies, social security funds, trusts, statutory authorities) and international governmental organizations.

In general, IPSASB's guidance, which deals with GPFRs other than GPFSs (e.g., RPG 1: Reporting on the Long-term Sustainability of an Entity's Finances), is not part of the set of IPSASs. An entity therefore has not to apply these RPGs to be in the position of claiming full compliance with IPSASs. Consequently, this type of guidance is called “Recommended Practice Guideline (RPG)” and not IPSASs.

The definition of a Government Business Enterprise (GBE) in IPSAS 1, Presentation of Financial Statements, has b een deleted and replaced with the term “commercial public sector entities” and hence consequential amendments were made in both the IPSASs and RPGs. These amendments address constituents’ concerns about the application of IPSASs to public sector entities and different interpretations of the GBE definition. IPSASs do not apply to commercial public sector entities which are profit-oriented. In addition, the IPSASB acknowledges the right of governments and national standard-setters to establish accounting standards and guidelines for financial reporting in their jurisdictions.

Table 9 provides a summary of the previous and future approach on the applicability of IPSASs:

Table 9: Overview of the previous and future approach on applicability of IPSAS

Previous approach

Future approach

Remit of IPSASB

IPSASB developed standards and other publications for use by public sector entities other than GBEs

High-level description of characteristics of public sector entities for which IPSASs are designed

Definition of GBEs

Reliance on a formal definition of a GBE in IPSAS 1

Deletion of the term GBE and its definition in IPSAS 1

The new term “commercial (public sector) entities” is now used when referring to GBEs

Scope of IPSAS/RPG

Scope section in each IPSAS and RPG provides that these pronouncements do not apply to GBEs

Preface to IPSASs explains that GBEs apply IFRSs

The scope section of each IPSAS and RPG has been amended by removing the paragraph that states that GBEs do not apply IPSASs

Statement in Preface that explains that GBEs apply IFRSs is removed

2.4 General purpose financial statements

Financial statements that are issued for users who are unable to request financial information to meet their specific information needs are referred to as GPFSs. Examples of such users of financial statements are citizens, voters, their political representatives and other members of the general public. The term “financial statements” used here and in the standards covers all disclosures and notes that have been identified as components of the GPFSs.

In addition to the GPFSs, a public sector entity may prepare financial statements for other parties (such as executive committees, the legislature and other parties with supervisory functions) that can request financial information tailored to their needs. Such financial statements are referred to as “special purpose financial statements.” The IPSASB recommends that IPSASs also be adopted for special purpose financial statements where appropriate.

As shown above, the publications of the IPSASB mainly comprise standards and RPGs, in addition to studies and other publications. Only the IPSAS standards relate to the GPFSs and are authoritative where an entity wants to make an unqualified statement of full compliance with IPSASs. RPGs are pronouncements that provide guidance on good practice in preparing GPFRs that are not financial statements. Unlike IPSASs, RPGs do not provide guidance on the level of assurance (if any) to which information should be subjected.

Financial statements prepared on the accrual basis of accounting comprise a statement of financial position, a statement of financial performance, a cash flow statement and a statement of changes in net assets/equity. For financial statements prepared on the cash basis of accounting, the statement of cash receipts and payments is the primary component of the financial statements in addition to the accounting policies and explanatory notes.

2.5 Authority of the International Public Sector Accounting Standards

The IPSASB recognizes the right of governments and national standard setters to establish accounting standards and associated guidance within their jurisdictions. Its objectives are “to serve the public interest by developing high-quality public sector financial reporting standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of financial reporting throughout the world.” Thus, the IPSASB sees itself in a supportive function. Jurisdictions which decide to adopt IPSASs may use IPSASs as international best practice and use them in their own standard-setting processes as guidance. The GPFSs of public sector entities may be governed by rules or laws in a jurisdiction. These rules may take the form of statutory reporting rules, directives or statements on accounting and/or accounting standards issued by governments, regulatory authorities and/or professional associations in the jurisdiction.

However, neither the IPSASB nor the accounting and audit profession can directly enforce compliance with IPSASs on their own. This means that IPSASs do not have an immediate binding effect for territorial authorities or other public sector entities.

However, the existing IPSASs can assist legislators and national standard setters in developing new standards or revising existing ones in order to achieve greater comparability of public sector entities’ financial statements at national and international level. The IPSASs can be of great help, especially for all jurisdictions that do not yethave accrual accounting standards for the public sector.

Emerging countries are also one of the main target groups for IPSASs. Financial institutions such as the International Monetary Fund, the World Bank or the Asian Development Bank play an important role as major donors and lending institutions for these countries. Nowadays, the strategy of providing financial resources to emerging countries via these institutions is mostly focused on creating transparent and consistent financial reporting structures as a basis for further financial help in the future. Accordingly, financial aid by these institutions is often related to the implementation of reporting procedures and structures based on IPSASs. For example, the World Bank encourages borrowers to prepare their financial reports in accordance with IPSASs. Thus, the IPSASs have gained increasing importance as the only internationally accepted accounting framework for the public sector.

However, there is also an increasing demand for the adoption of IPSASs in the developed part of the world for compatibility and comparability reasons. The various processes of collection and reallocation of resources employed by different countries, such as within the European Union, create the need for transparency regarding allocation criteria and the use of these means — especially in times of limited financial resources. Given that IPSASs are the only internationally-accepted public sector accounting model, these standards were therefore a guideline for the member states in eastern Europe who have decided to establish a state-of-the-art accounting system following the destruction of the old political systems.

Yet also in established European countries like Germany, Italy or the Netherlands, the need to modernize budgeting and financial reporting systems is uncontested. The IPSASs could be regarded as a reference model for the reform of governmental accounting there. The European Commission's project to develop European Public Sector Accounting Standards (EPSASs) has assessed the suitability of IPSASs for the member states in 2013 and concluded that IPSASs are taken as a reference for potential EU-harmonised public sector accounts (see chapter III.2 for more details).

The IPSASB strongly recommends adopting IPSASs and harmonizing national requirements of public sector accounting and financial reporting with those of IPSASs. Some states and national standard setters have already developed generally-accepted accounting standards for the public sector in their jurisdiction. In many jurisdictions, however, public sector accounting is still highly fragmented, typically containing special rules for certain levels or areas.

The IPSASB believes that the application of IPSASs, together with a statement of compliance, significantly enhances the quality of GPFSs prepared by public sector entities. In turn, this improves the basis for decisions on the appropriation of funds by public authorities, allowing for greater consistency, transparency and accountability.

2.6 IPSASs for accrual basis of accounting and cash basis of accounting

Due to their financial sovereignty, jurisdictions such as nations or states have the authority to decide on how they want to structure public sector accounting within their jurisdiction. Global surveys of professional services firms regularly show that countries often apply IPSAS-like standards at national/federal government level. This means that these countries have their own national accounting and financial reporting system but used the IPSASs as a blueprint or guideline.

Apart from that, mainly requirements relating to financial statistics have had an impact on public financial reporting to date. This impact is going to increase due to the enhancing trend toward alignment of statistical regulations, such as the IMF Statistics Department's Government Finance Statistics Manual 2014 (GFSM 2014), the System of National Accounts 2008 (2008 SNA) or the European System of Accounts (ESA 2010).

Public sector entities that keep their accounts in accordance with IPSASs can choose to use either accrual accounting or cash accounting. The IPSASB has decided to issue only one standard on the cash basis of accounting − the Cash Basis IPSAS. The application of this standard is still intended to build a stepping stone on the journey toward full accrual. Consequently, all other IPSASs are developed exclusively on the accrual basis of accounting − in line with the accounting concept applied in IFRSs.

This clearly reflects the IPSASB's preference for this basis of accounting. This preference seems to be increasingly mirrored by the accounting reality in the public sector globally. Accrual accounting is increasingly used at national/federal government level in all regions of the world. Even though cash basis accounting is still used, especially in Asia, Latin America and Africa, surveys have also shown that these regions share the most dynamic development and reform plans toward accrual accounting. The majority of countries in North America, Europe and Oceania have already moved to accrual-based accounting.

2.7 Background to the application of international accounting standards for the public sector

Internationally, the (New) Public Management movement has gained considerable importance in the public sector reform. One of the components of this new way of managing public affairs is the reform of public sector accounting and financial reporting. This new financial governance model for public sector organizations often entails reforms of their budgets. The accrual basis of accounting constitutes a major reform element in this context.

Table 10 provides an overview of major countries that have decided to introduce IPSASs or similar accounting standards or have already done so.

Table 10: Overview of major countries that have decided to introduce IPSASs/similar accounting standards or have already done so

Austria

Brazil

Chile

China

Colombia

France

Indonesia

Japan

Kenya

Lithuania

New Zealand

Nigeria

Morocco

Panama

Peru

Portugal

Spain

Russia

Switzerland

Tanzania

Vietnam

The IPSASB has also found that the public sector accounting practice in Australia, Canada, the UK and the United States is already largely in compliance with IPSASs. For example, Australia and UK use IFRSs as a basis for governmental accounting, but supplement them with IPSAS guidance where IFRS does not provide orientation.

The supranational organizations in Table 11 have also decided to introduce IPSASs. This is another fact underlining the growing importance of IPSASs.

Table 11: Overview of supranational organizations that have decided to introduce IPSASs or have already done so

 Council of Europe

 European Commission

 European Space Agency (ESA)

 European Organisation for the Exploitation of Meteorological Satellites (Eumetsat)

 OECD

 Noth Atlantic Treaty Organisation (NATO)

 Organisation for economic co-operation and development (OECD)

 United Nations system (including all its institutions, such as UNESCO, UNICEF,WFP, etc.)

In contrast to supranational organizations, which often adopt IPSASs directly, states have financial and legislative power and therefore tend to use this power to align their national accounting provisions to these standards instead of adopting them directly.