IPSASB Meeting Highlights and Decisions
December 2006
Contact: Barry Naik, barrynaik@ifac.org
This summary of decisions made at the International Public Sector
Accounting Standards Board’s (IPSASB) meeting in Norwalk, USA on
November 7-10, 2006 has been prepared for information purposes only.
Except for approval of documents for public exposure and issuance of final
standards, decisions reported are tentative and reflect only the current status
of projects.
The summary is the start of a number of initiatives that the IPSASB staff is
currently working on to evolve communications about the work of the
IPSASB. We will keep you informed of developments.
For more detailed information about the IPSASB, please refer to its website
at http://www.ipsasb.org.
Approach on Social Policy Obligations Revised
In November, an important development occurred in the IPSASB’s approach
to accounting for Social Policy Obligations.
There were concerns that under the requirements that had been developed,
liability recognition for cash transfers would be restricted to the amount of
the next payment following satisfaction of eligibility criteria relating to
reporting period. There is a view that this does not reflect the economic
reality for cash transfer programs.
The IPSASB particularly considered whether for contributory programs
obligating events occur at a point prior to satisfaction of all eligibility criteria.
Some consider that an initial obligating event occurs when an individual has
made sufficient contributions to qualify for benefits at a future date. Others
believe that this approach did not meet the definition of a liability and the
large amount of resulting expenses and liabilities may confuse users.
The IPSASB tentatively decided to proceed on the basis that, regardless of
whether a program is financed by contributions, earmarked taxes or general
taxation, the liability to be disclosed in relation to cash transfer programs
should be an actuarially assessed estimate of the present value of future cash
flows for beneficiaries who had satisfied threshold eligibility criteria at the
reporting date.
For many public sector entities, recognition based on this criterion would
represent a major change in accounting policy. Therefore, instead of
addressing recognition and measurement, the IPSASB tentatively agreed to
revise the exposure draft (ED) to deal with presentation and disclosure.
Disclosure of liabilities will initially apply to major cash transfer programs.
Later, this might be extended to all cash transfer programs and, possibly, to
certain programs providing individual goods and services. It might also
provide the basis for recognizing expenses and liabilities relating to social
benefits in the financial statements.
The project has now been renamed “Social Benefits,” harmonizing it with
existing IPSASB literature. Due to the complex issues in this area, the ED
will include an “Introduction to the Issues” section which will highlight that
the ED is at a very early stage in the development of an approach. In
addition, the Introduction will identify:
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Issues where there are robust and often conflicting views; and
Issues which the IPSASB has had difficulty reaching firm
conclusions.
Please contact IFAC staff member John Stanford at johnstanford@ifac.org
for more information on this project.
IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and
Transfers), Approved
In November, the IPSASB approved International Public Sector Accounting
Standard (IPSAS) 23, Revenue from Non-Exchange Transactions (Taxes and
Transfers), which establishes requirements for the recognition, measurement
and disclosure of a variety of public sector revenues, not previously included
in the IPSASs.
In approving IPSAS 23, most attention was given to the following issues
noting that these and other issues had already been thoroughly considered at
either the Invitation to Comment stage or by the Steering Committee
responsible for developing the IPSAS:
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Recognition of a liability with respect to an asset subject to a
condition;
Permitting, but not requiring, recognition of services in-kind;
The distinction between exchange and non-exchange transactions;
and
The transitional provisions.
In considering these issues the IPSASB concluded that it should retain the
principles that were proposed in ED 29, Revenue from Non-Exchange
Transactions (Including Taxes and Transfers), except that the transitional
provisions would be extended to all revenue. However, only a three-year
transitional provision would be allowed for non-tax revenue from nonexchange transactions.
The new standard is scheduled to be available on the IPSASB website in late
2006 and will subsequently be included in the 2007 Handbook of
International Public Sector Accounting Pronouncements.
Please contact IFAC staff member Matthew Bohun at
matthewbohun@ifac.org for more information on this project.
Project Brief on Service Concession Arrangements Reviewed
In July 2006, the IPSASB agreed to lead a collaborative project on service
concession arrangements, with participation from a group of national
standards setters and other organizations (NSS). At its meeting in November,
the IPSASB agreed to both the project brief and proposals for the
membership of a subcommittee comprising IPSASB and NSS members to
develop project material.
The subcommittee will initially develop a consultative paper which will take
into consideration the principles in International Financial Reporting
Interpretations Committee (IFRIC) 12, Service Concession Arrangements.
Please contact IFAC staff member Barry Naik at barrynaik@ifac.org for
more information on this project.
Project Brief on Public Sector Conceptual Framework Reviewed
In July 2006, the IPSASB agreed to lead a collaborative project on the
development of a public sector conceptual framework, with active
participation from a group of NSSs and other organizations. In November,
the IPSASB agreed to the project brief, subject to final review and comment
by the NSS participants. The IPSASB also agreed on proposals for the
membership of a subcommittee comprising IPSASB and NSS members to
coordinate and contribute to the development of consultative papers for
review by the IPSASB. The IPSASB noted that the project brief may get
fine-tuned in the light of progress, experience and input from constituents,
but that the project should start now.
The final project brief is scheduled to be posted on the IFAC website in late
2006.
Please contact IFAC staff member Paul Sutcliffe at paulsutcliffe@ifac.org for
more information on this project.
IPSAS 24, Presentation of Budget Information in Financial
Statements, Approved
In November, the IPSASB approved IPSAS 24, Presentation of Budget
Information in Financial Statements, which applies to the financial
statements of public sector entities which adopt the accrual basis of
accounting. It also approved an additional section dealing with the
presentation of budget information to be included in the Cash Basis IPSAS,
Financial Reporting under the Cash Basis of Accounting (which applies to
public sector entities which adopt the cash basis of accounting for their
financial statements). Both approved items establish requirements and
encouragements for reporting information about the entity’s compliance with
budgets which are made publicly available.
They are both scheduled to be available on the IPSASB website in late 2006
or early 2007 and will subsequently be included in the 2007 Handbook of
International Public Sector Accounting Pronouncements.
Please contact IFAC staff member Paul Sutcliffe at paulsutcliffe@ifac.org for
more information on this project.
Diverse Views – Submissions on Heritage Assets
In November 2006, the IPSASB considered submissions received on its
consultation paper, Accounting for Heritage Assets under the Accrual Basis
of Accounting, which included a discussion paper developed by the United
Kingdom Accounting Standards Board (UK ASB). Submissions reflected a
range of views on many topics including those summarized below:
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Recognition and measurement: there were strong views that
requirements for recognition and measurement should not depart from
those in IPSAS 17, Property, Plant and Equipment. An alternative
view was for non-recognition of existing heritage items and
expensing new acquisitions;
Definition: strong support for the view that heritage items do meet
the general asset definition in the IPSASB literature and considerable
support for many aspects of the definition of a heritage asset proposed
in the UK ASB discussion paper;
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Measurement bases: a view that, if heritage assets are to be
recognized and measured, both cost and valuation models should be
permitted;
Depreciation/Impairment: a minority supported specifically
exempting heritage assets from depreciation and impairment; and
Disclosures: considerable support for additional disclosures
regardless of recognition, though some concern about the cost/benefit
of a large volume of disclosures for entities not having a significant
heritage objective.
Please contact IFAC staff member John Stanford at johnstanford@ifac.org
for more information on this project.
General Improvements Project Completed
In July 2006, the IPSASB approved three (of 11) improved IPSASs and a
revised preface to the International Public Sector Accounting Standards. At
the November meeting, the IPSASB approved the remaining eight improved
IPSASs, concluding its general improvements project. The eight approved
IPSASs are:
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IPSAS 6, Consolidated and Separate Financial Statements;
IPSAS 7, Investments in Associates;
IPSAS 8, Interest in Joint Ventures;
IPSAS 12, Inventories;
IPSAS 13, Leases;
IPSAS 14, Events after the Reporting Date;
IPSAS 16, Investment Property; and
IPSAS 17, Property Plant and Equipment.
There were no significant amendments to the requirements in the eight
approved standards resulting from the improvements. All 11 improved
IPSASs have an effective date of January 1, 2008 and are scheduled to be
available on the IPSASB website in late 2006 or early 2007. They will also
be included in the 2007 Handbook of International Public Sector Accounting
Pronouncements.
Please contact IFAC staff member Matthew Bohun at
matthewbohun@ifac.org for more information on this project.
Next Meeting
The next IPSASB meeting will be held in Accra, Ghana on March 20-23,
2007.