International Federation of Accountants
Overview of International Public Sector
Accounting Standards
Tadashi Sekikawa
IPSASB Board Member
Improving Public Sector Financial Management
Seoul, Korea
May 19, 2011
Disclaimer
Views presented in this presentation are
personal views of the speaker. They do not
represent formal views of IPSASB or any
other organizations with which the speaker is
associated.
Seoul, Korea (May 19, 2011)
Overview of Session
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Scope and Authority of IPSASs
Cash-basis IPSAS; at Present and its Review
Accrual-basis IPSASs
Accrual-basis IPSASs - PS Specific
IFRS-based IPSASs – Major differences
Q&A
Seoul, Korea (May 19, 2011)
Scope and Authority of IPSASs
• The IPSASB develops IPSASs which apply to the
accrual basis of accounting and IPSASs which
apply to the cash basis of accounting
• IPSASs set out recognition, measurement,
presentation and disclosure requirements dealing
with transactions and events in general purpose
financial statements
• The IPSASs are designed to apply to the general
purpose financial statements of all public sector
entities
Seoul, Korea (May 19, 2011)
Why IPSASB Develops Cash Basis?
• IPSASB recognizes accrual basis financial
reporting better serve the accountability and
decision making purposes.
• IPSASB also recognize that;
1) some countries have not been prepared to
adopt full accrual based accounting; and
2) financial reporting need to be improved
within the framework of cash basis accounting.
Seoul, Korea (May 19, 2011)
Cash-basis IPSAS
• A comprehensive Cash Basis IPSAS that is
specific to the public sector
• It includes mandatory (Part 1) and encouraged
(Part 2) disclosures sections
• Financial Statement should be described as
complying with the cash basis IPSAS only if
they comply with all the requirements of
mandatory disclosure section.
Seoul, Korea (May 19, 2011)
Review of Cash Basis IPSAS
• A project is under way to:
– Identify implementation issues in developing economies
– Consider amendments to IPSAS & guidance in response
• Task Force established in December 08
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Lead data collection and make recommendations to IPSASB
Questionnaire issued April 2009 – 46 responses received
Follow-up discussions - Sept – Dec 2009
Progress report at Dec 2009 IPSASB meeting
• Task Force Report to IPSASB for July 2010
meeting
Seoul, Korea (May 19, 2011)
Accrual-basis IPSASs
IPSASB develops accrual basis IPSASs to
address public sector financial reporting
issues in two different ways:
•Public Sector Specific IPSASs
•IFRSs-based IPSASs
Seoul, Korea (May 19, 2011)
Accrual Basis IPSASs
• IPSAS 1—Presentation of Financial Statements
• IPSAS 2—Cash Flow Statements
• 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 (to be withdrawn)
• IPSAS 16—Investment Property
• IPSAS 17—Property, Plant, and Equipment
• IPSAS 18—Segment Reporting
Seoul, Korea (May 19, 2011)
Accrual Basis IPSASs (continued)
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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
IPSASs in white text are based on relevant IFRSs
IPSASs in yellow text are public sector specific
Seoul, Korea (May 19, 2011)
Accrual Basis IPSASs – PS Specific
Public Sector Specific IPSASs
•By addressing public sector financial reporting
issues:
– that have not been comprehensively or
appropriately dealt with in existing
International Financial Reporting Standards
(IFRSs) issued by the International Accounting
Standards Board (IASB), or
– for which there is no related IFRS; and
Seoul, Korea (May 19, 2011)
IPSAS 23 “Revenue from Non-exchange
Transactions”
• IPSAS 23 treats both taxes revenue and
transfer revenue.
• Main accounting issues on transfer inflow with
“stipulations”, which are terms in laws or
regulation, or a binding arrangement, imposed
upon the use of a transferred asset by entities
external to the reporting entity.
Seoul, Korea (May 19, 2011)
IPSAS 23 “Revenue from Non-exchange
Transactions” (Continued)
• Stipulations
- Conditions : return obligation
- Restrictions: without return obligation
• Conditions on transferred assets are stipulations that specify
that the future economic benefits or service potential
embodied in the asset is required to be consumed by the
recipient as specified or future economic benefits or service
potential must be returned to the transferor.
• Transfers without “conditions” are directly recognized as
income
• Transfers with “conditions” are recognized as income when
conditions are fulfilled.
Seoul, Korea (May 19, 2011)
Social Benefit - History
• November 2003 - ITC Accounting for Social
Policies of Government approved.
• March 2008: A package of documents
comprising;
1)ED 34, Social Benefits: Disclosure of Cash
Transfers to Individuals or Households,
2)Consultation Paper, Social Benefits: Key Issues in
Recognition and Measurement ; and
3)A Project Brief on Long-Term Fiscal
Sustainability Reporting published
Seoul, Korea (May 19, 2011)
Social Benefit – Current Status
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IPSASB decided not to develop ED 34 into an IPSAS.
IPSASB agreed that the general purpose financial
statements cannot convey sufficient information about
the financial condition of governmental programs
providing social benefits.
Start “Long-term fiscal sustainability” Project
IPSASB decided that proposals for recognition and
measurement should now be closely linked to work in
Phase II of the Conceptual Framework project dealing
with elements, particularly the definition of a liability.
Seoul, Korea (May 19, 2011)
Public Sector Specific Projects - ongoing
Work is under way on the following:
1) Conceptual Framework – Paramount
2) Projects within Financial Statements
– Service concession arrangements (SCAs)
– Entity combinations
3) Projects outside FS but within Financial Report
–Long-term fiscal sustainability
–Service performance reporting
–Narrative Reporting
Seoul, Korea (May 19, 2011)
Accrual Basis IPSASs – IFRS Based
IFRS-based IPSASs
• By developing IPSASs that are based on
IFRSs by adapting them to the public sector
context
• IPSASB has committed continuous alignment
of IFRS-based IPSASs with IFRSs
Seoul, Korea (May 19, 2011)
Alignment with IFRS
• IFRS-based Standard Setting completed by 2009:
– Financial instruments (IPSAS 28, 29 & 30, reflecting
IAS 32, IAS 39 & IFRS 7)
– Intangible assets (IPSAS 31)
– Agriculture (IPSAS 27)
• Renewed focus on regular liaison with IASB
(Chair, Vice-Chair)
• Maintaining IFRS-based IPSASs aligned with
IFRS
– Major improvements project to be done every 2 years
after 2010
Seoul, Korea (May 19, 2011)
Major Difference between IFRS-based
IPSASs and IFRSs
• Most IFRS-based IPSASs do not have major
differences with corresponding IFRSs. (terms,
examples, etc)
• Process for reviewing and Modifying IASB
Document (October 2008)
1) Whether identified PS issues warrant departures from
IASB document
2) IPSASB will use professional judgment
Seoul, Korea (May 19, 2011)
Major Difference between IFRS - based
IPSASs and IFRSs – IPSAS 1
IPSAS 1 “Presentation of Financial Statements”
IPSAS does not incorporate concept of “comprehensive
income”
• IPSAS 1 was developed based on IAS 1 (revised in 2003)
• IASB revised IAS 1 in 2007 to incorporate a concept
“comprehensive income”
• IPSASB have not yet considered this issue (IASB’s
continuous development, IPSASB’s conceptual framework)
Seoul, Korea (May 19, 2011)
Major Difference between IFRS - based
IPSASs and IFRSs – IPSAS 5
IPSAS 5 “Borrowing Cost”
IAS 23 requires capitalized borrowing cost for
qualifying assets. IPSAS 5 remain option of all
expensing borrowing cost.
• IPSAS 5 was developed based on IAS 23 (revised in 1993).
• IASB revised IAS23 in 2007 to delete an expensing option.
• IPSASB have discussed possible revision of IPSAS 5 and
issued ED 35, but based on the responses to ED 35,
IPSASB decided to consider the issue further using the
preliminary views developed in the Measurement phase of
its Conceptual Framework project.
Seoul, Korea (May 19, 2011)
Major Difference between IFRS - based
IPSASs and IFRSs – IPSAS 18
IPSAS 18 “Segment Reporting”
IPSAS 18 do not use “Management Approach”.
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IPSAS 18 was developed based on IAS 14 (revised in 1997).
IASB issued IFRS 8 in 2006, replacing IAS 14, to introduce
“Management Approach”.
The IPSASB considered possible revision of IPSAS 18, but the
IPSASB is concerned about whether the underlying basis of IFRS 8 is
readily transferable to the public sector. Possible implications for the
Conceptual Framework project may also need consideration. The
IPSASB decided that existing IPSAS 18 be retained unchanged.
Seoul, Korea (May 19, 2011)
Potential Impact of IASB's Major Project
• IFRS 9 “Financial Instruments –
Recognition and Measurement"
• Revenue Recognition
• Lease
The IPSASB closely monitored activities of IASB
and would consider necessary revisions to
corresponding IPSASs.
Seoul, Korea (May 19, 2011)
Keep up to date on IPSASB projects
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IPSASB Project Pages – All IPSASB projects
http://www.ifac.org/PublicSector/
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IFAC eNews – Free electronic newsletter
Enroll at www.ifac.org
• IPSASB Publications - Downloadable free of charge at:
http://www.ifac.org/Store/Category.tmpl?Category=Public%20Sector%20Accounting
Seoul, Korea (May 19, 2011)
Questions?
Seoul, Korea (May 19, 2011)