Learning Objectives

After the completion of this session, you will be able to:

Describe types of NGOs in Ethiopia
Understand the essence and spread of IPSAS
Describe the structure of IPSASB
List the current pronouncements that constitute IPSAS
Describe the Ethiopian new legal requirements related to
financial reporting
Describe the conceptual framework of IPSAS
 Economic
Sectors

The Third
Private Sector Public Sector
Sector (NGOs)
• The third sector is generally referred to as NGOs
• There is no internationally accepted standard definition
for NGOs
• It is generally agreed that NGOs :
 are not part of government, or
 are not organized primarily for private profit
• NGOs are formed on voluntary basis and possess spirit of
voluntarism
NGOS are diverse in terms of:
• Size
• Operating Styles
• Geographic Focus
• Religious background(secular vs Religious)
• Programmatic Orientation:
 Development (support the needy, environment,
animals, etc.)
 Advocacy (Press decision makers for action on
particular issues)
 Disaster relief
 Human right
NGOs are known by different names:
•Not-for-profit organizations (NFP)
•Civil society organization (CSO)- WB definition &generic
•Voluntary organizations (VOs)
•Voluntary Agencies (VAs)
•Voluntary Development Organizations (VDOs)
•Non Governmental Development Organizations (NDGO)
•Charities
Types of NGOs
By Level of Operation
• Community-Based Organization
• City Wide Organization
• National NGOs
• International NGOs
By their Function
• Operational [Grassroots] NGOs (Serve the final beneficiaries)
• Funding NGOs (financing the NGOs)
• Support NGOs (technically support other grassroots NGOS),
• Network NGOs (association of NGOs- CCRDA may be an example)
• Advocacy NGOs
NGOs (Charities and
societies) in Ethiopia
• In Ethiopia NGOs are generally called charities and
societies (CSO).
• Charity: An institution, which is established exclusively
for charitable purposes and gives benefit to the public.
• Society: An association of persons organized on non-
profit making and voluntary basis for the promotion of the
rights and interests of its members and to undertake
other similar lawful purposes as well as to coordinate
with institutions of similar objectives.
 The key purpose of a society is to further the
interests of its members – and in the case of a
professional society, those members represent a
particular profession.
• Both charities and societies are supervised by the
Charities and Societies Agency (CHSA)
• They are governed by:
 Charities and Societies Proclamation No.621/2009
and
 Charities and Societies Regulation No. 168/2009
• Charities and Societies Agency is accountable to Federal
Attorney General.
 Types of Charities and Societies by Residency

Charity and
Society

Charity Society

Ethiopian Ethiopian
Ethiopian Ethiopian
Residents Foreign Charities Residents
charities Societies
Charities Societies
 Size of NGOs in Ethiopia (2015 Data)
• 3,968 Charities and Societies
 111 Ethiopian Charities
2,013 Ethiopian Resident Charities
360 Foreign Charities
 336 Ethiopian Societies
 95 Ethiopian Resident Societies
 53 Consortiums
 Size of NGOs in other regions (In 2013)

• Global
 50,000 international NGOs
• Kenya
 37,200 NGOs (30,000 societies and 7,200 charities)
• South Africa
 116,000 registered NGOs
• Nigeria
 63,000 NGOs
 Public Accountability of CSOs

• CSOs are established for a social purpose and their public

accountability is mainly to:
Funders,
Donors,
Regulators (like CHSA),
Service users and other beneficiaries, and
Organization's members
 Accounting-related requirements of CSOs

• They should keep adequate book of records

• Their accounting records should contain entries showing
from day to day all sums of money received and expended
• Their accounting records should show the matters in
respect of which the receipt and expenditure takes place
• They should keep records of their assets and liabilities
• Their annual statement of accounts should be prepared in
accordance with “acceptable standards”.
• They should have annual activity report on their major activities
(special purpose report to CHSA).
• Charities and Societies whose annual flow of funds does not
exceed Birr 50,000.00 may choose to prepare a receipts and
payments account and a statement of assets and liabilities.
• Any charity or society should allocate not less than 70 percent of
the expenses in the budget year for the implementation of its
purposes and an amount not exceeding 30 percent for its
administrative activities (Monitoring and evaluation expenses fall
under the category of ‘administrative expenses’ [Guideline No.
2/2003]).
International Financial Reporting
Standards for NGOs
 Trends in NGOs Operations
• Charities and other non-governmental organizations
(NGOs) increasingly work internationally
• They get grants from governments, private donors and
international foundations which are increasingly taking a
global approach to their work.
• They face a multiplicity of international grant regimes
• There is growing recognition of the need to improve the
transparency and accountability of NGOs
• NGOs are too different from for-profit entities
 What Does Accounting Do and Why Does it Matter?
 It captures, measures and reports information
about the economic events of an entity

 Reports are used by stakeholders (management,

donors, beneficiaries, etc) to evaluate performance
and make effective decisions.

 In order to maximize the reliability and usefulness

of reported financial information, the accounting
standards applied should be comprehensive, widely
accepted and promote transparency. 25
 NGO-specific accounting issues

• Non-exchange transactions (e.g. donated income),

• Fund accounting issues(Reporting Entity),
• Equity definition,
• Budgetary information,
• Narrative reporting, and
• Valuation of NGO-specific assets (like)
At present there are 2 sets of International
Accounting Standards
IFRS – For profit entities
IPSAS – For public sector
NONE – For NGOs

Don't worry we’ll comeback

Financial Reporting Requirements in
Ethiopia
• Ethiopia passed financial reporting law in 2014 which
provides for financial reporting requirements for:
 Commercial businesses
 Charities and societies
• And auditing requirements for External Auditors
• The legal instruments are:
Proclamation No. 847/2014
Regulation No. 332/2014
Proclamation No. 847/2014
The proclamation requires:
1. Charities and societies to follow International Public Sector
Accounting Standards (IPSAS)
2. Commercial entities which have public interest to follow
International Financial Reporting Standards (IFRS)
 PIE is a reporting entity that is of significant public relevance
because of the nature of its business, its size, its number of
employees.
 PIE in Ethiopia includes significant PIEs: banks, insurances,
MFIs, public enterprises (PEs); and other PIEs: large private firms
measured in terms of sales turnover, labor force, total asset size,
and total liability size.
3. Commercial entities which don’t have public interest to follow IFRS
for SME
4. Public auditors to follow International Standards for Auditing.
 Structure, strategic plan, and roadmap of
AABE
• Accounting and Auditing Board of Ethiopia is
established by Regulation No. 332/2014
• It is an autonomous government organ
accountable to MOFEC.
• It is headed by the Director General
• It has 12-member Board of Directors

31
AABE duties (among others)
• Issue standards and directives relating to financial
reporting and auditing and ensure their compliance.
• Receive and register financial statements of reporting
entities
• Review and monitor the accuracy and fairness of FS to
enforce compliance with the reporting standards
• Register and license public auditors

32
• Oversee professional accountancy bodies
• Establish, publish and review a code of
professional conduct and ethics for certified
public accountants and certified auditors
• Conduct or arrange for the conduct of
professional examination for the purpose of
registering certified public accountants

33
 AABE Roadmap to IFRS Implementation

IFRS implementation road map: 3 phase transition over 3 years:

• Phase 1: Significant Public Interest Entities (Financial Institutions and public enterprises
owned by Federal - Adoption of IFRS)
• Adoption start from EFY 2009 (i.e. specifically July 8, 2017); Hamle 1 2008 is TD.
• Phase 2: Other Public Interest Entities (ECX member companies and those that meet PIE
quantitative thresholds and Regional Public Enterprises) adoption of IFRS and IPSAS for
Charities and Societies-
• start adoption of the standards at the start of EFY 2010 (i.e specifically July 8, 2018).
Hamle 1, 2009 is TD.
• PIE are those meeting 2 or more of: Annual TO of >= 50 mn; >= 100 employees; 100 mn capital; and
100 mn liability
• Phase 3: Small and Medium-sized Entities adoption of the IFRS for SMEs
• start adoption of the standards from EFY 2011 (i.e specifically July 8, 2019). Hamle 1, 2010
is TD.
• Are those meeting 2 or more of: Annual TO of >= 50 mn; >= 10 employees; 2 mn capital; and
500,000 liability
Conversion Roadmap to CSOs
According to the Revised AABE Roadmap, CSOs are the 2nd Phase Adopters
Restate opening First Full-set
balance sheet IPSAS reporting
as at Hamle 01, 2009 as at Sene 30, 2011

Fiscal Fiscal Fiscal Fiscal

2009 2010 2011 2012

2009 and 2010 statements filed under Local Standards

Run Previous GAAP and IPSAS Business As

reporting parallel
Usual (BAU):
Design and implementation of IPSAS Based
process, control & systems IPSAS statements
IPSAS Trainings to staffs at different levels (Top Managers to employees)
are published
annually with
Modification of operations, regulatory &HR comparatives
programs
 WE Came-Back
International Financial Reporting Regimes
International
Accounting
Regimes

IFRS IPSAS

IFRS IFRS for SME Cash Basis Accrual Basis

IFRS
What is IFRS?
 IFRS stands for International Financial Reporting Standards

 They are single-set of high quality, globally accepted and

enforced set of standards that require high quality,
transparent and comparable information in financial
statements.

 They are developed with the objective to provide financial

information about the reporting entity that is useful to
primary users: existing and potential investors, lenders and
other creditors in making decisions about providing
resources to the entity. 39
• IFRSs are Issued by International Accounting
Standards Board (IASB) based in London
• The Standards prescribe:
the items that should be recognized as assets,
liabilities, income and expense
how to measure those items;
how to present them in a set of financial statements;
and
related disclosures about those items.
Variants of IFRS

IFRS have two versions:

1. IFRS (also called full IFRS)
2. IFRS for SME
Full IFRS Standards
 International
Accounting Standards
(IAS) -24
International Financial
Reporting Standards
(IFRS)-16
Standing
Interpretations
Committee (SIC)- 5
International Financial
Reporting Interpretations
Committee (IFRIC)- 13
IPSAS
 IPSAS
• International Public Sector Accounting Standards
(IPSAS) are a set of “independently developed, high
quality, global” accounting standards for the public
sector.
• It aims to improve the transparency and
accountability of governments and their agencies
by improving and standardizing financial reporting.
• IPSAS are developed by the International Public
Sector Accounting Standards Board (IPSASB).
• For the purposes of IPSAS, the ‘public sector’ refers to
 National governments,
Regional governments (e.g., States, Zones),
Local governments (e.g., town and city), and
Other related governmental entities (e.g., agencies,
boards, and commissions).
• IPSAS doesn’t aim at public enterprises-Government
Business Enterprises (GBEs)
What is the IPSASB?
• IPSASB is Public Sector Accounting Standards Board
(IPSASB)
• IPSASB is based in New York but registered in
Switzerland.
• The IPSASB’s operations are facilitated by the
International Federation of Accountants (IFAC).
• It is one of the standard setting boards of International
Federation of Accountants (IFAC)
• IPSASB was formerly called the IFAC Public Sector
Committee
What is IFAC?
• The International Federation of Accountants (IFAC) is the global
organization for the accountancy profession dedicated to serving the public
interest by strengthening the profession and contributing to the
development of strong international economies.
• 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.
• Established in 1977, IFAC accepts only bodies as Members
• Supports four independent standard setting boards:
o International Auditing and Assurance Standards Board
oInternational Accounting Education Standards Board
oInternational Ethics Standards Board for Accountants
oInternational Public Sector Accounting Standards Board (IPSASB)
 THE IPSASB’S MISSION:

TO SERVE THE PUBLIC INTEREST BY DEVELOPING

HIGH-QUALITY ACCOUNTING STANDARDS AND
OTHER PUBLICATIONS FOR USE BY PUBLIC SECTOR
ENTITIES AROUND THE WORLD IN THE
PREPARATION OF GENERAL PURPOSE FINANCIAL
REPORTS.
IPSASB’s Board Members
• The IPSASB consists of 18 members
 15 are drawn from IFAC member bodies,
 3 are public members with expertise in public sector financial reporting (Canada, Italy and
Switzerland)
The current board members are drawn from:

1. United Kingdom 11. Panama

2. New Zealand 12. Canada
3. Canada 13. Brazil
4. Australia 14. Nigeria
5. South Africa 15. Austria
6. France 16. Romania
7. Italy 17. Switzerland
8. United States 18. China
9. Germany
10. Japan
• All members of the IPSASB are appointed by the IFAC
Board upon recommendations from the IFAC Nominating
Committee.
• The governance and standard-setting activities of the
IPSASB are overseen by the Public Interest Committee
(PIC)
• The PIC is comprised of individuals with expertise in
public sector or financial reporting
IPSASB’s Goals And Objectives
• The IPSASB aims to strengthen public financial
management and knowledge globally through the
enhancement of the quality and transparency of public
sector financial reporting by:
Developing high-quality public sector financial
reporting standards;
Developing other publications for the public sector;
and
Raising awareness of IPSAS and the benefits of their
adoption.
How Does The IPSASB Set Standards?
• The IPSASB follows a very structured and public
due process in the development of all International
Public Sector Accounting Standards (IPSAS).
 Research and Agenda setting
 Consultation Papers (CP)
 Exposure Draft (ED)
 IPSAS
Support of IPSASB’s Activities
The IPSASB receives support (both direct financial and in-
kind) from:
 The Government Accounting Standards Board (of USA),
 The Asian Development Bank,
 The Chartered Professional Accountants of Canada,
 The South African Accounting Standards Board,
 The New Zealand External Reporting Board, and
 The governments of Canada, New Zealand, and
Switzerland.
 The IPSAS World
• Many governments, jurisdictions, and international
institutions have already adopted IPSASs(close to 70)
• Many more are on the road to implementing the standards.
• Countries which adopt IPSAS include:
Austria Kenya
New Zealand
Brazil Nigeria
Panama
Cambodia Peru
Chile Portugal
Spain
China Switzerland
Colombia Vietnam
Costa Rica Ghana
Indonesia Uganda
Japan South Africa
• Multilateral Organizations which adopt IPSAS
include:
The European Commission
The North Atlantic Treaty Organization (NATO)
IFAC
The Organization for Economic Co-operation and
Development (OECD)
The United Nations (UN) system
European Space Agency (ESA)
• IPSASB sets:
 Conceptual framework
International Public Sector Accounting Standards
(IPSAS) and
 Recommended Practice Guidelines (RPGs)
Studies, Research and Special Report
• IPSAS is inspired by IFRS
• As a general rule, the IPSAS maintain the accounting
treatment and original text of the IFRS, unless there is a
significant public sector issue that warrants a departure.
Difference between IPSAS and RPG
• IPSAS relate to the general purpose financial statements (financial
statements) and are authoritative.
• RPGs are pronouncements that provide guidance on good practice
in preparing general purpose financial reports (GPFRs) that are
not financial statements.
• Unlike IPSAS, RPGs do not establish requirements.
• All pronouncements by IPSASB relating to GPFRs that are not
financial statements are RPGs.
• RPGs do not provide guidance on the level of assurance (if any) to
which information should be subjected.
• Since 1997, the IPSASB has developed and issued:
The Conceptual Framework for General Purpose
Financial Reporting by Public Sector Entities
 35 accrual standards (i.e., 40-5)
A cash-basis standard
 3 RPGs
 Accounting Basis
• IPSASs deal with financial reporting under the cash basis of accounting
and the accrual basis of accounting.
• Cash-basis accounting is an accounting method in which income is
recorded when cash is received, and expenses are recorded when cash is
paid out.
• Accrual accounting is an accounting method that measures the
performance and financial position of an organization by recognizing
income when earned and expense when incurred rather than when cash is
received or paid.
• The IPSASB encourages to adopt the accrual basis of accounting
• Accrual basis of accounting improve financial management and increase
transparency resulting in a more comprehensive and accurate view of a
government’s financial position.
 Broad themes of IPSAS
• Like IFRS, IPSASs deal with the four main issues of financial reporting:
recognition, measurement, presentation, and disclosure

• Recognition (Recording):
 Defines what are assets, liabilities, revenues, and expenses and when you
should record them.
• Measurement (Valuation):
 Establishes a standard method for valuing assets, liabilities, revenues and
expenses.

• Financial Reporting (presentation & disclosure):

 Prescribes the format and content of reports including the type of
disclosures that should be made in the reports in order to heighten
transparency.
LIST OF IPSAS
IPSAS 1- Presentation of Financial Statements (Based on IAS 1)
IPSAS 2- Cash Flow Statements (Based on IAS 7)
IPSAS 3- Accounting Policies, Changes in Accounting Estimates
and Errors (Based on IAS 8)
IPSAS 4- The Effects of Changes in Foreign Exchange Rates
(Based on IAS 21)
IPSAS 5- Borrowing Costs (Based on IAS 23)
IPSAS 6- Consolidated and Separate Financial Statements
IPSAS 7- Investments in Associates
IPSAS 8- Interests in Joint Ventures
IPSAS 9- Revenue from Exchange Transactions (Based on IAS 18)
IPSAS 10- Financial Reporting in Hyperinflationary Economies
(Based on IAS 29)
IPSAS 11- Construction Contracts (Based on IAS 11)
IPSAS 12- Inventories (Based on IAS 2)
IPSAS 13- Leases (Based on IAS 17)
IPSAS 14- Events After the Reporting Date (Based on IAS 10)
IPSAS 15- Financial Instruments: Disclosure and Presentation
(superseded by IPSAS 28 and IPSAS 30)
IPSAS 16- Investment Property (Based on IAS 40)
IPSAS 17- Property, Plant and Equipment (Based on IAS 16)
IPSAS 18- Segment Reporting (Based on IAS 14)
IPSAS 19- Provisions, Contingent Liabilities and Contingent
Assets (Based on IAS 37)
IPSAS 20- Related Party Disclosures (Based on IAS 24)
IPSAS 21- Impairment of Non-Cash-Generating Assets (Based on
IAS 36)
IPSAS 22- Disclosure of Financial 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 (superseded by IPSAS 39)
IPSAS 26- Impairment of Cash-Generating Assets (Based on IAS 36)
IPSAS 27- Agriculture (Based on IAS 41)
IPSAS 28- Financial Instruments: Presentation (Based on IAS 32)
IPSAS 29- Financial Instruments: Recognition and Measurement (Based
on IAS 39)
IPSAS 30- Financial Instruments: Disclosures (Based on IFRS 7)
IPSAS 31- Intangible Assets (Based on IAS 38)
IPSAS 32- Service Concession Arrangements: Grantor (Based on
IFRIC 12)
IPSAS 33- First-time Adoption of Accrual Basis IPSASs
IPSAS 34- Separate Financial Statements (Based on IAS 27)
IPSAS 35- Consolidated Financial Statements (Based on IFRS 10)
IPSAS 36- Investments in Associates and Joint Ventures (Based
on IAS 28)
IPSAS 37- Joint Arrangements (Based on IFRS 11)
IPSAS 38- Disclosure of Interests in Other Entities
(Based on IFRS 12)
IPSAS 39- Employee Benefits (Based on IAS 19)
IPSAS 40- Public Sector Combinations (Based on IFRS 3)
(Effective on or after 1 January 2019)
RPG 1- Reporting on the Long-Term Sustainability of an
Entity’s Finances
RPG 2- Financial Statement Discussion and Analysis
RPG 3- Reporting Service Performance Information

The Conceptual Framework for General Purpose

Financial Reporting by Public Sector Entities

Financial Reporting under the Cash-Basis of Accounting

Financial Reporting under the Cash-Basis of Accounting
• It includes mandatory and encouraged disclosures sections.
• It encourages an entity to voluntarily disclose accrual based information
even if its core financial statements are prepared under the cash basis of
accounting.
Conceptual Framework
• The IPSASB completed the Conceptual Framework for General
Purpose Financial Reporting by Public Sector Entities in the
second half of 2014.
• The Conceptual Framework establishes and makes explicit the
concepts that are to be applied in developing IPSAS and RPGs
applicable to the preparation and presentation of the general
purpose financial reports (GPFRs) of public sector entities.
• GPFRs are financial reports intended to meet the information
needs of users who are unable to require the preparation of
financial reports tailored to meet their specific information
needs.
• The Conceptual Framework (the Framework) establishes the concepts
that underpin general purpose financial reporting by public sector
entities that adopt the accrual basis of accounting.
• It does not establish authoritative requirements for financial
reporting
• It doesn’t override the requirements of IPSASs or RPGs.
• It provides guidance in dealing with financial reporting issues not
dealt with by IPSASs or RPGs.
 Objectives and Users of GPFRs
• The objectives of financial reporting by public sector entities are
to provide information about the entity that is useful to users of
GPFRs for accountability and decision-making purposes.

• The primary users of GPFRs are service recipients and their representatives and
resource providers and their representatives. They include:
Citizens (as taxpayer and/or service recipient)
Residents who are not citizens
Members of parliament
Multilateral or bilateral donors
Lenders
 Accountability and Decision-Making
• The discharge of accountability obligations requires the provision of
information about the entity’s management of the resources entrusted to it for
the delivery of services to constituents and others, and its compliance with
legislation, regulation, or other authority that governs its service delivery and
other operations.
• Service recipients and resource providers will also require information as
input for making decisions. For example:
Lenders, creditors, donors and others that provide resources on a
voluntary basis to make lending decision
Taxpayers to make decision on voting preferences
Donors and other financial supporters to make decisions about providing
resources to the entity.
Other users include government statisticians, analysts, the media, financial
advisors, public interest and lobby groups
Information Needs of Service Recipients and Resource
Providers
For accountability and decision making purposes information
is needed to assess:
1. The performance of the entity during the reporting period in, for
example:
 Meeting its service delivery and other operating and financial
objectives;
 Managing the resources it is responsible for;
 Complying with relevant budgetary, legislative, and other
authority regulating the raising and use of resources;
2. The liquidity (for example, ability to meet current obligations) and
solvency (for example, ability to meet obligations over the long term)
of the entity
3. The sustainability of the entity’s service delivery and other operations
over the long term
3. The capacity of the entity to adapt to changing circumstances,
whether changes in demographics or changes in domestic or global
economic conditions
 IPSAS-based Financial Statements
A complete set of financial statements comprises:
Statement of financial position
Statement of financial performance
Statement of changes in net assets/equity
Cash flow statement
When the entity makes it approved budget publicly available, a
comparison of budget and actual amounts
Notes, comprising a summary of significant accounting policies and other
explanatory notes
GPFRs should also include information on service delivery achievements
and prospective financial and non financial information
Qualitative characteristics of information included in
GPFRs
The qualitative characteristics of information included in GPFRs of
public sector entities are
• Relevance,
• Faithful representation,
• Understandability,
• Timeliness,
• Comparability, and
• Verifiability
All are integral part in making the financial and non-financial
information in GPFRs useful to users.
• Relevance: Capable of making a difference in users’
decisions
predictive value
confirmatory value

• Faithful representation: Faithfully represents the

phenomena it purports to represent
completeness (depiction including numbers and
words)
neutrality (unbiased)
free from error (ideally)

87
• Understandability: Classify, characterize, and present
information clearly and concisely
• Timeliness: having information available to decision-makers in
time to be capable of influencing their decisions
• Comparability: like things look alike; different things look
different
• Verifiability: knowledgeable and independent observers could
reach consensus, but not necessarily complete agreement, that
a depiction is a faithful representation

88
Pervasive constraints
Pervasive constraints on information included in GPFRs are:
• Materiality,
• Cost-benefit, and
• Achieving an appropriate balance between the qualitative
characteristics.
 Reporting Entity
• A public sector reporting entity is a government or other public sector
organization, program or identifiable area of activity (hereafter
referred to as an entity or public sector entity) that prepares GPFRs.
• A public sector reporting entity may comprise two or more separate
entities that present GPFRs as if they are a single entity—such a
reporting entity is referred to as a group reporting entity.
Key Characteristics of a Reporting Entity
• It is an entity that raises resources from, or on behalf of, constituents
and/or uses resources to undertake activities for the benefit of, or on
behalf of, those constituents; and
• There are service recipients or resource providers dependent on
GPFRs of the entity for information for accountability or decision
making purposes. This sometimes requires professional judgment
Elements used in Financial Statements
• Asset
• Liability
• Revenue
• Expense
• Ownership contributions
• Ownership distributions
 Asset
• An asset is a resource presently controlled by the entity as a result of a past
event.
• A resource is an item with service potential or the ability to generate economic
benefits.
• Indicators of control:
 Legal ownership;
Access to the resource, or the ability to deny or restrict access to the
resource;
The means to ensure that the resource is used to achieve its objectives; and
The existence of an enforceable right to service potential or the ability
to generate economic benefits arising from a resource.
• Liability is a present obligation of the entity for an outflow of
resources that results from a past event.
• Revenue is increases in the net financial position of the entity, other
than increases arising from ownership contributions.
• Expense is decreases in the net financial position of the entity, other
than decreases arising from ownership distributions.
 The entity’s surplus or deficit for the period is the difference
between revenue and expense reported on the statement of
financial performance.
• Ownership contributions are:
Inflows of resources to an entity, contributed by external parties in
their capacity as owners, which establish or increase an interest in the
net financial position of the entity.

• Ownership distributions are:

Outflows of resources from the entity, distributed to external parties
in their capacity as owners, which return or reduce an interest in the
net financial position of the entity.
Recognition Criteria
The recognition criteria are that:
• An item satisfies the definition of an element; and
• Can be measured in a way that achieves the qualitative characteristics
and takes account of constraints on information in GPFRs.
Measurement
• The objective of measurement is:
To select those measurement bases that most fairly reflect the cost of
services, operational capacity and financial capacity of the entity in a
manner that is useful in holding the entity to account, and for decision-
making purposes
Measurement of Assets
• Historical Cost
• Current Value Measurements
 Market value;
 Replacement cost
 Net selling price; and
 Value in use.
• Historical cost: The consideration given to acquire or develop an
asset, which is the cash or cash equivalents or the value of the other
consideration given, at the time of its acquisition or development.
(both depreciation and impairments are considered)
• Market value for assets is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm’s length
transaction.
• Replacement cost is the most economic cost required for the entity to
replace the service potential of an asset (including the amount that
the entity will receive from its disposal at the end of its useful life) at
the reporting date.
• Net selling price is the amount that the entity can obtain from sale of
the asset, after deducting the costs of sale. Net selling price differs
from market value in that it does not require an open, active and
orderly market
• Value in use is the present value to the entity of the asset’s remaining
service potential or ability to generate economic benefits if it
continues to be used, and of the net amount that the entity will
receive from its disposal at the end of its useful life.
Measurement of Liabilities
• Historical Cost;
• Cost of Fulfillment;
• Market Value;
• Cost of Release; and
• Assumption Price.
• Historical cost for a liability is the consideration received to assume an
obligation, which is the cash or cash equivalents, or the value of the
other consideration received at the time the liability is incurred.
• Cost of fulfillment is the costs that the entity will incur in fulflling the
obligations represented by the liability, assuming that it does so in the
least costly manner.
• Market value for liabilities is the amount for which a liability could be
settled between knowledgeable, willing parties in an arm’s length
transaction.
• Cost of release is the amount that either the creditor will accept in
settlement of its claim, or a third party would charge to accept the
transfer of the liability from the obligor.
• Assumption price is the amount which the entity would rationally be
willing to accept in exchange for assuming an existing liability. It refers
to the same concept as replacement cost for assets.
Seek Wisdom, Elevate Your Intellect,
and Serve Humanity!

Addis Ababa University

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IPSAS and The Way Forward
Factors Considered for New IPSAS Projects

1. Significance for the public sector – generally this would be a public

sector-specific project of high relevance to the public sector, for which
there is likely to be no private-sector equivalent.

2. Urgency of the issue – Developments globally may result in changes

in the environment and therefore an issue becoming more important.
For example, as a result of the global financial crisis in 2008, the IPSASB
accelerated work on IPSAS 28-30 as it considered it a priority to have a
complete set of standards on financial instruments
3. Gaps in standards – the project addresses an issue that has not previously
been addressed in IPSAS or RPGs.

4. IFRS convergence – the project meets the goal of convergence with the
IFRS where deemed appropriate. This would allow leveraging resources and
possibly collaborating with the International Accounting Standards Board.

5. Alignment with Government Finance Statistics (GFS) – the project helps

to reduce divergence between IPSAS and statistical reporting standards, such
as the International Monetary Fund’s Government Finance Statistics (GFS).
Seek Wisdom, Elevate Your Intellect,
and Serve Humanity!

Addis Ababa University

Thank You!