Introduction
Chapter (1)
Introduction
Structure of Course
• Based on accrual IPSAS in the IPSASB Handbook
• Series of independent modules
• Illustrative examples and case studies
• Self assessment quiz
Introduction
Who is the IPSASB?
• Independent standard-setting board
• 18 members; international composition; meetings and materials
public
• Objective: Strengthening public financial management (PFM)
globally through increasing adoption of accrual-based IPSAS:
Delivered through two main areas of activity, both of which have a public
interest focus:
– Developing and maintaining IPSAS and other high-quality financial
reporting guidance for the public sector; and
– Raising awareness of IPSAS and the benefits of their adoption.
Introduction
What are IPSAS?
• Authoritative standards for preparation of general purpose financial
statements
• Designed to apply to public sector entities that
– are responsible for the delivery of services to benefit the public and/or
to redistribute income and wealth;
– mainly finance their activities, directly or indirectly, by means of taxes
and/or transfers from other levels of government, social contributions,
debt or fees; and
– do not have a primary objective to make profits.
Introduction
Aligned with IFRS where Appropriate
IFRS
(Private Sector)
• Technology
• Guidance for public sector
• Issues of the public sector
• Examples from the public sector
IPSAS
(Public Sector)
Introduction
Relationship with GFS
More on IPSAS
• In addition to authoritative standards (including application
guidance) IPSASs include:
– Basis for Conclusion
– Implementation guidance
– Illustrative Examples
– Comparison with International Financial Reporting Standards (IFRSs)
where applicable
Introduction
IPSAS Due Process
Required
• Research – relevant international and national standards and
practices
• Develop and publish exposure draft – minimum 4 month comment
period
• Consider responses and amend draft standard as appropriate
• Final IPSAS
Public consultation paper may be issued before ED at IPSASB’s
discretion
Introduction
Different Bases of Accounting
IPSASB defines accounting basis to mean either the accrual or cash basis of
accounting as defined in the accrual basis IPSAS or the Cash Basis IPSAS,
respectively
Accounting Basis Continuum
Cash Modified Modified Accrual
Basis Cash Accrual Basis
Basis Basis
Transactions Transactions
recognized when recognized as
cash received or Variations they occur –
paid – reports reports all assets
cash and changes and liabilities
to cash
Introduction
Example of Difference Between Cash and Accrual
$100,000 10-year debenture with coupon rate of 6 % issued July 1,
20x0. Interest and principle payable annually. Fiscal period end is
December 31.
Introduction
Why adopt the accrual basis?
• Reports all
– economic resources controlled by entity
– claims against economic resources
– full cost of goods and services
• Improves transparency and accountability
• Provides better information for decision making
• Improves consistency and comparability of reporting
Introduction
Transitioning to Accrual Accounting
• IPSAS 33 – Exceptions from other IPSAS during transition period
• Recognition
• Measurement
• Presentation
• Comparative information
Introduction
Features of Successful Transition
• A clear mandate;
• Political commitment;
• Commitment of central entities & key officials;
• Adequate resources (human & financial);
• An effective project management structure;
• Adequate technological capacity and IT systems; and
• Use of legislation.
Introduction
Implementation Plan Key Steps
• Project initiation;
• Detailed project scoping and planning;
• Implementation phase; and
• Reporting.
Introduction
Technical Steps to Implementation
• Determining the reporting entity
• Developing accounting policies
• Implementation
– Inventory, existing assets, and liabilities
– Recognition and measurement
Introduction
Identifying the Reporting Entity
Is the entity a No
Don’t issue GPFS
reporting entity?
Yes
Is the entity an No Issue GPFS applying
economic entity? IPSAS except IPSAS 34
Yes
Required to prepare
No Prepare separate GPFS
Controlled Entities: consolidated GPFS
under IPSAS 34
- Departments, under IPSAS 35?
agencies and other Yes
administrative units
- Separate corporate Associates (IPSAS 36)
entities Identify components Joint Ventures
- Commercial public of economic reporting (IPSAS 36)
sector entities entity Joint Arrangements
(IPSAS 37)
Introduction
Accounting Policies
• Specific principles, bases, conventions, rules, and practices
– Determined by IPSASs when applicable
– Judgment used to select accounting policy when no IPSAS (IPSAS 3)
• GAAP hierarchy
• IPSASs dealing with similar and related issues
• Definitions, recognition and measurement criteria in the Conceptual
Framework for General Purpose Financial Reporting by Public Sector
Entities
• Other standard setting bodies
• Accepted practices
Introduction
Application of materiality
• IPSAS need not be applied when the effect of applying them is
immaterial
• An item is material if its omission from or misstatement in the
financial statements could influence the discharge of accountability
by the entity or the decisions that users make on the basis of the
financial statements
• The concept of materiality is considered in deciding
– Whether items need to be recognized
– The application of a particular accounting policy
– What items should be disclosed in notes
Introduction
Questions and Discussion
• Visit the IPSASB web site
http://www.ipsasb.org
Introduction
