Interpretation and Application of IPSAS - Caroline Aggestam-Pontoppidan - ebook

Interpretation and Application of IPSAS ebook

Caroline Aggestam-Pontoppidan

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Clear, practical IPSAS guidance, explanation, and examples Interpretation and Application of IPSAS providespractical guidance on the implementation and application of theInternational Public Sector Accounting Standards. This book bringsreaders up to date on the standards, and describes their properinterpretation and real-world application. Examples and mini-casestudies clarify the standards' roles throughout, giving readers abetter understanding of complex processes, especially where theIPSAS deviate from IFRS. Readers also gain insight into smoothlynavigating the transition for a public sector entity, which ismoving to either IPSAS under accrual basis of accounting or to cashaccounting IPSAS, plus an overview of IPSAS adoption status andmethods around the world. Global public sector accounting is highly diversified, resultingin ongoing moves to harmonise standards worldwide. The IPSAS areinternational standards that largely follow the IFRS model, butdiffer in some key areas and include standards in places where IFRShas none. This book provides complete guidance to IPSAS, with clearexplanation and expert insight. * Understand the meaning and role of each standard * Apply the standards to real-world scenarios * Manage the process of transition to IPSAS These standards are meant to be followed by all public sectorentities, including national and regional governments and localauthorities. They've been adopted by the UN, NATO, the EuropeanCommission, and others, and either have been or soon will beadopted in Malaysia, Switzerland, Spain, and more.

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Interpretation and Application of IPSAS

Caroline Aggestam-Pontoppidan Isabelle Andernack

This edition first published 2016 © 2016 Caroline Aggestam-Pontoppidan and Isabelle Andernack

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Library of Congress Cataloging-in-Publication Data

Names: Aggestam-Pontoppidan, Caroline, 1975– Andernack, Isabelle, 1972– Title: Interpretation and application of IPSAS / Caroline Aggestam-Pontoppidan. Description: Hoboken : Wiley, 2016. Series: Wiley regulatory reporting    Includes bibliographical references and index. Identifiers: LCCN 2015037506 (print) ISBN 9781119010296 (paperback) Subjects: LCSH: Finance, Public--Accounting--Standards. International public sector accounting standard. Classification: LCC HJ9733 .A34 2016 (print) LCC HJ9733 (ebook) DDC    657/.8350218--dc23 LC record available at http://lccn.loc.gov/2015037506

A catalogue record for this book is available from the British Library.

ISBN 978-1-119-01029-6 (pbk) ISBN 978-1-119-01031-9 (ebk) ISBN 978-1-119-01030-2 (ebk) ISBN 978-1-119-17032-7 (ebk)

Cover Design & Image: Wiley

Printed in Great Britain by TJ International Ltd, Padstow, Cornwall, UK

CONTENTS

Foreword

Acknowledgements

About the Authors

Caroline Aggestam Pontoppidan

Isabelle Andernack

List of IPSAS with Corresponding IFRS

Full Listing of all IPSAS and IFRS “Equivalent” As at 2 March 2015

List of IPSAS with Brief Description

Disclaimer

Part 1 Introducing Public Sector Accounting

1 Introduction

Aim of the Book

IPSAS and Public Sector Entities

Structure of the Book

Notes

2 Why Converge Public Sector Accounting Practices?

Transparency

Accountability

Why is there an Interest in Global Convergence of Public Sector Accounting?

Conclusion

Notes

3 The IPSASB

A Review of Events that have Shaped Today's IPSASB

Current Objectives, Structure, and Members of the IPSASB

Relationship between the IASB and the IPSASB

Oversight and Governance of the IPSASB

IPSASB Work in Process

New Pronouncements

Work-in-progress

Conclusion

Notes

Part 2 Accrual-based IPSAS

4 The IPSASB Conceptual Framework and Key Accrual Accounting Concepts

Principles-based Accrual Accounting

Background and Purpose of the IPSASB Conceptual Framework

The Content of the Conceptual Framework

Notes

5 Financial Statements

Presentation of Financial Statements

Structure, Frequency, and Content of Financial Statements

Segment Reporting

Accounting Policies, Changes in Accounting Estimates, and Errors

Events After the Reporting Date

Notes

6 Disclosure Standards

Related Party Disclosures

Loans

Disclosure about the General Government Sector

Notes

7 Long-Term (Non-Current) Assets

Property, Plant and Equipment (PP&E) (IPSAS 17)

Borrowing Costs (IPSAS 5)

Intangibles (IPSAS 31)

Investment Property (IPSAS 16)

Impairment (IPSAS 21 and IPSAS 26)

Notes

8 Current Assets

Inventories versus Property, Plant, and Equipment

Inventory (IPSAS 12)

9 Service Concession Arrangements: Grantor

Service Concession Arrangements: Grantor

Note

10 Leases and Leasing Arrangements

Does an Arrangement Contain a Lease?

Substance Over Form

Accounting Treatment by Lessees

Accounting Treatment by Lessors

Sale and Leaseback Transactions

Disclosures

11 Revenues and Expenses

Non-Exchange Revenue (IPSAS 23)

Measurement

Revenue from Exchange Transactions (IPSAS 9)

Transactions that Include Both an Exchange and Non-Exchange Component

Principal–Agent Accounting

Construction Contracts (IPSAS 11)

Expense Recognition

Notes

12 Employee Benefits, Social Benefits, and Other Liabilities

Contributions Received in Advance, Accounts Payable, and Accrued Liabilities

Employee Benefits (IPSAS 25)

Social Benefits

Notes

13 Provisions and Contingencies

How to Distinguish between Provisions, Accruals, and Payables

Note

14 Budget Reporting

Excessive Deficit Procedure

Stability and Growth Pact

The Role of IPSAS 24 on Presentation of Budget Information in Financial Statements

Applying IPSAS 24 on the Presentation of Budget Information in Financial Statements

Notes

15 Financial Instruments

What is a Financial Instrument?

Financial Instruments: Presentation

Offsetting

Financial Instruments: Recognition and Measurement

Financial Instruments: Disclosure

16 Consolidations and Strategic Investments

Consolidated and Separate Financial Statements (IPSAS 6)

Investments in Associates (IPSAS 7)

Joint Ventures (IPSAS 8)

Separate Financial Statements (IPSAS 34)

Disclosure of Interests in Other Entities (IPSAS 38)

Notes

17 Specific Standards: Accounting for Agriculture and Accounting in Hyperinflation Economies

Agriculture (IPSAS 27)

1. GENERAL INFORMATION

14. BIOLOGICAL ASSETS

Valuation methodology

Discount rate

Market overview

Financial Reporting in Hyperinflationary Economies (IPSAS 10)

Conclusion

Note

18 Recommended Practice Guidelines (RPGs)

Reporting on the Long-Term Sustainability of an Entity's Finances (RPG 1)

Financial Statement Discussion and Analysis (RPG 2)

Reporting Service Performance Information (RPG 3)

Conclusion

Notes

Part 3 CASH-BASED IPSAS

19 Cash Basis IPSAS

Content Part 1 Cash Basis IPSAS (Mandatory)

Examples of Use of Cash Basis IPSAS

Content Part 2 Cash Basis IPSAS (Non-Mandatory)

Notes

Part 4 MAKING THE TRANSITION TO IPSAS AND CLOSING

20 Making the Transition to IPSAS

Transitioning to IPSAS

Project Management Perspective

What is the Starting Point for Transition? Different Paths of IPSAS Adoption

First-time Adoption of Accrual Basis IPSAS (IPSAS 33)

Conclusion

Notes

Conclusion

Notes

Annex 1: Brief Description of IPSAS

Annex 2: Key Characteristics of Public Sector Entities

1

Notes

References

Annex 3: Employee Benefits: An Overview of the Key Principles

3.1 Short-term Employee Benefits

3.2 Post-Employment Benefits

3.3 Termination Benefits

3.4 Other Long-term Employee Benefits

Notes

Annex 4: Appendix to Chapter 21. Transition to IPSAS. Case Example: Iceland IPSAS Implementation Plan

1

Notes

Bibliography

Index

EULA

List of Tables

Chapter 1

Table 1.1

Chapter 3

Table 3.1

Table 3.2

Table 3.3

Chapter 4

Table 4.1

Table 4.2

Table 4.3

Chapter 5

Table 5.1

Table 5.2

Table 5.3

Table 5.4

Table 5.5

Table 5.6

Table 5.7

Chapter 6

Table 6.1

Chapter 9

Table 9.1

Table 9.2

Chapter 10

Table 10.1

Table 10.2

Table 10.3

Chapter 11

Table 11.1

Table 11.2

Table 11.3

Chapter 12

Table 12.1

Table 12.2

Chapter 13

Table 13.1

Chapter 14

Table 14.1

Chapter 15

Table 15.1

Table 15.2

Table 15.3

Chapter 16

Table 16.1

Chapter 17

Table 17.1

Table 17.2

Chapter 19

Table 19.1

Table 19.2

Table 19.3

Table 19.4

Table 19.5

Table 19.6

Chapter 20

Table 20.1

Table 20.2

Table 20.3

List of Illustrations

Chapter 3

Figure 3.1

Step-by-step due process for the development of IPSAS

Figure 3.2

IPSASB and IASB co-operation

Figure 3.3

Process for the IPSASB for reviewing and modifying IASB documents (IPSASB, 2008)

Figure 3.4

Summary view of responses in favor of IPSAS governance modalities in the long term vs. short term

Figure 4.2

IPSAS elements

Figure 4.3

GPFRs information: display or disclosure

Figure 4.4

Key relationships

Chapter 5

Figure 5.1

The two methods of presentation of the statement of financial performance

Figure 5.2

Key categories of notes

Chapter 6

Figure 6.1

Identifying related parties

Figure 6.2

The role of IPSAS 22 (cf. Scumesch, 2012: 78)

Figure 6.3

Tier structure in New Zealand for financial reporting

Chapter 7

Figure 7.1

Key questions to determine asset and asset related transactions

Figure 7.2

Cost vs. revaluation model

Figure 7.3

Borrowing costs and qualifying assets

Figure 7.4

An identifiable intangible asset

Figure 7.5

Characteristics which an intangible asset must possess in order to be recognized

Figure 7.6

Action if indication of impairment

Figure 7.7

Impairment indicators

Figure 7.8

Measure recoverable amount

Chapter 8

Figure 8.1

Defining costs

Chapter 9

Figure 9.1

Illustration of scope of IPSAS 32

Chapter 10

Figure 10.1

Determining whether an arrangement is or contains a lease

Figure 10.2

Key risks and rewards that arise from the ownership of an asset

Chapter 11

Figure 11.1

An overview of revenue definitions

Figure 11.2

Types of non-exchange revenues

Figure 11.3

Assets received are not reflected as non-exchange revenue

Figure 11.4

Stipulations on transferred assets

Figure 11.5

Principal–agent relations and accounting impact

Chapter 13

Figure 13.1

Events that may fall under the definition of restructuring

Figure 13.2

Minimum content of detailed plan for restructuring

Chapter 14

Figure 14.1

Presentation and disclosure of budget information

Chapter 15

Figure 15.1

Definition of a financial asset

Figure 15.2

Definition of a financial liability

Figure 15.3

Definition of a derivative

Figure 15.4

Principle of initial recognition of financial instruments

Figure 15.5

Fair value hierarchy

Figure 15.6

Fair value hierarchy and disclosures

Chapter 16

Figure 16.1

Establishment of control (IPSAS 6.41)

Chapter 17

Figure 17.1

Options for determining fair value under IPSAS 27

Figure 17.2

Indicators that can assist in determining whether an economy is hyperinflationary under IPSAS 10

Chapter 18

Figure 18.1

High-level overview of RPG 1

Figure 18.2

Encouraged disclosures

Figure 18.3

Components of information

Figure 18.4

Overview of sustainability

Figure 18.5

Relationships between the dimensions of long-term fiscal sustainability

Figure 18.6

Big picture – reporting service performance

Chapter 19

Figure 19.1

Nature of information under IPSAS cash basis

Figure 19.2

Treatment of foreign currency transactions and balances

Figure 19.3

Adopting cash basis IPSAS is the first step in the Malaysian transition to accrual-based accounting (IPSASB, 2013)

Chapter 20

Figure 20.1

Transition to IPSAS – key success factors

Figure 20.2

Critical components for the transition to IPSAS

Figure 20.3

Some key components of a transition

Figure 20.4

Critical pre-implementation conditions

Figure 20.5

Key components of a healthy implementation process

Figure 20.6

OSCE high level IPSAS adoption timeline

Figure 20.7

OSCE IPSAS adoption timeline per IPSAS

Figure 20.8

IPSAS awareness and communication sessions

Figure 20.9

IPSAS benefits

Figure 20.10

IPSAS adoption and the associated challenges

Guide

Cover

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FOREWORD

It is with pleasure that I am writing this foreword to Interpretation and Application of IPSAS, which has been authored by Caroline Aggestam-Pontoppidan and Isabelle Andernack.

International Public Sector Accounting Standards (IPSASs) are issued by the IPSAS Board (IPSASB) for use by public sector entities around the world in the preparation of their financial statements, and are intended to improve the quality of financial reporting.

However, although an entirely accurate picture is difficult to obtain, it would appear that adoption and implementation of IPSAS around the world has been slower than expected. It is hopefully the case that the next few years will see many more public sector organizations on all continents embracing IPSAS, and thereby upgrading the reporting, the accountability and the transparency of their organizations.

Relatively few publications dealing with the practical adoption of IPSAS have been available to implementers and other interested parties so far, and it is to everybody's benefit to see this work, entitled Interpretation and Application of IPSAS, being published.

In particular, I am pleased to see a text that includes examples and mini-case studies that help to illustrate how IPSAS is applied – this will be very helpful for training and education purposes. This book also provides useful insights into navigation of the transition to IPSAS, either under the accrual basis or cash basis of accounting.

I am confident that this important work will be of significant benefit to the relevant communities, and congratulate the authors on their achievement.

By Marc Gardiner BSc (Econ) CPA, Chief Executive Officer of IASeminars Ltd., London

IASeminars is an independent global financial training company specialising in international accounting seminars (IFRS & US GAAP & IPSAS) and other financial training events.

ACKNOWLEDGEMENTS

The process of writing this book has been enabled by the inspiration and support of a number of individuals from the global “IPSAS-community”, who have taken time out to help us.

Firstly, we are sending our sincere appreciation to the commissioning team at John Wiley & Sons Ltd. We have had the pleasure of being supported by wonderful, encouraging and helpful people, such as Stephen Mullaly, Gemma Valler and Tessa Allen.

Secondly, we would like to thank the knowledgeable IPSAS practitioners who have granted us permission to use IPSAS compliant financial statements. We are particularly thankful to Ms. Nutan Wozencroft (UNESCO) and Mr. Uday Dayal (formerly at the IAEA). We send special appreciation to Melissa Dias Buerbaumer, Ph.D., CPA, and Chief of Accounts at the OSCE, who has lent us her expertise and has let us include two practical case studies, based on her experiences of adopting IPSAS. For this we are grateful.

In addition to those who have directly contributed to this book, we would like to mention that a number of organizations, such as the CIPFA and IASeminars, have been valuable resources in the writing of this book. We are also thankful to the well-maintained website of the IPSASB, which allows any public sector accountant to stay fully abreast of the developments in IPSAS and other work related to the IPSASB.

Also, we send our special thanks to Gary Bandy for his review of the manuscript and invaluable suggestions for improvements hereof.

Thirdly, we want to thank former and present colleagues, both in the academic and the practice communities, who, through conversations about public sector accounting and IPSAS, have provided insight and inspiration that has helped to shape this book. Specifically, we thank our respective departments at the Copenhagen Business School and Sorbonne University for supporting us with the writing of this book.

Finally, we both thank our respective families, who have endured us spending many long days and nights in front of our computers.

Any errors or flaws in the book remain the authors' responsibility.

ABOUT THE AUTHORS

CAROLINE AGGESTAM PONTOPPIDAN

Caroline Aggestam Pontoppidan (Ph.D) works as an Associate Professor at the Department of Accounting and Auditing at the Copenhagen Business School (CBS). She earned her Ph.D in auditing in 2005. Caroline is an experienced educator and researcher who today specializes in International Public Sector Accounting Standards (IPSAS) and other international accounting and auditing issues in the public sector as well as the education of public sector accountants.

Since completing her Ph.D, she has carried out research on the development of public sector accounting at the global level as well as providing training services for various public sector entities on International Standards of Auditing (ISA) as well as on the interpretation and application of IPSAS.

Caroline previously spent three years in Japan teaching and researching emerging accounting and auditing issues. In addition, she has practical work experience from having served a number of United Nations agencies for more than eight years in total. Her work within international organizations has included, for example, business process re-engineering and the provision of technical advice on accounting and internal control systems.

ISABELLE ANDERNACK

Isabelle Andernack is a French Chartered Accountant (Diplômée d'expertise comptable) and Financial Auditor (Commissaire aux comptes), and a Member of the French financial analysts' institution (Société française des analystes financiers, SFAF).

She has nearly 20 years of professional experience in both the private and public sectors, including training, accounting, managing transitions to new accounting systems, planning and implementation. and specifically International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS).

She has worked on many high-profile accounting and audit training and consulting engagements, both in the public as well as in the private sector. Recently Isabelle has been implementing an ERP (enterprise resource planning) system for an international organization that she had previously converted from cash accounting to the accrual basis of accounting under IPSAS, in order to improve its management and long-term financial and business strategy.

Isabelle is a lecturer at Paris I Panthéon-Sorbonne University and at CFAF (Training Centre for French Financial Analysts). To follow the work of Caroline and Isabelle on IPSAS please visit www.ipsasapplied.com.

LIST OF IPSAS WITH CORRESPONDING IFRS

FULL LISTING OF ALL IPSAS AND IFRS “EQUIVALENT” AS AT 2 MARCH 2015

IPSAS

IFRS “equivalent” (if applicable)

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 Statements1

IAS 27 (replaced)

IPSAS 7—Investments in Associates2

IAS 28 (replaced)

IPSAS 8—Interests in Joint Ventures3

IAS 31 (replaced)

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— (withdrawn)4

IPSAS 16—Investment Property

IAS 40

IPSAS 17—Property, Plant, and Equipment

IAS 16

IPSAS 18—Segment Reporting

IAS 14 (replaced)

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

N/A5

IPSAS 22—Disclosure of Information about the General Government Sector

N/A

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

N/A

IPSAS 24—Presentation of Budget Information in Financial Statements

N/A

IPSAS 25—Employee Benefits

IAS 19

IPSAS 26—Impairment of Cash-Generating Assets

IAS 36

IPSAS 27—Agriculture

IAS 41

IPSAS 28—Financial Instruments: Presentation

IAS 32

IPSAS 29—Financial Instruments: Recognition and Measurement

IAS 39

IPSAS 30—Financial Instruments: Disclosures

IFRS 7

IPSAS 31—Intangible Assets

IAS 38

IPSAS 32—Service Concession Arrangements: grantor

N/A

IPSAS 33—First-Time Adoption of Accrual Basis IPSASs

An entity shall apply those amendments for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is permitted. If an entity applies IPSAS 33 for a period beginning before 1 January 2017, the amendments shall also be applied for that earlier period.

IFRS 1

IPSAS 34—Separate Financial Statements

An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2017, it shall disclose that fact and apply IPSAS 35, IPSAS 36, IPSAS 37, and IPSAS 38 at the same time.

IAS 27 (2011)

IPSAS 35—Consolidated Financial Statements

An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2017, it shall disclose that fact and apply IPSAS 34, Separate Financial Statements, IPSAS 36, IPSAS 37, and IPSAS 38 at the same time.

IFRS 10

IPSAS 36—Investments in Associates and Joint Ventures

An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2017, it shall disclose that fact and apply IPSAS 34, IPSAS 35, IPSAS 37, and IPSAS 38, Disclosure of Interests in Other Entities, at the same time.

IAS 28 (2011)

IPSAS 37—Joint Arrangements

An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2017, it shall disclose that fact and apply IPSAS 34, IPSAS 35, IPSAS 36, and IPSAS 38, Disclosure of Interests in Other Entities, at the same time.

IFRS 11

IPSAS 38—Disclosure of Interests in Other Entities

An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017. Earlier application is encouraged.

IFRS 12

LIST OF IPSAS WITH BRIEF DESCRIPTION

IPSAS 1 Presentation of Financial Statements sets out the overall considerations for the presentation of financial statements, guidance for their structure and minimum requirements for the content of financial statements prepared under the accrual basis of accounting.

IPSAS 2 Cash Flow Statements requires the provision of information about the changes in cash and cash equivalents during the financial period from operating, investing and financing activities.

IPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors specifies the accounting treatment for changes in accounting estimates, changes in accounting policies and the correction of material errors.

IPSAS 4 The Effects of Changes in Foreign Exchange Rates deals with accounting for foreign currency transactions and foreign operations, sets out the requirements for determining which exchange rate to use for the recognition of certain transactions and balances, and prescribes how to recognize the financial effect of changes in exchange rates within the financial statements.

IPSAS 5 Borrowing Costs prescribes the accounting treatment for borrowing costs and requires either the immediate expensing of borrowing costs or, as an allowed alternative treatment, the capitalization of borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset.

IPSAS 6 Consolidated and Separate Financial Statements requires all controlling entities to prepare consolidated financial statements, which consolidate all controlled entities on a line-by-line basis.

IPSAS 7 Investments in Associates requires all such investments to be accounted for in the consolidated financial statements using the equity method of accounting.

IPSAS 8 Interests in Joint Ventures requires proportionate consolidation to be adopted as the benchmark treatment, and the equity method of accounting as an allowed alternative to account for joint ventures.

IPSAS 9 Revenue from Exchange Transactions establishes the conditions for the recognition of revenue arising from exchange transactions, and requires such revenue to be measured at the fair value of the consideration received or receivable.

IPSAS 10 Financial Reporting in Hyperinflationary Economies describes the characteristics of a hyperinflationary economy and requires financial statements of entities that operate in such economies to be restated so that the financial information provided is meaningful.

IPSAS 11 Construction Contracts defines construction contracts and establishes requirements for the recognition of revenues and expenses arising from such contracts.

IPSAS 12 Inventories establishes the measurement requirements for inventories (including those held for distribution at no or nominal charge), and provides guidance on the assignment of costs.

IPSAS 13 Leases establishes requirements for the accounting treatment of operating and finance leases by lessees and lessors.

IPSAS 14 Events After the Reporting Date establishes requirements for the treatment of certain events that occur after the reporting date, and distinguishes between adjusting and non-adjusting events.

IPSAS 15 Financial Instruments: Disclosure and Presentation has been superseded by IPSAS 28 Financial Instruments: Presentation, IPSAS 29 Financial Instruments: Recognition and Measurement, and IPSAS 30 Financial Instruments: Disclosures.

IPSAS 16 Investment Property establishes the accounting treatment and related disclosures for investment property, providing for application of either a fair value or historical cost model.

IPSAS 17 Property, Plant and Equipment (PPE) establishes the accounting treatment for property, plant and equipment, including the basis and timing of their initial recognition, and the determination of their ongoing carrying amounts and related depreciation.

IPSAS 18 Segment Reporting establishes requirements for the disclosure of financial information of the distinguishable activities of reporting entities.

IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets establishes requirements for the recognition and measurement of provisions, and the disclosure of contingent liabilities and contingent assets.

IPSAS 20 Related Party Disclosures establishes requirements for the disclosure of transactions with parties that are related to the reporting entity.

IPSAS 21 Impairment of Non-Cash-Generating Assets prescribes the procedures that apply to determine whether a non-cash-generating asset is impaired and to ensure that impairment losses are recognized.

IPSAS 22 Disclosure of Financial Information About the General Government Sector prescribes disclosure requirements for governments that elect to present information about the general government sector in their consolidated financial statements.

IPSAS 23 Revenue from Non-Exchange Transactions deals with issues that need to be considered in recognizing and measuring revenue from non-exchange transactions.

IPSAS 24 Presentation of Budget Information in Financial Statements sets out the requirement for a comparison of budget amounts and the actual amounts arising from execution of the budget to be included in the financial statements, and a reconciliation of the actual amounts in the budget to actual amounts in the financial statements.

IPSAS 25 Employee Benefits prescribes the accounting treatment and disclosure requirements of employee benefits, including the timing of recognition of liabilities and expenses.

IPSAS 26 Impairment of Cash-Generating Assets prescribes the procedures that apply to determine whether a cash-generating asset is impaired and to ensure that impairment losses are recognized.

IPSAS 27 Agriculture prescribes the accounting treatment and disclosures for biological assets and agricultural produce at the point of harvest when they relate to agricultural activity.

IPSAS 28 Financial Instruments: Presentation establishes principles for presenting financial instruments as liabilities or net assets/equity and for offsetting financial assets and financial liabilities.

IPSAS 29 Financial Instruments: Recognition and Measurement establishes principles for recognizing and measuring financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

IPSAS 30 Financial Instruments: Disclosures requires entities to provide disclosures in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity's financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

IPSAS 31 Intangible Assets prescribes the accounting treatment for recognizing and measuring intangible assets.

IPSAS 32 Service Concession Arrangements prescribes the accounting for service concession arrangements by the grantor, a public sector entity.

IPSAS 33 First-Time Adoption of Accrual Basis IPSASs. An entity shall apply those amendments for annual financial statements covering periods beginning on or after 1 January 2017.

IPSAS 34 Separate Financial Statements. An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017.

IPSAS 35 Consolidated Financial Statements. An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017.

IPSAS 36 Investments in Associates and Joint Ventures. An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017.

IPSAS 37 Joint Arrangements. An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017.

IPSAS 38 Disclosure of Interests in Other Entities. An entity shall apply this Standard for annual financial statements covering periods beginning on or after 1 January 2017.

DISCLAIMER

This book should not be used as a substitute for obtaining professional advice and input when adopting either cash based or accrual based IPSAS. The brief summaries of IPSAS requirements and principles provided in this book should be read in conjunction with the IPSASs and other guidance materials as promulgated by the IPSASB, which are copyrighted by the IFAC. The IPSASB website will provide a reader with updates on all new developments.

It should also be noted that this book does not contain advice on accounting treatments and does not consider the particular legal or other regulatory requirements of specific countries.

Readers of this book who are working on the implementation of IPSAS are encouraged to contact IPSAS specialists to obtain advice and support specific to their circumstances and requirements.

Part 1Introducing Public Sector Accounting

1Introduction

International Public Sector Accounting Standards (IPSAS) are gaining increasing acceptance globally (see Table 1.1 for a full listing of all IPSAS). Public administrators are today encountering important challenges in reducing the distance between accounting systems within countries as well as across borders. This entails a move towards harmonization of accounting practices in the public sector and thus requires choosing an appropriate set of accounting and financial reporting standards (see also Caperchione, 2015).

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