INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARD
TRAINING
P REP A RED FO R
P R O J E C T F IN A N C E S P E C IA L IS TS

F A C IL ITA TO R :
The primary objectives of this course are:
• To examine the fundamental requirements of accrual based
International Public Sector Accounting Standards (IPSAS) on
 a standard-by-standard basis, for the benefit of preparers,

auditors and users of financial statements



• To provide guidance on how to use IPSAS in practice, with

 the aid of questions, cases and exercises

• To explain the difference between the Cash Basis IPSAS and

accrual-based IPSAS

• To provide an overview of how IPSAS are used around the

world

• To explain the workings of the International Public Sector

Accounting Standards Board (IPSASB) and how these are
developing
 MODULE 1:

THE NATURE AND OPERATIONS OF THE IPSASB

 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Table of contents
• Formation of the IPSASB
• The organisation of the IPSASB
• The objective of the IPSASB
• The current organisation of the IPSASB
• Public due process for the development
of IPSAS The IPSASB and the IASB
• Developing the IPSASs
• Key characteristics of public sector entities
• Listing of IPSASs
• IPSAS across the world
• Intergovernmental organizations and International
Organizations
• The Conceptual Framework for Financial Reporting
• Frequently asked questions
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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Formation of the IPSASB

The IPSASB is, today, an independent standard-
setting board under the auspices1.
of the
2.
International Federation of Accountants
3.
(IFAC).
4.

IFAC is an international, private, standard-setting

organization for the accounting profession that was
established back in 1977.

To enable reaching its target objectives, the IFAC

established four committees in the year of its foundation:

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Formation of the IPSASB

1.The International Auditing Practices Committee (today the
International Auditing and Assurance Standards Board)
2.The Education Committee (today the International Accounting
Education Standards Board)
3.The Ethics Committee (today the. International Ethics Standards
Board for Accountants) and
4.The Management Accounting Committee (today the
Professional Accountants in Business Committee).

IFAC created a fifth committee dedicated to accounting

and financial reporting issues in the public sector, namely
the Public Sector Committee (PSC).

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The organisation of the IPSASB

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The organisation of the IPSASB

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The objective of the IPSASB

The objective of the IPSASB is:

 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.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The current organisation of the IPSASB

o The current form of the IPSASB is made up of 18
volunteer members.
o Fifteen members come from IFAC member bodies and
three are public members with experience and expertise
in public sector financial reporting.

The IPSASB receives support (both direct financial and in-kind) from the
World Bank, the Asian Development Bank, the United Nations and the
governments of Canada, China, New Zealand, and Switzerland.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Public due process for the development of IPSAS

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

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Public due process for the development of IPSAS

Consulted Parties:-
• Preparers of public sector financial statements
• Auditors of public sector financial statements
• Users of public sector financial statements
• Governments
• Professional bodies including accountancy
institutes
• Academics

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Developing the IPSASs

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Developing the IPSASs

The IPSASB issues the following:

• International Public Sector Accounting Standards
(IPSAS)
• Recommended Practice Guidelines (RPG)
• Studies to provide advice on financial reporting
issues in the public sector.
• Other papers and research reports to provide
information that contributes to the body of
knowledge about public sector financial reporting
issues and developments.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The following table describes other characteristics

of public sector entities.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The current organisation of the IPSASB

• Public accountability
• Multiple objectives ·
·

• Rights and responsibilities

·

• Lack of equity ownership

• Importance and use of budgets
• Governance structures
• Nature of resources
• Non-exchange transaction
• Relationship to statistical reporting
• The longevity of the public sector

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Listing of IPSASs

Based upon
IPSAS Title IFRS (where
applicable)
IPSAS 1 Presentation of Financial IAS 1
Statements
IPSAS 2 Cash Flow Statements IAS 7
IPSAS 3 Accounting Policies, Changes in IAS 8
Accounting Estimates and Errors
IPSAS 4 The Effects of Changes in Foreign IAS 21
Exchange Rates
IPSAS 5 Borrowing Costs IAS 23
IPSAS 6 Consolidated and Separate IAS 27
Financial Statements
IPSAS 7 Investments in Associates IAS 28
IPSAS 8 Interests in Joint Ventures IAS 31
IPSAS 9 Revenue from Exchange IAS 18
Transactions
IPSAS 10 Financial Reporting in IAS 29
Hyperinflationary Economies
IPSAS 11 Construction Contracts IAS 11

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Listing of IPSASs

IPSAS 12 Inventories IAS 2 IPSAS 25 Employee Benefits IAS 19

IPSAS 13 Leases IAS 17 IPSAS 26 Impairment of Cash-Generating Assets IAS 36
IPSAS 14 Events After the Reporting Date IAS 10 IPSAS 27 Agriculture IAS 41
IPSAS 28 Financial instruments: Presentation IAS 32
IPSAS 15 IPSAS 15 has been replaced by IPSAS
28, 29 and 30
IPSAS 29 Financial instruments: Recognition and IAS 39
IPSAS 16 Investment Property IAS 40
measurement
IPSAS 17 Property, Plant and Equipment IAS 16 IPSAS 30 Financial instruments: Disclosures IFRS 7
IPSAS 18 Segment Reporting IAS 14/
IFRS 8 IPSAS 31 Intangible assets IAS 36
IPSAS 19 Provisions, Contingent Liabilities and IAS 37 IPSAS 32 Service concession arrangements IFRIC
Contingent Assets 12
IPSAS 20 Related Party Disclosures IAS 23 Cash Financial Reporting Under the Cash
IPSAS 21 Impairment of Non-Cash Generating Basis Basis of Accounting
Assets IPSAS
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

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Intergovernmental organizations and International Organizations

Among intergovernmental institutions and international organisations we

can observe a number of institutions and organisations that have
chosen to adopt IPSASs directly.

The OECD (Organisation for Economic Co-operation and

Development) was an early adopter of IPSAS. It issued its first set of
IPSAS compliant financial statements in 2000 and was followed by
NATO
(North Atlantic Treaty Organization) in 2008.
Where a public sector organization operates as a financial institution
IPSAS requires that the organization apply IAS/IFRS. Consistent with
that requirement, development banks such as the World Bank, Asian
Development Bank and International Fund for Agricultural Development
(IFAD) apply IAS/IFRS rather than IPSAS.

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The Conceptual Framework for Financial
Reporting
 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

The IPSASB is currently in the process of developing the Conceptual Framework.

A major item in the list of publications of the IPSASB

are the first four chapters of the Conceptual
Framework for General Purpose Financial Reporting
by Public Sector Entities.

The framework states that the main purpose of

financial statements is to give information to users for
accountability purposes and as input for decision
making.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial

Reporting

The IPSASB Conceptual Framework: Development

Process

Chapter 1: Role and Authority of the Conceptual Framework

Chapter 2: Objectives and Users of General Purpose
Financial Reporting
Chapter 3: Qualitative Characteristics
Chapter 4: Reporting Entity

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

The other phases of the IPSAS Conceptual Framework that are
being developed include:

Phase 2: The definition and recognition of the

elements of financial statements
Phase 3: The measurement of the elements that
are recognized in the financial statements
Phase 4: The presentation of information in
general purpose financial reports.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

Chapter 2: Objectives and Users of

General Purpose Financial
Reporting

Service recipients and

resource providers are defined
as the primary
users of the GPFRs. The
provision of useful information
for accountability and decision-
making is the ultimate target
objective of the GPFRs.
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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Chapter 3: Qualitative Characteristics

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

In addition to the qualitative characteristics, chapter 3 of the Chapter 4: Reporting Entity

conceptual framework also addresses constraints on information
included in the GPFRs. A public sector entity is an entity that;

1. Materiality. Information is material if its omission or misstatement 1. raises economic resources from, or on behalf of,
could influence of the discharge of accountability by the entity or the constituents and/or uses economic resources to undertake
decisions that users make on the basis of the entity’s GPFRs activities for the
prepared for the reporting period. benefit
2. whoseof, or on behalf
service of, those
recipients constituents
or resource and are dependent
providers
2. Cost-Benefit. The benefits of the financial report should justify the on GPFRs of the entity for information for accountability or
costs of producing it. decision- making purposes.

It is also highlighted in chapter 3 of the conceptual framework that a

balance between the qualitative characteristics should be sought in the
GPFRs. As a preparer of GPFRs consideration has to be given to the
balance between qualitative characteristics. The qualitative
characteristics should work together to contribute to the usefulness of the
information.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

A high level look at the future chapters A deferred inflow: is an inflow of service potential or
economic benefits provided to the entity for use in a specified
The forthcoming phases of the IPSAS Conceptual Framework are, future
as mentioned above, the following: reporting period that results from a non-exchange transaction
and increases net assets.
Phase 2: The definition and recognition of the elements of financial A deferred outflow: is an outflow of service potential or
statements economic benefits provided to another entity or party for use in a
Phase 3: The measurement of the elements that are recognized in specified future reporting period that results from a non-exchange
the financial statements transaction and decreases net assets.
Phase 4: The presentation of information in general purpose financial
reports. Deferred inflows may, for example, include items such as
specific multi- year grants that do not meet the definition of a
For each of the listed phases there is an underlying exposure draft (ED) liability.
that can be accessed at the IPSASB website. The framework is Deferred outflows may, for example, include multi-year grants
expected to be completed during 2014. that
stipulate they must be used over future reporting periods. These
The EDs provide two key definitions that are not used in private items would be recognized as revenues or expenses as the
sector future time periods expire.
accounting under IFRS/IAS, namely deferred inflows and outflows.
These two terms were included in the EDs to accommodate the
special nature of revenue and expenses that is seen in the public
sector. The definitions
are below.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

In addition to deferred inflow and deferred outflow a number of other

key
definitions can be lifted from the EDs:
Asset Expenses
An asset is a resource, with the ability to provide an inflow Expenses are:
of a. Outflows during the current reporting period which
service potential or economic benefits that an entity decrease the net assets of an entity, other than:
presently controls, and which arises from a past event. i. Ownership distributions and
Liability ii. Increases in deferred outflows and
A liability is a present obligation of the entity arising from b. Outflows during the current reporting period that
result from decreases in deferred outflows.
past events, the settlement of which is expected to result in
an outflow from the entity of resources embodying
economic benefits. Ownership contributions and distributions
Ownership contributions are inflows of resources to an
Revenue entity, contributed by external parties that establish
Revenues are: or increase an interest in the net assets of the entity.
a. Inflows during the current reporting period, which
increase the net assets of an entity, other than: Ownership distributions are outflows of resources from the
i. Ownership contributions and entity, distributed to external parties that return or reduce
ii. Increases in deferred inflows and an interest in the net assets of the entity.
b. Inflows during the current reporting period that
result from decreases in deferred inflows.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

The Conceptual Framework for Financial Reporting

Summary of position

International Public sector guidance exists in the first four chapters of

the
IPSASB’s Conceptual Framework (i.e. the first phase) to outline
the concepts that underlie the financial reporting process.
The final, complete conceptual framework will be used as a guide by
both
international and national standard-setters to set consistent and logical
accounting standards. It will also assist preparers and auditors in
interpreting standards and dealing with issues that the standards do
not cover.

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 MODULE 1: THE NATURE AND OPERATIONS OF THE IPSASB

Frequently asked questions

1. What is the relationship between the IFAC and the 1. The IPSASB is a standard setting board under IFAC (i.e. IFAC is
IPSASB? the
2. What is the high level objective of the IPSASB? parent body).
2. The objective of the IPSASB is

“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

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