IPSAS Explained

A Summary of International Public Sector Accounting Standards

Thomas Müller-Marqués Berger

• Publisher: Wiley
• Year: 2018
• ISBN:
  9781119415107
• Edition: 3
• Topic: Business
• Subtopic: Accounting Standards
• Index: Business

A succinct, yet highly informative guide to IPSAS and their application

IPSAS Explained provides a concise summary of the International Public Sector Accounting Standards for practitioners needing to maintain compliance with ever-changing practices. Comprehensively updated to align with newly-accepted standards in key subject areas and including the latest iteration of the framework and improvement projects, this guide distills each standard into a useful and accessible format. Coverage of each IPSAS includes a brief overview of the basic principles behind it, as well as charts, graphs and tables that provide information at a glance.

Updated material includes discussion of the new IPSASB governance structure, including the Public Interest Committee and Consultative Advisory Group, as well as information on the current Exposure Drafts and the changes forthcoming from the Improvements Project. New sections on First-Time Adoption of Accrual Basis IPSAS, new consolidation standards and Service Performance Reporting bring practitioners completely up to date to help ensure full compliance.

• Locate relevant IPSAS quickly and easily
• Get up to date on newly adopted standards
• Deepen conceptual understanding with graphical representations
• Understand the operations of the IPSASB, as well as new and ongoing projects

The International Public Sector Accounting Standards Board is engaged in the ongoing process of bringing public sector accounting in line with the IPSAS, which largely align with the IFRS model: where an IFRS exists, it is either adopted directly or adjusted to be suitable for the public sector; where no relevant IFRS exists, the IPSASB issues an IPSAS. IPSAS Explained condenses and clarifies each IPSAS, providing context, background and practical guidance to help practitioners find the answers they need to comply.

IV. Overview of accrual basis IPSASs

IPSAS 1: Presentation of Financial Statements

Objective

IPSAS 1 provides the basis of presentation for general purpose financial statements in order to ensure comparability on the one hand with the entity's financial statements of previous periods and, on the other, with the financial statements of other public sector entities. The standard sets out overall requirements of the presentation of financial statements prepared under the accrual basis of accounting, and provides guidance for the structure and minimum requirements of the content of such financial statements. The recognition and measurement of specific transactions and other events, and the corresponding disclosure requirements are dealt with in other International Public Sector Accounting Standards.

The IFRS on which the IPSAS is based

IAS 1, Presentation of Financial Statements

Content

Principal definitions

Assets are resources controlled by an entity as a result of past events and from which future economic benefits or service potential are expected to flow to the entity.

Liabilities are present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits or service potential.

Net assets/equity is the residual interest in the assets of the entity after deducting all its liabilities.

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners.

Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrences of liabilities that result in decreases in net assets/equity, other than those relating to distributions to owners.

The term economic entity means a group of entities comprising a controlling entity and one or more controlled entities.

Scope

IPSAS 1 is of particular significance for the financial reporting of public sector entities as it is applicable for all general purpose financial statements prepared under the accrual basis of accounting.

Purpose of financial statements

The objective of general purpose financial statements is to provide information to meet the needs of those users of financial statements who are not in a position to demand reporting adapted to their needs. The users of general purpose financial statements include taxpayers, members of parliaments, creditors, suppliers, the media and public sector employees.

Financial statements prepared in accordance with IPSASs must present fairly the financial position, financial performance and cash flows of an entity (cf. IPSAS 1.27). To meet this requirement, a public sector entity must first of all observe general qualitative characteristics of financial reporting.

Before the Conceptual Framework was published, Appendix 1 of IPSAS 1 described the “qualitative characteristics of financial reporting”. As outlined in Chapter I.3, the Conceptual Framework outlines the qualitative characteristics and pervasive constraints on information. As a result of the publication of IPSASB's Conceptual Framework the qualitative characteristics in Appendix 1 were deleted.

Furthermore, IPSAS 1 defines general standards for the preparation of financial statements. These include the going concern assumption (IPSAS 1.38 et seq.), consistency of presentation (IPSAS 1.42 et seq.), materiality and aggregation (IPSAS 1.45 et seq.), offsetting (IPSAS 1.48 et seq.) and comparative information (IPSAS 1.53 et seq.).

Components of financial statements

A complete set of financial statements in accordance with accrual basis IPSASs comprises the following components listed in IPSAS 1.21:

• 
  A statement of financial position
• 
  A statement of financial performance
• 
  A statement of changes in net assets/equity
• 
  A cash flow statement
• 
  When the entity makes publicly available its approved budget, a comparison of budget and actual amounts either as separate additional financial statements or as a budget column in the financial statements
• 
  Notes, comprising a summary of significant accounting policies and other explanatory notes
• 
  Comparative information in respect of the preceding period as specified in IPSAS 1.53 and 1.53A
• 
  Compliance with the conceptual framework for general purpose financial reporting by public sector entities (the conceptual framework)

Public sector entities whose financial statements comply with IPSASs should disclose that fact in the notes to the financial statements. Financial statements that do not comply with all the requirements of the applicable IPSASs must not be described as complying with IPSASs. Only in extremely rare circumstances when the management of a public sector entity has reached the conclusion that compliance with a requirement in an IPSAS would give a misleading presentation may an entity depart from this requirement. Figure 5 illustrates the principal relationships between fair presentation and IPSAS compliance:

Figure 5: Relationship between fair presentation and IPSAS compliance

When preparing financial statements, a public sector entity is required to assess whether it can be assumed that it is able to continue as a going concern (cf. IPSAS 1.38). Generally, financial statements of a public sector entity are prepared on a going concern basis unless there is an intention to liquidate the entity or discontinue business or administrative operations, or there is no alternative but to do so. Should the management of a public sector entity have significant doubt as to the entity's ability to continue as a going concern, such uncertainties must be disclosed. Where financial statements are not prepared on a going concern basis, the public sector entity is required to disclose the fact, t...