ACCA IPSAS Certification MODULE 1

1. ACCA IPSAS CertificationMODULE 1

2. Agenda IPSAS 1 Public Sector Organization 2 Conceptual Framework 3 IPSASB On Going Project 4

3. Overview

4. Formation • IFAC (International Federation of Accountant) is an international, private, standard-setting organization for the accounting profession • IFAC was established back in 1977. • The original constitution of the IFAC stated that the role of the IFAC was: • the development and enhancement of a coordinated worldwide accounting profession with harmonized standards.

5. The establishment of the Public Sector Committee (PSC) of IFAC • During the late 1970s and early 1980s  harmonization in the area of public sector accounting and financial reporting was developing. • The establishment of the PSC  problems that not much financial data existed for public sector entities and governmental organizations. • An increasing interest in the large amount of funds held and managed in the public sector  need for financial accountability • The first meeting of the PSC was held in January 1987 in London. • “the Committee is charged with the task of developing accounting and auditing standards and promoting their voluntary acceptance.” • The PSC had mandate to develop programme aimed at strengthening public sector financial management and accountability.

6.   IPSASB replaces PSC The first International Public Sector Accounting Standards (IPSAS) were published in May 2000. They were primarily based on International Accounting Standards (IASs) and were based on the accrual method of accounting. In 2003, IFAC commissioned a review of the PSC by an externally chaired review panel, known as the Likierman Review which was published in 2004  IFAC to re-establish the PSC as the IPSASB in 2004 with revised terms of reference to reflect the mandate to focus on developing and issuing IPSASs.

7. Key factors justifying private international standard-setting for public sector accounting and financial reporting: The need to enhance and improve the quality of public sector financial reporting and build on recent improvements. The improvement of international consistency and comparison. The significance, often neglected, of public sector debt in global capital markets. The fact that few countries have independent standard-setters with a public sector responsibility. The need for a standard-setter independent of national governments. The global economies of scale that can be achieved through an international, independent standard-setter. Improvement in the quality of the financial management's quality in the public sector.

8. The development of the IPSASB - A list of detailed events

9. The development of the IPSASB - A list of detailed events

10. The development of the IPSASB - A list of detailed events

11. The development of the IPSASB - A list of detailed events

12. The development of the IPSASB - A list of detailed events

13. The development of the IPSASB - A list of detailed events

14. The development of the IPSASB - A list of detailed events

15. The Organization of the IPSASB

16. The Organization of the IPSASB

17. The objective of the IPSASB

18. The IPSASB Work Agenda

19. The current organization of the IPSASB

20. Step by step due Process

21. IPSASB and IASB

22. IPSASB and IASB

23. Developing the IPSASs

24. Developing IPSASs

25. The Characteristic of Public Sector Entities Public accountability Governments are elected through a democratic process to be granted constitutional or devolved rights, powers and responsibilities. Governments and their institutions use public resources and may have been given delegated powers and responsibilities that also demand broad accountability to the public. Public accountability is an overriding feature of public sector entities and ensuring the availability of information to demonstrate such accountability is the primary objective of public sector reporting.

26. The Characteristic of Public Sector Entities

27. The Characteristic of Public Sector Entities

28. The Characteristic of Public Sector Entities

29. The Characteristic of Public Sector Entities

30. The Characteristic of Public Sector Entities

31. The Characteristic of Public Sector Entities

32. IPSAS

33. IPSAS

34. IPSAS

35. IPSAS

36. IPSASs across the world • IPSASs are accounting standards for application by national, regional and local governments, and related governmental. • IPSASs do not apply to government business enterprises. • Countries that have already adopted full accrual accounting and are applying accounting standards that are consistent with IPSAS : • Australia Canada • New Zealand United Kingdom • United States of America • It is estimated that more than 30 countries have either already adopted or are in the process of adopting IPSAS (either on the cash basis or the accrual basis) for financial reporting by all or part of their public sectors. • Adoption method: • Directly use IPSAS • IPSASs as a reference point in developing national public sector accounting standards.

37. IPSASs across the world Example: New Zealand From 1 July 2014 the Financial Statements of the Government in New Zealand are prepared in accordance with Public Benefit Entity accounting standards. The new suite of PBE standards is made up of mainly International Public Sector Accounting Standards (IPSASs), modified where appropriate for the New Zealand context. The suite also includes five NZ IFRSs and four domestic standards (FRSs). You can read more about the development of this suite of standards here: http://www.treasury.govt.nz/publications/guidance/reporting/ipsas/overview

38. Intergovernmantal organization and international organization • Among intergovernmental institutions and international organizations we can observe a number that have chosen to adopt IPSASs directly. • The OECD (Organization for Economic Co-operation and Development) was an early adopter of IPSAS in 2000. • 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.

39. The Conceptual Framework for Financial Reporting The Conceptual Framework of the IPSASB was developed over an eight-year period and was published in full on 31 October 2014 as The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. The Framework stipulates that IPSASs are developed to apply across countries and jurisdictions with diverse political systems, different forms of government, and varying institutional and administrative arrangements for the delivery of services to citizens. The IPSASB recognizes these numerous differences in the form of government, social and cultural traditions, and service delivery mechanisms that exist in the many nation states that may adopt IPSASs. In establishing the Conceptual Framework, the IPSASB has sought to consider and respond to, and embrace, this diversity.

40. The Conceptual Framework for Financial Reporting The Conceptual Framework deals with concepts that apply to general purpose financial reporting (financial reporting) under the accrual basis of accounting and it establishes the purpose of financial statements and the major principles lying behind their preparation 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.

41. The Conceptual Framework for Financial Reporting "Approving the Conceptual Framework is a historic achievement for the IPSASB and a landmark for setting global accounting standards for the public sector," said IPSASB Chair Andreas Bergmann. "These concepts will provide the basis for our ongoing development of consistent and useful International Public Sector Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs). They will also provide guidance to preparers faced with financial reporting issues not dealt with by IPSASs or RPGs." See https://www.ifac.org/news-events/2014-09/ipsasb-approves-public-sector-conceptual-framework

42. The Conceptual Framework for Financial Reporting • The Framework is structured into eight chapters with the following titles: • 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 • Chapter 5: Elements in Financial Statements • Chapter 6: Recognition in Financial Statements • Chapter 7: Measurement of Assets and Liabilities in Financial Statements • Chapter 8: Presentation of Information in General Purpose Financial Statements

43. The Conceptual Framework for Financial Reporting Accounting policies developed from individual IPSASs shall be compatible with the Conceptual Framework. The Conceptual Framework is not an accounting standard, and as such it should be noted that requirements stipulated in an individual IPSAS or Recommended Practice Guideline (RPG) will prevail over the Conceptual Framework. For financial reporting issues that are not dealt with by IPSASs or RPGs the Conceptual Framework can serve an important role in providing guidance. In these circumstances, preparers and others can refer to and consider the applicability of the definitions, recognition criteria, measurement principles, and other concepts identified in the Conceptual Framework.

44. The Conceptual Framework for Financial Reporting Chapters 1-4 relate to the role, authority, and scope of general purpose financial reporting, the objectives and users as well as the qualitative characteristics and the reporting entity. Chapters 5-8 define the elements, referred to as "building blocks", that together establish the financial statements, the criteria for elements to be recognized in financial statements, how assets and liabilities should be measured in financial statements, and how financial statements should be presented.

45. The Conceptual Framework for Financial Reporting • Chapter 1: Role and Authority of the Conceptual Framework • The framework will identify the concepts that the IPSASB will draw upon in developing the IPSASs and RPGs. • The Conceptual Framework will therefore underpin the development of IPSASs

46. The Conceptual Framework for Financial Reporting • Chapter 2: Objectives and Users of General Purpose Financial Reporting • the objectives of financial reporting, the users of GPFR, accountability and decision-making as well as information needs of users and information provided in GPFRs. GPFRs encompass financial statements and the presentation of information that enhances and supplements the financial statements. Examples include information • on service delivery achievements, prospective financial and non-financial information as well as other narrative explanations (i.e. explanatory information). • 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.

47. The Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics The qualitative characteristics of information to be included in GPFRs are relevance, faithful representation, understandability, timeliness, comparability and verifiability. It should be noted that IPSAS embraces the principle of substance over form. This means that when accounting for a transaction it should be done according to its transactional substance rather than its legal form. In chapter 3 of the conceptual framework the concept of substance over form is alluded to. The principle of substance over legal form is key to the faithful representation and reliability of information contained in the financial statements.

48. The Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics

49. The Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics In addition to the qualitative characteristics, chapter 3 of the Conceptual Framework also addresses constraints on information included in the GPFRs. Materiality. Information is material if its omission or misstatement could influence of the discharge of accountability by the entity or the decisions that users make on the basis of the entity’s GPFRs prepared for the reporting period. Cost-Benefit. The benefits of the financial report should justify the costs of producing it. 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.

50. The Conceptual Framework for Financial Reporting • Chapter 4: Reporting Entity • A public sector entity is an entity that; • raises economic resources from, or on behalf of, constituents and/or uses economic resources to undertake activities for the benefit of, or on behalf of, those constituents and • whose service recipients or resource providers are dependent on GPFRs of the entity for information for accountability or decision-making purposes.