IPSAS
Arief Rahman
Introduction
The public sector has been undertaking broad reforms in the
public sector accounting – not only since the global finance
crisis
Cash basis accounting is still common in the public sector
IPSAS is the only international accepted standard for public
sector accounting
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IPSAS
International Public Sector Accounting Standards (IPSAS) are high-
quality global financial reporting standards for application by public
What are sector entities other than government business enterprises (GBEs).
IPSAS? Accrual-based IPSAS set out recognition, measurement, presentation
and disclosure requirements dealing with transactions and events in
general purpose financial statements.
The IPSAS Board (IPSASB) is the responsible body formed to develop
and issue IPSAS under its own authority. IPSASB is a board under the
What is the auspices of the International Federation of Accountants (IFAC).
IPSASB? IPSASB develops standards that apply to an accrual- based and to the
cash basis of accounting.
IPSAS
More and more governments and other public sector entities around
the world are adopting the accrual-based IPSAS as a basis for their
Who is accounting and financial reporting. In total, more than 40 countries
adopting have adopted or are adopting IPSAS or comparable standards. The
European Commission is currently considering using accrual-based
IPSAS? IPSAS as a basis for the European Public Sector Accounting Standards
(EPSAS).
IPSAS represent a global standard for best-practice accounting in the
What are the public sector. The main benefits of IPSAS are their worldwide
acceptance and the increased transparency they provide over an
benefits of
entity’s finances. Furthermore, IPSAS require that more information is
implementing provided and disclosed in an organization’s financial statements, as
IPSAS? compared to cash accounting, leading to better information
availability and more transparency for decision- making.
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IPSASB
The IPSAS Board is an accounting standard-setter
that is dedicated to enhancing the quality of the
accounts of public sector entities. Its goal is to
develop:
§ standards that are convergent with international
private sector standards
§ specific standards for the public sector where
there is no equivalent in the body of private
sector standards
Countries which plan or already
adopted IPSAS
Austria Ghana Morocco South Africa
Brazil Indonesia Nigeria Spain
Chile Israel Pakistan Switzerland
Costa Rica Kenia Peru Tanzania
Cyprus Latvia Portugal Uruguay
Czech Rep. Lithuania Romania Vietnam
France Malaysia Russia
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National standards are broadly
consistent with IPSAS
Australia
Canada
New Zealand
United Kingdom
USA
Supranational organizations
using IPSAS
Commonwealth NATO
Secretariat
OECD
European Commission
United Nations
EUMETSAT
European Space Agency
(ESA)
IFAC
INTERPOL
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Scope of IPSAS
applied to all general purpose financial statements
prepared and presented under the accrual basis of
accounting in accordance with IPSASs.
does not apply to condensed interim financial
information
applies to all public sector entities other than
Government Business Enterprises (GBEs)
Government Business Enterprise
Government Business Enterprise means an entity that has all the
following characteristics:
§ Is an entity with the power to contract in its own name;
§ Has been assigned the financial and operational authority to carry on
a business;
§ Sells goods and services, in the normal course of its business, to other
entities at a profit or full cost recovery;
§ Is not reliant on continuing government funding to be a going
concern (other than purchases of outputs at arm’s length); and
§ Is controlled by a public sector entity.
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Purpose of Financial Statements
Financial statements are a structured representation of the financial
position and financial performance of an entity.
The objectives to provide information about the financial position,
financial performance and cash flows of an entity that is useful to a
wide range of users in making and evaluating decisions about the
allocation of resources.
the objectives of general purpose financial reporting in the public
sector should be to provide information useful for decision-making,
and to demonstrate the accountability of the entity for the resources
entrusted to it
Supplementary information, including non-financial statements, may
be reported alongside the financial statements in order to provide a
more comprehensive picture of the entity’s activities during the period
Components of FS
a. A statement of financial position;
b. A statement of financial performance;
c. A statement of changes in net assets/equity;
d. A cash flow statement;
e. When the entity makes publicly available its approved budget, a
comparison of budget and actual amounts either as a separate
additional financial statement or as a budget column in the
financial statements; and
f. Notes, comprising a summary of significant accounting policies
and other explanatory notes.
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Timeliness
The usefulness of financial statements is impaired if they are
not made available to users within a reasonable period after the
reporting date.
An entity should be in a position to issue its financial statements
within six months of the reporting date.
Ongoing factors such as the complexity of an entity’s
operations are not sufficient reason for failing to report on a
timely basis.
More specific deadlines are dealt with by legislation and
regulations in many jurisdictions.
Implications of Accrual Acctg
IPSAS/accrual accounting will not solve financial problems of a
jurisdiction, but it contributes to and promotes better financial
management in the future
Clearer financial picture in the first years of implementation need
to be seen as incentive for improvement and stimulus to further
reforms
Accrual accounting information needs to get embedded in
decision-making and made use of by decision makers
Scope of information increases significantly; key is to make use of
these information
Finally, accrual accounting requires a change of mind
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Challenges in adopting IPSAS
Cost and time The time and costs associated with an IPSAS conversion are always
expected to be substantial, but they often remain unclear. This
efforts uncertainty is a major challenge for promoters of accounting reforms
needed in political discussions.
In many cases, a detailed time line for the conversion project is either
Detailed time not available or not specific enough. A lack of experience with such
line missing projects often means the sequencing of the necessary transition steps
is not clear.
Many areas of In many cases, a detailed time line for the conversion project is either
not available or not specific enough. A lack of experience with such
organization projects often means the sequencing of the necessary transition steps
affected is not clear.
Challenges in adopting IPSAS
Comprehensive IPSAS requirements demand entities to conduct an
Comprehensive inventory of all assets and liabilities, as well as apply new
IPSAS measurement provisions. Furthermore, IPSAS requires notes
requirements disclosures that make new processes necessary to capture the
required information.
Finance staff members may not have experience in leading a
Required skills conversion. Therefore, capacity building and personnel development
programs should be high on the agenda of every conversion project.
