General Introduction To IPSAS &

Conceptual Framework
General Introduction to IPSAS
 International Accounting
Standards

 International Financial Reporting Standards (IFRS)

 IFRS for Small and Medium-Sized Entities (SMEs)

 International Public Sector Accounting Standards

(IPSAS)
 International Federation of Accountants (IFAC)

• Global organization for the accountancy profession dedicated to

serving the public interest by strengthening the profession and
contributing to the development of strong international
economies.
• Comprised of 179 members and associates in over 130 countries
and jurisdictions, representing approximately 3 million
accountants in public practice, education, government service,
industry, and commerce.
• Through its independent standard-setting boards, establishes
international standards on :
– Ethics
– Auditing and Assurance
– Accounting education
– Public sector accounting
 International Public Sector Accounting
Standards Board (IPSASB)
• An independent, expert, international
standard setting body developing
international acct standards targeting not-for-
profit entities.
• Established by IFAC in 1987
• Formerly known as Public Sector Committee
• A recipient of financial support from the
World Bank, Asian Development Bank,
European Commission, and others.
 What is IPSAS?

• A set of independently produced, high quality,

financial reporting standards designed for
public sector (not-for-profit entities)
• Based on IFRS (keep pace with best practices
because IPSAS are based on IFRS which are best
practices for business orgns) (i.e. IPSAS = IFRS
modified for Public sector + others)
• Subject to due process
• Issued by IPSASB
 Process for Reviewing and modifying IASB
Documents

1. Are there 2. Should a

public sector
Ye
s
separate Yes 5. Separate public sector
public sector
issues that
project be project (IPSAS 23)
warrant
departure? initiated?

No

No 3. Modify IASB
documents (IPSAS 21)
IPSAS 5,9,17

4. Make IPSASB style and terminology 6. IPSASB

changes Document
 Existing IPSASs
• IPSASB so far issued 43 IPSAS for accrual accounting

• IPSASB has also issued a comprehensive cash Basis

IPSAS that includes mandatory and encouraged
disclosures sections.
 Existing IPSASs
IPSAS # Name of Standard
IPSAS 1 Presentation of Financial Statements

IPSAS 2 Cash flow Statements

IPSAS 3 ACCT policies, Change in Acct Estimates and Errors

IPSAS 4 The Effect of changes in foreign Exchange rates

IPSAS 5 Borrowing Costs

IPSAS 6 Consolidated and Separate FS

IPSAS 7 Investment in Associates

IPSAS 8 Interest in Joint Ventures

IPSAS 9 Revenue From exchange transactions

IPSAS 10 Financial Reporting in Hyperinflationary Economies

 Existing IPSASs Cont’d

IPSAS # Name of Standard

IPSAS 11 Construction Contracts
IPSAS 12 Inventories
IPSAS 13 Leases
IPSAS 14 Events after reporting Period
IPSAS 16 Investment Property
IPSAS 17 PPE
IPSAS 18 Segment Reporting
IPSAS 19 Provisions, Contingent Liabilities, and Contingent assets
IPSAS 20 Related Party Disclosures
IPSAS 21 Impairment of Noncash generating assets
IPSAS 22 Disclosure of Financial Information About the General
Government Sector
 Existing IPSASs Cont’d
IPSAS # Name of Standard

IPSAS 23 Revenue from Non-exchange transactions (Taxes and Transfers)

IPSAS 24 Presentation of Budget information in Financial statements
IPSAS 26 Impairment of Cash-generating assets
IPSAS 27 Agriculture
IPSAS 28 Financial Instruments: Presentation

IPSAS 29 Financial Instruments: Recognition and Measurement

IPSAS 30 Financial Instruments: Disclosure

IPSAS 31 Intangible Assets

IPSAS 32 Service Concession Arrangements: Grantor

IPSAS 33 First Time Adoption of Accrual Basis IPSAS

IPSAS 34 Separate Financial Statements

 IPSASs Cont’d
IPSAS # Name of Standard
IPSAS 35 Consolidated Financial Statements
IPSAS 36 Investment in Associates and Joint Ventures
IPSAS 37 Joint Arrangements
IPSAS 38 Disclosure of Interests in other entities
IPSAS 39 Employee Benefits
IPSAS 40 Public Sector Combinations
IPSAS 41 Financial Instruments
IPSAS 42 Social benefits
IPSAS 43 Leases (After Jan 1, 2025)
Cash Basis IPSAS
 Why Adopt IPSAS (Accrual)?
1. Reports all:
 economic resources controlled by entity
 claims against economic resources
 full cost of goods and services
2. Improves transparency and accountability
3. Provides better information for decision making
4. Improves consistency and comparability of reporting
 The Conceptual Framework For
General Purpose Financial Reporting
By Public Sector Entities
 IPSAS Conceptual Framework
 The Conceptual Framework (CF) for General Purpose Financial
Reporting by Public Sector Entities establishes the concepts that
are to be applied in developing:
 International Public Sector Accounting Standards(IPSASs), and

 Recommended Practice Guidelines (RPGs)

 applicable to the preparation and presentation of General

Purpose Financial Reports (GPFRs) of public sector entities
 The conceptual framework has eight chapters
 Chapter 1:Role & Authority of The Conceptual
Framework

• Role: CF identifies the concepts that the IPSASB will apply in

developing IPSASs and RPGs intended to assist preparers and
others in dealing with financial reporting issues
• Authority: It does not establish authoritative requirements
for financial reporting by public sector entities that adopt
IPSASs, nor does it override the requirements of IPSASs or
RPGs.
 Chapter 2:objectives and Users of General
Purpose Financial Reporting
 Objectives of Financial Reporting
 to provide information about the entity that is useful to users
of GPFRs for accountability purposes and for decision-making
purposes.
 Users of General Purpose Financial Reports
 the primary users of GPFRs are service recipients and their
representatives and resource providers and their
representatives
 Chapter 3: Qualitative Characteristics

• The qualitative characteristics of information included in

GPFRs of public sector entities are:
 Relevance,
 Faithful Representation,
 Understandability,
 Timeliness,
 Comparability, and
 Verifiability.
 Constraints on Information Included in General
Purpose Financial Reports
Materiality
 Information is material if its omission or misstatement could influence
the discharge of accountability by the entity, or the decisions that users
make on the basis of the entity’s GPFRs prepared for that reporting
period.
 Materiality depends on both the nature and amount of the item judged
in the particular circumstances of each entity.
Cost-Benefit
 Financial reporting imposes costs.
 The benefits of financial reporting should justify those costs.
Balance between Qualitative Characteristics (QCs)
 The qualitative characteristics work together to contribute to the
usefulness of information.
 Chapter 4: Reporting Entity
The Reporting Entity
• Government or other public sector organization, program
or identifiable area of activity that prepares GPFRs
• Key characteristics
• Raising & Use of Resources; and
• Service recipients or resource providers dependent
on GPFRs
• May comprise two or more separate entities
• Separate legal identity not essential
Chapter 5: Elements in Financial Statements

Ownership
Asset Revenue
Contributions

Ownership
Liability Expense
Distributions

Conceptual Framework
 Chapter 6: Recognition In Financial Statements

 Item satisfies definition of an element

 Can be measured in a way that:

 Achieves qualitative characteristics; and

 Takes account of constraints

 Recognition criteria are not incorporated in element

definitions
Chapter 7 Measurement Bases for Assets

Historical
Current Value
Cost

Replacement Net Selling

Market Value Value in Use
Cost Price

Conceptual Framework
Measurement Bases for Liabilities

Historical
Current Value
Cost

Cost of Market Cost of Assumption

Fulfillment Value Release Price

Conceptual Framework
Chapter 8: Presentation In General Purpose Financial
Reports

• Information selection,

• Information location and

• Information organization
 Discussion Questions
Question 1
• Where there is an inconsistency between an
IPSAS and the Conceptual Framework,
preparers should apply the Conceptual
Framework.
• True or False?
Question 2
• Is Injibara University a reporting entity under
IPSAS? Explain
 IPSAS 1
Presentation of
Financial Statements
 Contents

• Components Financial Report

• Overall considerations of
Financial Statements
• Structure and Content of
Financial Statements
 Objectives of Financial Statements

• To meet information needs of service recipients and

resource providers for accountability and decision
making
• Users need information about:
– The performance of the entity e.g. meeting service
delivery and other operating and financial objectives;
– Managing resources it is responsible for
– Complying with legislative & other authority
– Liquidity and solvency
– Sustainability of service delivery and other operations
– Capacity to adapt to changing circumstances
 Required Financial Statements

• A complete set of financial statements includes:

• Statement of financial position
• Statement of financial performance
• Statement of changes in net assets/equity
• Cash flow statement
• Comparison of budget and actual amounts
• Notes
• Comparative information in respect of the
preceding period
 Overall Consideration
 Fair presentation & compliance
 Going concern.

31
 Materiality & aggregation
 Offsetting
 Comparative information
 Fair presentation and
Compliance
• Concept: Fair presentation is the faithful representation of
the effects of transactions, other events, and conditions in as
per the definition and recognition criteria for assets, liabilities,
revenues, and expenses set out in IPSASs.
• Application guidance: Fair presentation is
achieved by compliance with applicable IPSASs.
• An entity whose financial statements comply with
IPSASs shall make an explicit and unreserved statement of
such compliance in the notes
• Financial statements shall not be described as
complying with IPSASs unless they comply with all the
requirements of IPSASs
 A fair presentation also requires an entity

(a) to select and apply accounting policies in accordance with

IPSAS 3.
(b) to present information, in a manner that provides relevant,

33
reliable, comparable and understandable information.
(c) to provide additional disclosures when compliance with the
specific requirements in IPSASs is insufficient to enable users
to understand the impact of particular transactions, other
events & conditions on the entity’s financial position & financial
performance.
 Going concern
• Concept: an entity is a going concern unless
management intend to liquidate the entity or to cease
operating, or have no realistic alternative to liquidation
in the foreseeable future.
• Principle: unless management determine the entity is
not a going concern, GPFS is prepared on the basis of
the reporting entity being a going concern.
• Application guidance: when preparing Financial
Statements, MGT (those responsible for the preparation
of the financial statements) must assess the ability of
the reporting entity to continue as a going concern.
 2. Going Concern…
• When management is aware, in making their
assessment, of material uncertainties related to
events or conditions that may cast significant
doubt upon the entity’s ability to continue as a
going concern, those uncertainties shall be
disclosed.
• When financial statements are not prepared on a
going concern basis, that fact shall be disclosed,
together with the basis on which the financial
statements are prepared and the reason why the
entity is not regarded as a going concern.
 Comparative Information

• Required for previous period for all

amounts reported
• Included for narrative and descriptive
information when relevant to
understanding
 Presentation and Disclosure

• Consistency of presentation and classification

in financial statements is retained unless
– Another is more appropriate
– An IPSAS requires a change
• If changed, comparative amounts reclassified
• Disclosure for reclassified items or classes of
item
• Disclosure on face of statements or in notes
 Materiality and Aggregation

• Each material class of similar items shall

be presented separately
• Items of a dissimilar nature or function
shall be presented separately unless
immaterial
• Specific requirements in IPSASs need not
be satisfied if information immaterial
 Offsetting
• Assets and liabilities, and revenue and
expenses shall not be offset
• Measuring assets net of valuation
allowances is not offsetting
• Netting of revenue and expenses may be
appropriate if it reflects the substance of
the transaction
 STRUCTURE & CONTENT
(Presentation)

• Clearly identify the Financial statements &

distinguish them from other information in the
same published document.
• An entity shall display the following information
1. the name of the entity
2. Name of the statement and whether the FS
are consolidated or not
3. the reporting date or period covered
4. the presentation currency and
5. the level of rounding (e.g. $000s)
40
 Structure and Content
Reporting Period
• Financial statements shall be presented at least annually.
• When reporting date changes and the annual financial
statements are presented for a period longer or shorter
than one year, disclose:
– The period covered by the financial statements
– The reason for using a longer or shorter period; and
– The fact that comparative amounts for certain
statements such as the statement of financial
performance, statement of changes in net Assets or
equity, cash flow statement and related notes are not
entirely comparable.
 Structure and Content
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.
 Statement of Financial Position
• Present current and non-current assets, and current and non-
current liabilities, as separate classifications on the face
• Current Assets: (expected to be used within 12 months):
Inventories (fuel, spare parts, rations, vaccines, supplies),
Investments (short term), Receivables (short-term); cash.
• Non-current Assets: (expected to last more than 12 months):
PPE (land, building, vehicles, IT and communication
equipment), Intangibles (software, copyrights) receivables
(long term) investment (long term).
• line items, headings and sub-totals shall be presented on the
face of the statement of financial position when such
presentation is relevant to an understanding of the entity’s
financial position
 Liabilities and Net Assets/ Equity
• Current Liabilities: Payables (short-term),
Employee benefit liabilities (short term), provision
(short-term)
• Non current liabilities: payables (long term),
employee benefit liabilities (long term); Provisions
(long-term)
• Net Assets/Equity: represent the residual interest
in the assets of the organization after deducting all
its liabilities. These include reserves and
accumulated surplus surplus/deficit.
 Minimum Disclosures on Statement
of Financial Position
ASSETS LIABILITIES
1. Property, plant and equipment 1. Taxes and transfers payable
2. Investment property 2. Social benefit liabilities
3. Intangible assets 3. Payables
4. Financial assets 4. Provisions
5. Investments (equity method) 5. Financial liabilities
6. Inventories
7. Recoverables from non-
exchange transactions
8. Receivables from exchange NET ASSETS/EQUITY
transactions
9. Cash and cash equivalents

Additional items relevant to understanding statements

Presentation: Financial Statements

Current Assets Current Liabilities
Cash 800 Accounts Payable 925
Investments 2,000 Employee benefits 100
Inventories 100 Other current liabilities 600
Accounts Receivable 2,100 1625
Other current assets 100
5,100 Non Current liabilities
Long-term provisions 200
Non-Current assets Employee benefits 1,000
Investments 950 Other non-currrent liabs 400
Accounts Receivable 365 Total Liabilities 1,600
Other financial assets 10
PPE 3,900 Net Assets/Equity
Intangible assets 100 Accumulated Suplus (deficits) 5,050
Other non-curren assets 100 Other reserves 2,250
5,425 Total net assets 7,300
Total Assets 10,525 Total liabilities and Net assets 10,525
 Statement of Financial Performance

• All items of revenue and expense recognized in a

period are presented.
• This includes the effects of changes in accounting
estimates.
• Expenses are presented classified based on either the
nature of expenses or their function within the entity.
• If classified by function, disclose additional information
on the nature of expenses, including depreciation and
amortization expense and employee benefits expense.
 By Nature By Function
Revenue Br'M Revenue Br'M
Voluntary
contributions 3000Voluntary contributions 3000
Investment revenue 100Investment revenue 100
Miscellaneous
revenue 50Miscellaneous revenue 50
Total revenue 3,150 Total revenue 3,150

Expenses Expenses
Employee benefits 2,000Poverty eradication 1000
Deprecn &
amortization 200Human rights 400
supplies used 300Peacekeeping 1000
Travel 150Environmental issues 200
Other expenses 50Other expenses 100
Total Expense 2,700 Total Expense 2700
Surplus for the Surplus for the
period 450 Period 450
 Statement of Changes in Net Assets/Equity

Statement of changes in net assets/equity

required showing on the face
1. Surplus or deficit for the period
2. Revenue and expense recognized directly in
net assets/equity
3. Effects of changes in accounting policies

Presentation: Financial Statements

 Public Sector Entity
Consolidated Statement of Changes in Net Assets/Equity
For the Year Ended December 31, 20X2
(in thousands of currency units)

Presentation: Financial Statements

 Notes to Financial Statements

• Present information about the basis of

preparation of the financial statements and the
specific accounting policies
• Disclose required information not presented on
the face of statements and
• Provide additional information
• Significant judgments made
• Information about estimation uncertainty

Presentation: Financial Statements

 Discussion Question
• An entity has decided that a change to
functional classification of expenses from the
classification based on their nature would be
more relevant to users of its financial
statements.
• What are the requirements of IPSAS 1 for
making such a change?
 53

Statement of Cash Flows

(IPSAS 2)

53
 Objective of Cash Flow Statement

• Mandatory
• Provides users with basis to assess how entity
generates and uses cash
• Users can assess effect activities had on financial
position
• Information has predictive value
– Amounts, timing and certainty of future cash flows
– Future cash requirements
– Sustainability of activities

Presentation: Cash Flow Statement

Cash and Cash Equivalents

Cash Cash Equivalents

• Cash • Short-term liquid investments
• Demand deposits (3 months or less)
• Readily convertible
• Insignificant risk

Components must be disclosed

Presentation: Cash Flow Statement

Cash and Cash Equivalents

Scenario 1
An entity acquires a three year fixed rate
government bond in an active market two months
before its maturity.
– Is the bond cash and cash equivalent? Explain

Presentation: Cash Flow Statement

Cash and Cash Equivalents

Scenario 2
An entity’s general bank account fluctuates between having a balance
and overdraft in accordance with the entity’s cash receipts and
payments cycle. The overdraft is repayable on demand.
– Is overdraft part of cash and cash equivalents? Explain

Presentation: Cash Flow Statement

 Cash Flow Statement

Report cash flows classified by:

• Operating activities - derived from main cash-generating
activities e.g. revenue from taxes, payments to suppliers
• Investing activities - purchase/sale of assets and other long-term
investments for resources contributing to future service delivery
• Financing activities - changes in the size and composition of
contributed capital and borrowings of entity e.g. payment of
interest; issuance of debt

Presentation: Cash Flow Statement

Reporting Operating Activities

Direct Method Indirect Method

Discloses Surplus/deficit adjusted for

• major classes of gross cash • noncash transactions
receipts • deferrals
• gross cash payments • accruals

Use of direct method preferred

Presentation: Cash Flow Statement

 Public Sector Entity
Consolidated Statement of Cash Flows (Direct Method)
For the Year Ended December 31, 20X2
(in thousands of currency units)

Presentation: Cash Flow Statement

 Public Sector Entity
Consolidated Statement of Cash Flows (Indirect Method)
For the Year Ended December 31, 20X2
(in thousands of currency units)

Presentation: Cash Flow Statement

 Disclosures

• Changes in liabilities arising from financing activities

• Components of cash and cash equivalents
• Additional information relevant to users in understanding the
financial position and liquidity of entity
– Amount of undrawn borrowing facilities and restrictions
– Cash flows from interests in joint ventures
– Amount and nature of restricted cash balances
• Reconciliation of the surplus/deficit with net cash flow from
operating activities when direct method used

Presentation: Cash Flow Statement