The International Public Sector Accounting Standards Board (IPSASB) has released for comment two Exposure Drafts related to its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. The Conceptual Framework continues to be the IPSASB’s key strategic objective and is of fundamental importance to the future of global public sector standard setting.
“The Conceptual Framework continues to be IPSASB’s main priority and, when finalized, will underpin IPSASB’s standard-setting activities for many years to come,” said IPSASB Chair Andreas Bergmann. “These two Exposure Drafts propose concepts that deal with key aspects of the financial statements—the elements and the appropriate measurement bases. We strongly encourage all stakeholders to submit comments on the two Exposure Drafts.”
The NZASB is currently consulting on its proposal that Tier 1 and Tier 2 Public Sector Public Benefit Entities apply PBE Standards, based on IPSASs. The IPSASB’s Conceptual Framework will therefore have a significant impact on New Zealand entities.
Conceptual Framework Exposure Draft (ED) 2, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Elements and Recognition in Financial Statements, refines the issues highlighted in the Consultation Paper published in 2010 and reflects the IPSASB’s consideration of the responses to that Consultation Paper. Elements are the building blocks from which the financial statements are constructed.
The ED proposes definitions of eight elements: assets, liabilities, revenue, expenses, deferred inflows, deferred outflows, ownership contributions, and ownership distributions. It also proposes deferred inflows and deferred outflows as elements in order to distinguish the flows related to the reporting period from flows which relate to another reporting period. Deferred inflows and deferred outflows apply to flows that are provided for use in one or more specified reporting periods and are restricted to non-exchange transactions. The ED also considers how to deal with the uncertainty that can arise over the existence and measurement of elements.
Conceptual Framework Exposure Draft (ED) 3, Measurement of Assets and Liabilities in Financial Statements, identifies the measurement concepts that should guide the IPSASB in the selection of measurement bases for International Public Sector Accounting Standards. The ED stresses the importance of selecting measurement bases that meet the objectives of financial reporting-decision making and accountability. Many assets in the public sector are held for their operational capacity and, therefore, entry values that reflect the cost of purchase are likely to be adopted in many situations.
For liabilities that arise from obligations to provide goods and services to citizens and other eligible beneficiaries, the appropriate measurement basis will often be the cost of fulfilment—that is to say, the current cost of meeting the obligations represented by the liability.
Comments can be made to the New Zealand Accounting Standards Board (NZASB) addressed to the Chairman, New Zealand Accounting Standards Board, PO Box 11250, Manners Street Central, Wellington 6142, or by email to email@example.com. Comments can address any or all of the issues in the paper. Comments can also be made electronically to the IPSASB website (www.ifac.org), using the “Submit a Comment” link on the Exposure Drafts and Consultation Papers page.
Comments on the Exposure Drafts are due to the NZASB by 15 March 2013 and to the IPSASB by 30 April 2013.
Read IPSASB At a Glance - Conceptual Framework Exposure Draft Summary, Phase 2 of 4—Elements and Recognition in Financial Statements (November 2012)
Read IPSASB ED Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Elements and Recognition in Financial Statements (November 2012)
Read IPSASB At a Glance - Conceptual Framework Exposure Draft Summary, Phase 3 of 4—Measurement of Assets and Liabilities in Financial Statements (November 2012)
Read IPSASB ED Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Measurement of Assets and Liabilities in Financial Statements (November 2012)