Definition of an Operation and Recognition of Acquired Liabilities and Contingent Liabilities
Proposed amendments to IPSAS 40
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Proposed narrow scope amendments to IPSAS 40 Public Sector Combinations We want to hear your feedback on the International Public Sector Accounting Standards Board’s (IPSASB) Exposure Draft 96 Definition of an Operation and Recognition of Acquired Liabilities and Contingent Liabilities (Amendments to IPSAS 40). This Exposure Draft proposes targeted amendments to IPSAS 40 Public Sector Combinations, focusing on clarifying the definition of an operation and the recognition requirements for certain liabilities in the context of public sector combinations. Your feedback will help inform our response to the IPSASB on this Exposure Draft. Once the IPSASB finalises the amendments, the New Zealand Accounting Standards Board (NZASB) will consider whether any amendments should be incorporated into the suite of PBE Standards for Tier 1 and Tier 2 public benefit entities (PBEs) in New Zealand. We will consult separately on proposed amendments to New Zealand PBE Standards in due course. |
What is IPSAS 40 and how is it relevant in New Zealand
In New Zealand, PBE IPSAS 40 PBE Combinations sets out how Tier 1 and Tier 2 PBEs in the public sector and not-for-profit sector account for combinations. A PBE combination involves the bringing together of separate operations into one public benefit entity, either as an acquisition or an amalgamation.
PBE IPSAS 40 is based on the IPSASB standard IPSAS 40 Public Sector Combinations.
What amendments does the IPSASB propose to IPSAS 40 and why
IPSAS 40 establishes requirements for determining whether an acquired or received set of activities and assets constitutes an operation, which affects the assessment of whether the related transaction constitutes a public sector combination. IPSAS 40 also sets out requirements for recognising assets and liabilities acquired or received in a combination. These assessments require judgement and can have a significant effect the accounting outcome.
To assist public sector entities in making these assessments, the Exposure Draft proposes narrow scope targeted amendments to IPSAS 40 in two parts:
- Part 1 – Definition of an operation: Adding further guidance and illustrative examples to clarify the definition of an operation, including the introduction of an optional concentration test to simplify the assessment of whether an acquired set of activities and assets constitutes an operation.
- Part 2 – Liabilities and contingent liabilities: For combinations classified as acquisitions, the Exposure Draft proposes to clarify the recognition of liabilities and contingent liabilities by referring to the requirements in IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets, in relation to whether a present obligation exists at the acquisition date. The amendments also clarify that an acquirer shall not recognise a contingent asset, as defined in IPSAS 19, at the acquisition date.
These proposals are aligned with amendments issued by the International Accounting Standards Board (IASB), i.e. Definition of a Business and parts of References to the Conceptual Framework. The IPSASB considers that these amendments will also be appropriate and beneficial for the public sector.
Submit your feedback
We are interested in your feedback on the IPSASB Exposure Draft – particularly on the expected benefits of the proposals and any cost impacts or unintended consequences.
In New Zealand, PBE Standards for Tier 1 and Tier 2 PBEs are primarily based on IPSAS. In addition to informing our response to the IPSASB, your feedback will support the continued development of standards that support high-quality and consistent financial reporting for the New Zealand public and not-for-profit sectors. Please note that once the IPSASB finalises its amendments, we will consult on any proposed change to New Zealand PBE Standards separately.
The IPSASB Exposure Draft is available on the IPSASB website here.
How to provide feedback
Submissions to the XRB close on Tuesday 2 June 2026.
You can also send your comments directly to the IPSASB by Tuesday 30 June 2026. If you do, sending a copy of your submission to the XRB via accounting@xrb.govt.nz would be appreciated.
All submissions will be published on the XRB website unless confidentiality is requested. If you object to the release of any information in your submission, please identify the specific parts and the reasons under the Official Information Act 1982. We reserve the right not to publish defamatory submissions. Submissions are subject to the Official Information Act 1982 and the Privacy Act 2020. The XRB will handle personal information in accordance with these Acts.