Introduction to IPSAS and conceptual framework

S.S. Afemikhe Consulting
INTRODUCTION TO INTERNATIONAL PUBLIC SECTOR ACCOUNTING
STANDARDS (IPSASs) AND CONCEPTUAL FRAMEWORK FOR GENERAL PURPOSE
FINANACIAL REPORTING FOR PUBLIC ENTITIES

TABLE OF CONTENTS
1) DEFINITIONS OF PUBLIC SECTOR AND PSA
2) MAIN PURPOSE OF PSA
3) INTRODUCTION TO IPSASs
4) IPSASs SUMMARY
5) CONCEPTUAL FRAMEWORK FOR GPFR
6) ACCRUAL BASIS OF ACCOUNTING
7) SPECIAL PURPOSE FINANCIAL REPORTS
8) GENERAL PURPOSE FINANCIAL REPORTS
9) OBJECTIVE OF FINANCIAL REPORTS
10) USERS OF GPFR
11) FINANCIAL POSITION, FINANCIAL PERFORMANCE AND CASH FLOW
12) QUALITATIVE CHARACTERISTICS
13) CONSTRAINTS ON INFORMATION INCLUDED IN FINANCIAL REPORTS
14) REPORTING ENTITY
15) KEY CHARATERISTICS OF REPORTING ENTITY
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Definitions.
• Public Sector
All organisations which are not privately owned and operated, but
which are established, run and financed by the Government on
behalf of the public.
•Public Sector Accounting
This is the process of recording, communication, summarising,
analysing and interpreting Government financial statement.
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Effective Date of Transition
In view of the importance of IPSAS to the economy and the need
to align with global best practices.
• Nigeria adopted IPSAS cash basis of accounting with effect
from January 2014.
• The effective date of transition to IPSAS accrual basis is
January 2016.
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Main purpose of PSA
a) Ascertaining the legitimacy of transaction and their compliance with the
established norms, regulations and statute.
b) Providing evidence of stewardship
c) Assisting planning and control
e) Assisting objective and timely reporting
f) Providing basis for decision making
g) Enhancing the appraisal of the efficiency of Management
h) Highlight various sources of revenue and expenditure to be incurred
i) Identifying the sources of funding capital project.
j) Ensuring that cost are matched by at least equivalent benefit incurred
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INTRODUCTION TO IPSASs
• The International Public Sector Accounting Standards Board
(IPSASB) develops accounting standards for public sector entities
referred to as International Public Sector Accounting Standards
(IPSASs).
• The IPSASB recognizes the significant benefits of achieving
consistent and comparable financial information across jurisdictions
and it believes that the IPSASs will play a key role in enabling
these benefits to be realized.
• The IPSASB issues IPSASs dealing with financial reporting under the
cash basis of accounting and the accrual basis of accounting.
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INTRODUCTION TO IPSASs(CONT’D)
• The accrual IPSASs are based on the International Financial Reporting
Standards (IFRSs) issued by the IASB where the requirements of those
Standards are applicable to the public sector.
• The adoption of IPSASs by governments will improve both the quality
and comparability of financial information reported by public sector
entities around the world.
• The IPSASB recognizes the right of governments and national standard
setters to establish accounting standards and guidelines for financial
reporting in their jurisdictions. The IPSASB encourages the adoption of
IPSASs and the harmonization of national requirements with IPSASs.
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IPSASs Summary
• IPSAS 1 Presentation of Financial Statements IAS 1
• IPSAS 2 Cash Flow Statements IAS 7
• IPSAS 3 Accounting Policies, Changes in Accounting Estimates and
Errors IAS 8
• IPSAS 4 The Effects of Changes in Foreign Exchange Rates IAS 21
• IPSAS 5 Borrowing Costs IAS 23
• IPSAS 6 Consolidated and Separate Financial Statements IAS 27
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IPSASs Summary (CONT’D)
• IPSAS 7 Investments in Associates IAS 28
• IPSAS 8 Interests in Joint Ventures IAS 31
• IPSAS 9 Revenue from Exchange Transactions IAS 18
• IPSAS 10 Financial Reporting in Hyperinflationary Economies IAS 29
• IPSAS 11 Construction Contracts IAS 11
• IPSAS 12 Inventories IAS 2
• IPSAS 13 Leases IAS 17
• IPSAS 14 Events After Reporting Date IAS 10
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• IPSAS 15 Financial Instruments: Disclosure & Presentation - superseded by IPSAS 28 and
IPSAS 30
• IPSAS 16 Investment Property IAS 40
• IPSAS 17 Property, Plant and Equipment IAS 16
• IPSAS 18 Segment Reporting IAS 14
• IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets IAS 37
• IPSAS 20 Related Party Disclosures IAS 24
• IPSAS 21 Impairment of Non-Cash-Generating Assets IAS 36
• IPSAS 22 Disclosure of Financial Information About the General Government Sector N/A
• IPSAS 23 Revenue from Non-Exchange Transactions (Taxes and Transfers) N/A
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• IPSAS 24 Presentation of Budget Information in Financial Statements N/A
• IPSAS 25 Employee Benefits IAS 19
• IPSAS 26 Impairment of Cash-Generating Assets IAS 36
• IPSAS 27 Agriculture IAS 41
• IPSAS 28 Financial Instruments: Presentation IAS 32
• IPSAS 29 Financial Instruments: Recognition & Measurement IFRS 7, IAS 39
• IPSAS 30 Financial Instruments: Disclosures IFRS 7
• IPSAS 31 Intangible Assets IAS 38
• IPSAS 32 Service Concession Arrangements IFRS 12
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THE CONCREPORTING BY PUBLIC SECTOR ENTITESEPTUAL
FRAMEWORK FOR GENERAL PURPOSE FINANCIAL
• DEFINITON OF FRAMEWORK – The basic structure of something : a set
of ideas or facts that provide support for something.
• CONCEPTUAL FRAMEWORK - Is an analytical tool with several
variations and contexts. It is used to make conceptual distinctions and
organize ideas.
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• It describes the objective of, and the concepts for general purpose
for something.
• It is a theoretical structure of assumptions, principles, and rules
that holds together the ideas comprising a broad concept

The Conceptual Framework for General Purpose Financial Reporting by
Public Sector Entities.
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It establishes and makes explicit 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.
.

Why IPSASs are Developed
• IPSASs are developed to apply across countries and jurisdictions
with different political systems, different forms of government
and different institutional and administrative arrangements for
the delivery of services to constituents.
• The International Public Sector Accounting Standards Board
(IPSASB) recognizes the diversity of forms of government, social
and cultural traditions, and service delivery mechanisms that exist
in the many jurisdictions that may adopt IPSASs.
• In developing this Conceptual Framework, the IPSASB has
attempted to respond to and embrace that diversity.
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Accrual Basis of Accounting
• The Conceptual Framework deals with concepts that apply to
general purpose financial reporting (financial reporting) under
the accrual basis of accounting.
• Under the accrual basis of accounting, transactions and other
events are recognized in financial statements when they occur
(and not only when cash or its equivalent is received or paid).
• Therefore, the transactions and events are recorded in the
accounting records and recognized in the financial statements of
the periods to which they relate.
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Special Purpose Financial Reports
Standard setters often describe as “special purpose financial
reports” those financial reports prepared to respond to the
requirements of users that have the authority to require the
preparation of financial reports that disclose the information they
need for their particular purposes.
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General Purpose Financial Reports
• The Conceptual Framework acknowledges that, to respond to
user’s information needs, GPFRs may include information that
enhances, complements, and supplements the financial
statements.
• Therefore, the Conceptual Framework reflects a scope for
financial reporting that is more comprehensive than that
encompassed by financial statements.
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Objectives of Financial Reporting
1. The objectives of financial reporting by public sector entities are
to provide information about the entity that is useful to users of
GPFRs for accountability purposes and for decision-making
purposes (hereafter referred to as “useful for accountability and
decision-making purposes”).
2. Financial reporting is not an end in itself. Its purpose is to
provide information useful to users of GPFRs. The objectives of
financial reporting are therefore determined by reference to the
users of GPFRs, and their information needs.
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Users of General Purpose Financial Reports
i) Governments
ii) Other public sector entities
iii) Taxpayers
iv) Donors
v) Lenders
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Financial Position, Financial Performance and
Cash Flows
Information about the financial position of a government or other public sector
entity will enable users to identify the resources of the entity and claims to those
resources at the reporting date. This will provide information useful as input to
assessments of such matters as:
1. The extent to which management has discharged its responsibilities for
safekeeping and managing the resources of the entity;
2. The extent to which resources are available to support future service delivery
activities, and changes during the reporting period in the amount and
composition of those resources and claims to those resources; and
3. The amounts and timing of future cash flows necessary to service and repay
existing claims to the entity’s resources.
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Financial Statements and Information that Enhances,
Complements and Supplements the Financial Statements
• The scope of financial reporting establishes the boundary
around the transactions, other events and activities that may be
reported in GPFRs.
• To respond to the information needs of users, the Conceptual
Framework reflects a scope for financial reporting that is more
comprehensive than that encompassed by financial statements.
• It provides for the presentation within GPFRs of additional
information that enhances, complements, and supplements those
statements.
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Qualitative Characteristics
The qualitative characteristics of information included in GPFRs of
public sector entities are:
A) Relevance
B) Faithful representation
C) Comparability
D) Verifiability
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Qualitative Characteristics
• Relevance: Financial and non-financial information is relevant if it is
capable of making a difference in achieving the objectives of financial
reporting.
•Faithful Representation: To be useful in financial reporting, information
must be a faithful representation of the economic and other phenomena
that it purports to represent.
• Comparability: Comparability is the quality of information that enables
users to identify similarities in, and differences between, two sets of
phenomena.
• Verifiability: Verifiability is the quality of information that helps assure
users that information in GPFRs faithfully represents the economic and
other phenomena that it purports to represent.
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Constraints on Information Included in General Purpose Financial Reports
• 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.
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Cost-Benefit
• Financial reporting imposes costs. The benefits of financial reporting should
justify those costs.
• It is often not possible to identify and/or quantify all the costs and all the
benefits of information included in GPFRs.
• The costs of providing information include the costs of collecting and
processing the information, the costs of verifying it and/or presenting the
assumptions and methodologies that support it, and the costs of
disseminating it.
• Omission of useful information imposes costs, including the costs that users
incur to obtain needed information from other sources and the costs that
result from making decisions using incomplete data provided by GPFRs.
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Reporting Entity
• A public sector reporting entity is a government or other public sector
organization, program or identifiable area of activity (hereafter
referred to as an entity or public sector entity) that prepares GPFRs.
• A public sector reporting entity may comprise two or more separate
entities that present GPFRs as if they are a single entity—such a
reporting entity is referred to as a group reporting entity
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Key Characteristics of a Reporting Entity
1. It is an entity that raises resources from, or on behalf of,
constituents and/or uses resources to undertake activities for
the benefit of, or on behalf of, those constituents; and
2. There are service recipients or resource providers dependent on
GPFRs of the entity for information for accountability or
decision-making purposes.
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Introduction to IPSAS and conceptual framework

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Introduction to IPSAS and conceptual framework