IPSASB Update INTOSAI PSC Steering Committee Brasilia Brazil
IPSASB Update INTOSAI PSC Steering Committee, Brasilia, Brazil Presented by: Stuart Barr June 9, 2017 Page 1 | Proprietary and Copyrighted Information
IPSASB Recent Progress Final pronouncements approved: • Applicability of IPSASs • Minor Improvements • Impairment of Revalued Assets • IPSAS 39, Employee Benefits • IPSAS 40, Public Sector Combinations Consultation paper issued for comment: • Financial Reporting for Heritage in the Public Sector Staff Paper issued: • Emissions Trading Schemes Consultations closed - responses being analyzed: • Update of Cash Basis IPSAS ED 61 • Social Benefits Consultation Paper • Public Sector Financial Instruments – monetary authority issues – Consultation Paper Establishment of the Consultative Advisory Group • Objective of CAG: Advice on Strategy, Work Plan, Technical Issues or Matters Impeding the Adoption and Implementation of IPSASs • Meetings held - June and December 2016 • Meetings planned – June and December 2017 Page 2 | Proprietary and Copyrighted Information
IPSAS 40 Public Sector Combinations: Classification • Amalgamation or Acquisition • Control essential for acquisition, but not conclusive • Economic substance – Consideration Does one party to the public sector combination gain control of operations? No Yes Is the economic substance of the public sector combination that of an amalgamation? – Decision Making • Carrying amounts for amalgamations vs fair value for acquisitions Yes Amalgamation No Acquisition Page 3 | Proprietary and Copyrighted Information
Current IPSASB work programme: Key projects 2016 - 2018 Project Public sector specific IFRS convergence Social Benefits Revenue & Non-Exchange Expenditure Heritage Leases Financial Instruments Public Sector Measurement Infrastructure Assets (starting September 2017) Cash Basis IPSAS (limited-scope update) Page 4 | Proprietary and Copyrighted Information
Social Benefits • Social Benefits are “benefits payable to individuals and households, in cash or in kind, to mitigate the effect of social risks. ” • Social risks are “events or circumstances that may adversely affect the welfare of individuals and households either by imposing additional demands on their resources or by reducing their income. ” Page 5 | Proprietary and Copyrighted Information
Revenue and Non-Exchange Expenditure Current global literature on Revenue • • IPSAS 23 (Non-Exchange Revenue: Taxes and Transfers) IPSAS 9 (Revenue from Exchange Transactions) IPSAS 11 (Construction Contracts) IFRS 15 (Revenue from Contracts with Customers) Single CP – consider the need for common approach between Non-Exchange Revenue and Expenditure (e. g. grants) Replace IPSASs 9 & 11 with IFRS 15 - based standard Retain IPSAS 23 - based standard - address application issues Assess extent to which public sector version of IFRS 15 performance obligation approach may be apprpriate Page 6 | Proprietary and Copyrighted Information
Non-Exchange Expenses Non-exchange expenses outside Social Benefits project • e. g. Defense, Education and Health expenses, transfers / grants No current IPSAS Consistency / links with Social Benefits and existing IPSASs Three potential approaches: • Obligating event approach (IPSAS 19 - based) • IFRS 15 – performance obligation approach (reverse of revenue) • IPSAS 23 reverse No obligating event for Collective Goods and Services, or Other Transfers in Kind? Obligating event limited to transfers /grants to other entities? Page 7 | Proprietary and Copyrighted Information
Description of Heritage Items • Items that are intended to be held indefinitely and preserved for the benefit of present and future generations because of their rarity and/or significance in relation, but not limited, to their archeological, architectural, agricultural, artistic, cultural, environmental, historical, natural, scientific or technological features. Page 8 | Proprietary and Copyrighted Information
Heritage Assets—Consultation Paper proposes: • Heritage items can be assets • Recognize heritage items if they meet recognition criteria: – Asset definition – Able to be measured • Measurement bases: – Historical cost – Replacement cost – Market value • Acknowledge non-recognition and recognition at symbolic/nominal value but question conceptual validity Page 9 | Proprietary and Copyrighted Information
Heritage Liabilities—Consultation Paper • Do heritage preservation intentions give rise to present obligations and liabilities? – Special characteristics of heritage items do not, of themselves, result in a present obligation – Entity is able to avoid an outflow of resources – Do not recognize a liability based only on intentions Page 10 | Proprietary and Copyrighted Information
Leases Existing IPSAS 13 based on IAS 17 IFRS convergence project – responding to new IFRS 16 Introduction of “right-of-use model” for lessee accounting More on balance sheet – fiscal impact? IPSAS 13 retention - not an option because of mixed groups IPSASB view that IFRS 16 lessor accounting inappropriate for public sector • Public sector needs symmetry between lessee and lessor accounting – lease arrangements common between public sector entities • IPSASB agreed to include the “right–of-use model” for lessor accounting Page 11 | Proprietary and Copyrighted Information
Financial Instruments Update IPSASB agreed principles consistent with IFRS 9 for: • Definitions • Classification • Measurement • Expected credit loss impairment model • Hedging • Transitional Provisions Public sector specific guidance included: • Concessionary loans • Financial guarantees issued through a non-exchange transaction • Additional public sector examples Audit Challenges – Expected Credit Loss Model • IFRS 9 – ECL model a trigger for the IAASB to consider revisions to ISA 540, Auditing Accounting Estimates and Related Disclosures - April 2017 ED published – comment period until August 1, 2017 • Need for public sector auditors to also consider ECL challenges Page 12 | Proprietary and Copyrighted Information
Public Sector Specific Financial Instruments CP Topics IPSASB CP decisions influenced by: • Currency in Circulation • Monetary Gold • IMF quota subscription & Special Drawing Rights • The IPSASB Conceptual Framework • IPSASB policy paper for considering statistical reporting guidelines Project – Next Steps • IPSASB initial consideration of responses at June 2017 meeting • Project output not yet determined by IPSASB Page 13 | Proprietary and Copyrighted Information
Public Sector Measurement: Conceptual Framework Measurement Bases Assets Historical Cost Current Value measures • Market Value • Replacement Cost • Net Selling Price • Value in Use Liabilities Historical Cost Current Value measures • Market Value • Cost of Fulfilment • Cost of Release • Assumption Price Page 14 | Proprietary and Copyrighted Information
Public Sector Measurement Project Combined impact on IPSASs of CF and IFRS 13: • Service potential - need for entry-based values • Existing measurement requirements not consistent with CF • Fair value references inconsistent with IFRS 13 (exit-based) Other key issues: • Transaction costs treatment (including borrowing costs) • Consistency with GFS and IVSC guidance • Further Implementation Guidance needed? Task Force to include GFS and IVSC representatives Preliminary analysis stage before deciding next steps Page 15 | Proprietary and Copyrighted Information
2019 -2023 Strategy / Work Plan challenges Complexity of PFM landscape Coordination with other stakeholders? Relative balance between: • • Addressing public sector-specific issues? Maintaining (increasing? ) IFRS convergence? Relationship with Government Finance Statistics? Improving communication of financial information? IPSASB’s role in relation to adoption and implementation? How do these demands fit with available resources? Development work during 2017 Public consultation H 1 2018 – Finalise H 2 2018. Page 16 | Proprietary and Copyrighted Information
Developing the next IPSASB Strategy and Work Plan Stakeholder outreach 2017 Public consultation 2018 CAG input PIC advice Multi-year Strategy (2019 -2023), Work Plan to implement/operationalize Strategy Page 17 | Proprietary and Copyrighted Information
Questions, discussion & further information • Visit our webpage http: //www. ipsasb. org/ • Or contact us by e-mail : – IPSASB Member: Stuart. Barr@oag-bvg. gc. ca – Deputy Technical Director: Ross. Smith@ipsasb. org Page 18 | Proprietary and Copyrighted Information
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