International Public Sector Accounting Standards (IPSAS) Workshop Training Course
PROGRAMME OVERVIEW
There has been increasing pressure for governments around the world to be more accountable for their public budgets
with governments and to produce accurate, meaningful and transparent financial statements. International Public Sector Accounting Standards (IPSAS) enable public entities to show clear accrual accounting and budgeting techniques and demonstrate results-based monitoring and reporting.
This workshop training will provide the comprehensive understanding of applying IPSAS from the IASB’s IFRS standards to the
framework of public bodies and enable delegates to increase transparency and develop a better system of
performance/results measurement of costs and cost budgets.
Though the use of case studies of all the major topics, delegates will gain a working knowledge of how to apply and
adopt IPSAS to their organisation. We will conduct discussions on how to overcome the challenges faced by other entities in implementing IPSAS.
The International Public Sector Accounting Standards Board (IPSASB) focuses on the accounting and financial reporting needs of national, regional and local governments, related governmental agencies, and the constituencies they serve. It addresses these needs by issuing and promoting benchmark guidance and facilitating the exchange of information among accountants and those who work in the public sector or rely on its work. IPSASB is responsible for the issue of IPSAS.
There are two types of IPSAS:
• Cash basis: Allows for transparent financial reporting of cash receipts, payments and balances, under the
cash basis of accounting.
• Accrual Accounting: Focuses on revenue, cost, assets, liability and equity, instead of cash flow only.
Most IPSAS are on accrual basis which is in line with IFRS
Compliance with the IPSAS guarantees that the financial reporting of public bodies conveys what is termed a “true and fair view” of the financial status of an organisation as is. IPSAS are modelled around the International Financial Reporting Standards (IFRS.) The use of IPSAS also ensures that financial statements are comparable for organisations that adopt them.
IPSAS take account of the characteristic features of the public sector. They are high quality global financial
reporting standards for the application by public sector entities other than Government Business Enterprises. (GBEs)
Why IPSAS
The application of the IPSAS gives the financial reporting by bodies incorporated under public law greater significance through comparability with internationally recognised regulations for submitting financial statements. The greater transparency raises the quality of financial management, facilitates dealings with financiers and simplifies communication with the general public.
In Kenya, there is increasing demand for public accountability and transparency by all stakeholders in the Public Sector. Current revelations during the Public Accounts Committee (PAC) hearing on the Auditor General’s reports raise issues of financial accountability and transparency. The preparation of transparent and understandable financial statements is an important way for Government bodies to demonstrate their accountability to their taxpaying stakeholders and development partners. This communication is an important part of building trust.
Quality and comparability
The adoption of IPSASs by governments will improve both the quality and comparability of financial information reported by public sector entities around the world. It will improve the comparability of reports between various government agencies, parastatals, donor funded projects etc. Reports prepared in accordance with IPSASs provide for comparability between different financial periods, even within the same institutions, hence facilitating management decisions.
Transparency
Disclosure information requirements of various reports will facilitate transparency in the fi nancial dealings of
public institutions. These disclosures will enable users of financial information interpret the reports in the right
context and better decision making processes.
Consistency
IPSASs will also improve consistency in preparation and reporting of financial information. This will in turn enable
users to draw consistent conclusions given similar sets of financial statements.
Accountability
Adoption of IPSASs will improve accountability and ease the audits of public institutions. This will translate into
timely audit reports, better information to donors and countries providing external assistance, better quality
and credibility of financial reports.
Governance
IPSASs will result in stronger governance procedures and a framework for the accounting practise in the public
sector. This will strengthen the financial management of public institutions.
BENEFITS OF ATTENDING
On completion of the training delegates are expected to:
Apply IPSAS to their organisation’s accounting practices
Accomplish increased transparency and meet the international requirements of banks and donors and multilateral
agencies
Apply best practice and avoid common pitfalls in their IPSAS implementation
Build a strong system of performance-based management in their accounting reports
PROGRAMME OUTLINE
• Conceptual framework for general purpose financial reporting by public sector entities
• In-depth Look at Key Standards: Hyperinflation, adjusting and non-adjusting events, disclosure requirements,
investments reporting – equity/costs, interest in joint ventures
• Accounting and financial reporting for service concession arrangements
• Amendments, reviews and changes in IPSAS and expected future developments
• IPSASB projects, consultation papers, resources, reference materials and research on IPSAS
• Presentation of Financial Statements and Cash
• Flow Statements
• Accounting Policies, Changes in Accounting Estimates and Errors
• Foreign Exchange Rates
• Consolidated and Separate Financial Statements
• Property – valuation, depreciation, expensing,capitalisation, lessee and lessor, inventories,construction contracts
• Impairment of Non-cash generating assets and cash-generating assets
• Financial instruments
• Employee benefits
The UN Group made the decision to adopt IPSASs in 2005. A number of other supranational organizations are
also using IPSASs for their fi nancial reporting. These include the European Commission and the OECD,
NATO, IFAC and INTERPOL.
More than 70 countries have agreed processes or have as part of wider reforms to adopt accrual accounting e.g.
Rwanda, Uganda, Algeria, South Africa, Ghana, Brazil, Switzerland, Russia, India,China, Britain, USA, etc.
a project in place to adopt IPSASs or align with IPSASs
Challenges in Adopting IPSAS
There are a number of challenges envisioned in the adoption of IPSAS. These include:
• The IPSASs concept needs to be embraced by stakeholders such as Parliament, National Audit Office, Treasury, Government departments, Development Partners as well as Non – Governmental Organisations (NGOs).
• It is essential to have a legislative backing for the adoption of IPSASs among the public sector entities
• There are varying levels of national regulations relating to auditors and preparers of financial statements, as well as a history of developing ethics codes to meet local requirements.
• There are cost to be incurred in the implementations of IPSASs. Statutory bodies responsible for enforcing
accounting regulations require funding to roll out implementation of IPSAS. These costs include research, training, technology and consultancy costs.
• There is call for political goodwill in the implementation of better accountability in the Public Sector due to divergent views on accountability.
IPSAS SUMMARY
There are 26 accrual based IPSAS and 1 cash based IPSAS currently in issue. Below is a summary of the IPSASs and their key objective.
Cash Basis IPSAS
Objective: To prescribe the manner in which general purpose financial statements should be presented under the cash basis of accounting. Compliance with the requirements and encouragements of this Standard will enhance comprehensive and transparent financial
reporting of the cash receipts, cash payments and cash balances of the entity. It will also enhance comparability with the entity’s own financial statements of previous periods and with the financial statements of other entities which adopt the cash basis of accounting.
Accrual Basis IPSASs
IPSAS No. 1: Presentation of Financial Statements
Objective: To set out the manner in which general purpose financial statements should be prepared under the accrual basis of accounting, including guidance on their structure and minimum requirements for content.
IPSAS No. 2: Cash flow Statement
Objective: To require the presentation of information about historical changes in public sector entity’s cash and cash equivalents by means of a cash flow statement that classifies cash flows during the period according to operating, investing and financing activities.
IPSAS No.3: Accounting Policies, Changes in Accounting Estimates and Errors
Objective: To prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosures of changes in accounting policies, changes in accounting estimates, and correction of errors.
IPSAS No. 4: The effects of Changes in Foreign Exchange Rates
Objective: To prescribe how to include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements.
IPSAS No. 5: Borrowing Costs
Objective: To prescribe the accounting treatment of borrowing costs.
IPSAS No. 6: Consolidated and Separate Financial Statements
Objective: To prescribe requirements for preparing and presenting consolidated financial statements for an economic entity under the accrual basis of accounting. To prescribe how to account for investments in controlled entities, jointly controlled entities and associates in separate financial statements
IPSAS No. 7: Investments in Associates
Objectives: To prescribe the investor’s accounting for investments in associates where the investment in the associate leads to the holding of an ownership interest in the form of a shareholding or other formal equity structure.
IPSAS No. 8: Interests in Joint Ventures
Objectives: To prescribe accounting treatment required for interests in joint ventures, regardless of the structures or legal forms of the joint ventures activities.
IPSAS No.9: Revenue from Exchange Transactions
Objectives: To prescribe the accounting treatment for revenue arising from exchange transactions and events
IPSAS No. 10: Financial Reporting in Hyperinflationary Economies
Objectives: To prescribe specific standards for entities reporting in the currency of a hyperinflationary economy, so that the financial information (including the consolidated financial information) provided is meaningful.
IPSAS No. 11: Construction Contracts
Objectives: To prescribe the treatment for revenue and costs associated with construction contracts in the financial statements of the contractor
IPSAS No. 12: Inventories
Objectives: To prescribe the accounting treatment of inventories under the historical cost system, including cost determination and expense recognition, including any write down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories
IPSAS No. 13: Leases
Objective: To prescribe for leases and lessors, the appropriate accounting policies and procedures to apply in relation to finance and operating lease.
IPSAS No. 14: Events after the Reporting Date
Objective: To prescribe when an entity should adjust its financial statements for events after the reporting date and disclosures about the date when financial statements were authorised for issue and about events after the reporting date.
IPSAS No. 15: Financial Instruments – Disclosures and Presentation
Objective: To enhance users understanding of the significance of on balance sheet and off balance sheet financial instruments to an entity’s financial position, performance and cash flows.
IPSAS No. 16: Investment Property
Objective: To prescribe the accounting treatment for investment property and related disclosures.
IPSAS No. 17: Property, Plant and Equipment
Objective: To prescribe the principles for initial recognition and subsequent accounting for property, plant and equipment (carrying amount, depreciation and impairment loss)
IPSAS No. 18: Segmental Reporting
Objective: To establish principles for reporting financial information by segments to better understand the entity’s past performance and to identify the resources allocated to support the major activities of the entity, and enhance the transparency of financial reporting.
IPSAS No. 19: Provisions, Contingent liabilities and contingent Assets
Objectives: To prescribe the appropriate recognition criteria and measurement bases for provisions, contingent liabilities and contingent assets, and to ensure that sufficient information is disclosed in the notes to financial statements.
IPSAS No. 20: Related Party Disclosures
Objective: To ensure that financial statements disclose the existence of related party relationships and transactions between the entity and its related parties.
IPSAS No 21: Impairment of Non Cash Generating Assets
Objective: To ensure that non cash generating assets are carried at no more than their recoverable service amount, and to prescribe how recoverable service amount are calculated.
IPSAS No. 22: Disclosure of Financial Information about the General Government Sector
Objective: To prescribe disclosure requirements for governments which elect to present information about the General Government Sector (GGS) in their consolidated financial statements.
IPSAS No. 23: Revenue from Non Exchange
Transactions (Taxes & Transfers) Objective: To prescribe requirements for the financial reporting of revenue arising from non exchange transactions that give rise to an entity combination.
IPSAS No. 24: Presentation of Budget Information in Financial Statements.
Objective: To ensure that the public sector entities discharge their accountability obligations and enhance the transparency of their financial statements by demonstrating compliance with approved budget.
IPSAS No. 25—Employee Benefits
Objective: To prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognize:
(a) A liability when an employee has provided service in exchange for employee benefits to be paid in the future; and
(b) An expense when the entity consumes the economic benefits or service potential arising from service provided by an employee in exchange for employee benefits.
IPSAS No 26—Impairment of Cash-Generating Assets
Objective: To prescribe the procedures that an entity applies to determine whether a cash-generating asset is impaired and to ensure that impairment losses are recognized. This Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures.