IPSASB Update Ian Carruthers IPSASB Chair EPSAS Working Group Rome 22 nd November 2016 Page 1 Proprietary and Copyrighted Information
IPSASB progress to date during 2016 Final pronouncements approved to date: Applicability of IPSASs Minor Improvements Update of IPSAS 25 Employee Benefits IPSAS 39 Consultation paper issued for comment: Public Sector Financial Instruments monetary authority issues Consultation responses being analysed: Public Sector Combinations ED 60 (December meeting - IPSAS 40?) Update of Cash Basis IPSAS ED 61 (closed July 31st) Social Benefits Consultation Paper Page 2 Proprietary and Copyrighted Information
IPSAS 25 / 39 Employee Benefits update IPSAS 25 updated to maintain convergence with IAS19 Removal of option to defer recognition of changes in the net defined benefit liability (the corridor approach ) Introduction of net interest approach for defined benefit plans Amendment of certain disclosure requirements for defined benefit plans and multi-employer plans Removal of requirements for composite social security programs Large number of text changes so clearer to issue new standard - IPSAS 39 (effective 1 January 2018) Page 3 Proprietary and Copyrighted Information
Public Sector Combinations (draft IPSAS 40): Classification Amalgamation or Acquisition Control essential for acquisition, but not conclusive Economic substance Consideration Decision Making 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? Yes No Amalgamation Acquisition Page 4 Proprietary and Copyrighted Information
Public Sector Combinations (draft IPSAS 40): Accounting for Amalgamations and Acquisitions Modified Pooling Acquisition Method Net Assets / Equity Resulting Entity Goodwill, Loss or Gain Acquirer Amalgamation Acquisition Difference / Reserves Recognized by Combining Operations Difference Identifiable Assets and Liabilities Carrying Amount Fair Value Page 5 Proprietary and Copyrighted Information
Current IPSASB work programme Key projects Project Social Benefits Public sector specific IFRS convergence Revenue & Non-Exchange Expenditure Financial Instruments Heritage Public Sector Measurement (starting 2017) Infrastructure Assets (starting 2017) Leases Page 6 Proprietary and Copyrighted Information
Social Benefits Narrower scope of current project Projects Social Benefits Non-Exchange Expenses IPSAS 25 Update (IPSAS 39) Social Assistance Social Security Other Transfers In Kind Collective Goods and Services Employment Related Social Insurance Page 7 Proprietary and Copyrighted Information
Social Benefits Obligating event Potential recognition points Earliest Recognition Point Latest Recognition Point Key Participatory Events Occur Some but not all eligibility criteria may be met Eligibility Criteria Initially Met Eligibility Criteria Met to Receive Next Benefit Eligibility Criteria Met to Receive Next Benefit Claim Approved Eligibility Criteria Met to Receive Next Benefit Claim Approved Payment Date Arrived Key Participatory Events Threshold Eligibility Criteria Eligibility Criteria Met to Receive Benefit Approved Claim Enforceable Claim Requirements to satisfy ongoing eligibility criteria (including revalidation) affect measurement but not recognition Requirements to satisfy ongoing eligibility criteria (including revalidation) affect both recognition and measurement Page 8 Proprietary and Copyrighted Information
Social Benefits Obligating Event - Respondents support for options Page 9 Proprietary and Copyrighted Information
Revenue and Non-Exchange Expenditure Current 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) Assessment of extent that IFRS15 performance obligation approach can be applied to public sector revenues Address issues identified with application of IPSAS 23 Single CP to address need for common approach between Non-Exchange Revenue and Expenditure (e.g. grants) Page 10 Proprietary and Copyrighted Information
Applying a performance obligation approach to revenue and expense transactions? Applying the IPSAS 15 performance based approach in the public sector Page 11 Proprietary and Copyrighted Information
Revenue reporting options Current classification Exchange Non-Exchange Potential re-classification Performance Obligation Non-Performance obligation Transaction categories Category C Category B Category A Converged IFRS 15 Stretched Performance Obligation Approach? IPSAS 23 based standard Description (in summary) Sale of goods or services on commercial terms Satisfaction of performance obligations but does not include all the characteristics of a commercial based transaction No performance obligations Example e.g. fees from professional services provided at market rates e.g. fees in exchange for the delivery of subsidised health services e.g. taxes, transfers, grants with no restrictions over use Page 12 Proprietary and Copyrighted Information
IPSAS 23 implementation issues Global standard high level Implementation Guidance on main tax types more detail required? Subsequent measurement not covered Exchange/non-exchange classification Transfers lumpy grants : Stipulations - time requirements Capital grants Options: Stipulations - time as a condition? Other Resources and Other Obligations? Disclosure Page 13 Proprietary and Copyrighted Information
Non-Exchange Expenditure No current IPSAS Non-exchange expenses outside Social Benefits project e.g. Defense, Education, and Health and expenditure Consistency / links with Social Benefits and existing IPSASs Three potential approaches: Expanded IPSAS 19 Public sector 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 14 Proprietary and Copyrighted Information
Heritage Project overview Provide requirements and guidance to replace provisional guidance in IPSAS 17 Consultation Paper as initial step Heritage items defined Possible items included considered using UNESCO conventions Discussion in terms of Conceptual Framework (CF) asset and liability definitions CF impact on recognition, measurement and disclosure Page 15 Proprietary and Copyrighted Information
Heritage Potential Preliminary Views Special characteristics do not prevent Heritage items meeting definition of asset in CF Should be recognised in Statement of Financial Position if meet CF recognition criteria Historical cost, replacement cost, restoration cost and market value could all be appropriate measurement bases Special characteristics do not of themselves give rise to liabilities Presentation requirements to hold entity accountable and help decision making (e.g. on allocations) Page 16 Proprietary and Copyrighted Information
Leases Existing IPSAS 13 based on IAS 17 IFRS convergence project responding to new IFRS 16 Changes lessee recognition model More on balance sheet fiscal impact? No change not an option mixed groups Public Sector needs symmetry between lessee and lessor accounting lessor / lessee arrangements common e.g. property Current Board view that IFRS 16 lessor accounting inappropriate for public sector: other models under consideration including right of use model Page 17 Proprietary and Copyrighted Information
Lessor accounting Alternative options Lessor Accounting Context of Development of Options New IPSAS 32 IPSASB Service lessor Concessions: guidance? Grantor IPSASB Conceptual Framework IPSASB Rules of the Road Page 18 Proprietary and Copyrighted Information
Questions, discussion & further information Visit our webpage http://www.ipsasb.org/ Or contact us by e-mail : IPSASB Chair: iancarruthers@ipsasb.org Technical Director: johnstanford@ipsasb.org Page 19 Proprietary and Copyrighted Information