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INTRODUCTION

Emerging issues in public sector accounting standards PRESENTER- PATRICK ABACHI, HEAD OF SECRETARIAT PSASB-K. INTRODUCTION.

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INTRODUCTION

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  1. Emerging issues in public sector accounting standardsPRESENTER- PATRICK ABACHI, HEAD OF SECRETARIAT PSASB-K

  2. INTRODUCTION In the last decade adoption of IPSAS accrual across the world has gained momentum. Governments and public sector entities are increasingly adopting IPSAS in order to improve transparency and accountability of public funds.

  3. WHY IPSAS? Governments and public sector entities are adopting IPSAS due to the following benefits: • Greater accountability and transparency • Better decision making arising from increased information • Improved efficiency in financial reporting and auditing processes • Data consistency and application resulting from standardisation • Enhanced accounting professionalism in the public sector • Broader economic and social advantages e.g increase in direct investments which translate to more jobs

  4. WHY IPSAS? • Governments and public sector entities are adopting IPSAS due to the following benefits: • International Comparability between Governments and Public sector entities • Government stability through reforms brought about by IPSAS adoption

  5. ADOPTING IPSAS- CONSIDERATIONS • Some of the considerations to make while adopting IPSAS include: • Stakeholder engagement- to gain buy in • Structural and legal transformation • Transformation and change management • Skills capacity • Cost • Technology and infrastructure • Implementation approach- Phased or big bang • External support- private sector, donors, professional firms…. • If these considerations are not well factored, they become challenges.

  6. IPSAS STANDARDS- EMERGING ISSUES • Emerging issues under the international public sector accounting standards are broad. These issues emanate from the standards, public sector gaps/ needs, changes within the global accounting environment, frequent and rapid developments under IFRSs and PFM reforms. • These emerging issues are tackled in detail in the subsequent slides.

  7. IPSAS STANDARDS- EMERGING ISSUES • Below is a classification of these emerging issues: • Adoption of IPSAS within Africa States • New standards • On- going projects • Public sector specific dynamics and developments • Dynamic global financial reporting environment

  8. IPSAS STANDARDS- EMERGING ISSUES Adoption of IPSAS within African States Country Adoption status Implementation date Ghana Partially adopted- Accrual adoption with full roll out expected to take 5 years 2016-2021 Nigeria Partially adopted Each independent state to decide implementation date 2016 Tanzania Completed- Adopted IPSAS for all levels of govt. 2013

  9. IPSAS STANDARDS- EMERGING ISSUES • Adoption of IPSAS within African States • South Africa • Partially adopted- Local government 2009(GRAP). National and provincial entities use modified cash • 2009 • Zambia • Partially adopted • 2016-2020 • Zimbabwe • Planned- To announce IPSAS accrual adoption in 2021 • 2021

  10. IPSAS STANDARDS- EMERGING ISSUES Adoption of IPSAS within African States Kenya Partially adopted- National and County Governments apply IPSAS cash. National government SCs and SAGAs apply IPSAS accrual or IFRS as appropriate. 2014. Full IPSAS accrual adoption scheduled. Source: www.accaglobal.com

  11. IPSAS STANDARDS- EMERGING ISSUES • Adoption of IPSAS within African States CHALLENGES OF IPSAS ADOPTION These challenges have contributed to the slow pace with which IPSAS is being adopted in Africa and globally. • Capacity • Weak internal control environment • Change management • Stakeholder support and government buy in • Legislation which is inconsistent with accrual basis of accounting • Implementation cost and infrastructural challenges

  12. IPSAS STANDARDS- EMERGING ISSUES 2. New Standards • Currently, there are 42 IPSAS standards. For the purpose of this presentation, I have focused on the last three standards with application dates for January 2019 and beyond.

  13. IPSAS STANDARDS- EMERGING ISSUES 2. New Standards- Potential impact • IPSAS 40: Public Sector combinations Before the issuance of this standard by IPSASB, there was lacking literature with relation to organisational restructures in the public sector. This standard will deal with bailouts, nationalisations, restructures and non- exchange amalgamations The standard is expected to provide more clarity in the classification, measurement and disclosure of public sector combinations. The standard is to be applied prospectively from 1st Jan 2019 and no restatement is required

  14. IPSAS STANDARDS- EMERGING ISSUES 2. New Standards- Potential impact • IPSAS 41: Financial Instruments IPSAS 41 replaces IPSAS 29 Financial instruments: Recognition and measurement. The standard aims at improving the relevance of information for financial assets and liabilities. The standard was issued in line with IFRS 9: Financial instruments whose application date was 1st Jan 2018. The standard is expected to address government debt to global capital markets which is quite significant. The standard is applicable from 1st Jan 2022.

  15. IPSAS STANDARDS- EMERGING ISSUES 2. New Standards- Potential impact • IPSAS 42: Social Benefits IPSAS 42 has been the longest running and most challenging standard for the IPSASB- it has taken 16 years. The standard fills a gap in accounting literature that has been lacking over the years. Governments which are under accrual accounting will be required to include a liability on social benefits(benefits relating to retirement, old age, unemployment, disability) in their balance sheet. The standard is applicable from 1st Jan 2022 with earlier adoption permitted.

  16. IPSAS STANDARDS- EMERGING ISSUES 3. On-going projects –Project objectives • Outlined below are some of the ongoing projects that the IPSASB is working on: • Infrastructure assets- The project objective is to research and identify issues preparers have when applying IPSAS 17 to infrastructure assets(such as roads, railways pipelines etc). Informed by this research the aim is to provide additional guidance on accounting for infrastructure assets. (Example of complexity is on cost- benefit analysis of valuation of infrastructure assets where cost is not existent)

  17. IPSAS STANDARDS- EMERGING ISSUES 3. On-going projects –Project objectives • Outlined below are some of the ongoing projects that the IPSASB is working on: • Heritage The project’s objective is to develop accounting requirements for heritage assets. The project seeks to address the gap in the current IPSAS literature relating to accounting for heritage assets which are assets because of their cultural, environmental and historical significance. Discussion of this project to be included in IPSASB’s upcoming meeting. (March 2019). (Complexities arise on measurement of heritage items due to their increasing value over time based on significance)

  18. IPSAS STANDARDS- EMERGING ISSUES 3. On-going projects –Project objectives • Outlined below are some of the ongoing projects that the IPSASB is working on: • Leases: The objective is to issue a new IPSAS on Leases which will be converged with IFRS 16, Leases, to the extent appropriate. An exposure draft was issued and responded to by 30th June 2018. A new standard is expected once the task force at IPSASB addresses all concerns from the respondents.

  19. IPSAS STANDARDS- EMERGING ISSUES 3. On-going projects –Project objectives • Outlined below are some of the ongoing projects that the IPSASB is working on: • Non- exchange expenses: The aim of the project is to develop a standard(s) that provides recognition and measurement requirements applicable to providers of non-exchange transactions, except for social benefits. Currently, there is a standard on non- exchange revenue but none for non- exchange expenses which are quite significant in the public sector.

  20. IPSAS STANDARDS- EMERGING ISSUES 3. On-going projects –Project objectives • Outlined below are some of the ongoing projects that the IPSASB is working on: • Revenue: The aim of the project is to develop one or more IPSASs covering revenue transactions (exchange and non-exchange) in IPSASs towards convergence to IFRS 15: Revenue whose application

  21. IPSAS STANDARDS- EMERGING ISSUES 4. Public sector specific dynamic and developments • The accounting profession has developed over the past years and accounting in the public sector has not been left behind due to some of the factors listed below….. • Increased demand for accountability by the citizenry • Increased demand for accountability by donors and financiers • Increased calls for professionalization of the public sector • Increased complexity in reporting of certain elements such as financial instruments, debt, pension liabilities among others (IPSAS should be able to address these trends/ developments)

  22. IPSAS STANDARDS- EMERGING ISSUES 5. Dynamic global financial reporting environmentAnnual reports and financial statements are key sources of information regarding an entity or a government. In the recent past, users of these reports have increasingly demanded to have an overall view of an entity through its financial reports. This has created the need to increasingly disclose non- financial information and link it to the financial information through:-Integrated reporting-Sustainability reporting-Governance reports-Cooperate Social responsibility reports among others

  23. IPSAS STANDARDS- EMERGING ISSUES Q&A

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