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IPSAS and IFRS

IPSAS and IFRS. A HIGHLIGHT OF THE DIFFERENCES. Scope. IPSAS . IFRS. IPSAS applies to International organizations Public sectors National government Local government Other government agencies and commissions. IFRS applies to Government Business Entities Private sectors.

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IPSAS and IFRS

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  1. IPSAS and IFRS A HIGHLIGHT OF THE DIFFERENCES

  2. Scope IPSAS IFRS IPSAS applies to • International organizations • Public sectors • National government • Local government • Other government agencies and commissions IFRS applies to • Government Business Entities • Private sectors

  3. Basis of Accounting IPSAS IFRS IPSAS allows • Accrual Basis; or • Cash Basis IFRS strictly uses • Accrual basis

  4. Financial Statement Presentation IPSAS 1 IAS 1 • A complete set of financial statements comprises: • Statement of financial position; • Statement of financial performance; • Statement of changes in net assets; • Cash flow statement; • A comparison of budget and accrual amounts; • Notes to FS • Does not prohibit the use of extra-ordinary items • A complete set of financial statements comprises: • Statement of financial position; • Income statement • Statement of changes in equity; • Cash flow statement; • Statement of comprehensive income; • Notes to FS • Prohibits the use of extra-ordinary items

  5. Cash Flow Statement IPSAS 2 IAS 7 • Changes in cash and cash equivalents are classified into operating, investing and financing activities. • Operating activities can be presented using either direct or indirect method. • If direct method is used, IPSAS encourages entities to disclose a reconciliation of Surplus/Deficit and Cash flows from operations • Changes in cash and cash equivalents are classified into operating, investing and financing activities. • Operating activities can be presented using either direct or indirect method.

  6. Accounting Policies, Estimates and Errors IPSAS 3 IAS 8 • Changes in accounting estimates are treated currently and prospectively • Changes in accounting policy are accounted for retrospectively • Correction of errors are accounted for retrospectively • Retrospective application requires adjustment of Accumulated Surplus/Deficit • Changes in accounting estimates are treated currently and prospectively • Changes in accounting policy are accounted for retrospectively • Correction of errors are accounted for retrospectively • Retrospective application requires adjustment of Retained Earnings

  7. Effects of Changes in Foreign Exchange Rates IPSAS 4 IAS 21 • Foreign currency gains and losses are recognized in surplus/deficit. • Foreign currency translation adjustments are recognized as a separate component of net assets. • Foreign currency gains and losses are recognized in profit or loss. • Foreign currency translation adjustments are recognized as part of other comprehensive income.

  8. Borrowing costs IPSAS 5 IAS 23 Two accounting treatments are allowed: • Expense model (benchmark treatment); and • Capitalization model (alternative treatment) • Borrowing costs are recognized as expense when incurred. • Borrowing costs related to a qualifying asset shall be included as part of the cost of the asset.

  9. Separate and Consolidated Financial Statements IPSAS 6 IAS 27 and IFRS 10 • Allows entities to use the equity method to account for controlled entities in the separate financial statements of controlling entities. • Requires controlling entities to disclose a list of significant controlled entities in consolidated financial statements. • Requires investment in subsidiary to be accounted for using the cost method in the separate financial statements. • IAS 27 does not require this disclosure.

  10. Investment in Associates/ Joint Venture IPSAS 7 and 8 IFRS 11 • Investments in associates are accounted for using the equity method. • Investments in joint ventures are accounted for using: • Equity method; or • Proportionate consolidation. • Investments in associates are accounted for using the equity method. • Investments in joint ventures are accounted for using equity method

  11. Revenue IPSAS 9 IAS 18 • Title- Revenue from Exchange Transactions • Revenue includes those that arise from ordinary activities and gains. • Title- Revenue • Revenue is limited only to those that arise from ordinary activities.

  12. Construction Contracts IPSAS 11 IAS 11 • IPSAS 11 makes it clear that the requirement to recognize an expected deficit on a contract immediately it becomes probable that contract costs will exceed total contract revenues applies only to contracts in which it is intended at inception of the contract that contract costs are to be fully recovered from the parties to that contract. • Recognize loss immediately when the total estimated cost exceeds the total revenue from the contract.

  13. Inventory IPSAS 12 IAS 2 • Inventories are required to be measured at the lower of cost and net realizable value. • Inventories are required to be measured at the lower of cost and current replacement cost where they are held for: • Distribution at no charge; or • Consumption in the production process of goods to be distributed at no charge • Inventories are required to be measured at the lower of cost and net realizable value.

  14. Leases IPSAS 13 IAS 17 • Leases are classified into: • Operating Lease; or • Finance Lease • Income or expense related to operating lease is recognized on a straight line basis over the lease term • Leases are classified into: • Operating Lease; or • Finance Lease • Income or expense related to operating lease is recognized on a straight line basis over the lease term • Exposure draft on Leases is expected to change the accounting for leases.

  15. Events after Reporting Date IPSAS 14 IAS 10 • Events after the reporting date are classified into • Adjusting event; and • Non-adjusting event • IPSAS 14 notes that where the going concern assumption is no longer appropriate, entity should determine the impact of this change on the carrying value of assets and liabilities recognized in the financial statements • Events after the reporting date are classified into • Adjusting event; and • Non-adjusting event • If going concern assumption is no longer appropriate, IFRS 5 shall be applied (PIC)

  16. Financial Instruments IPSAS 28, 29 and 30 IFRS 9 • Financial assets are classified into: • Financial assets at FVPL • Available for sale • Held to maturity • Loans and receivables • Financial assets are classified into: • Financial assets at FVPL • Financial assets at amortized costs

  17. Investment Property IPSAS 16 IAS 40 • Investment property is a real property that is held by an entity for capital appreciation, for rental, or both. • Property held to provide a social service and which also generates cash inflows is not an investment property. • Investment property is a real property that is held by an entity for capital appreciation, for rental, or both.

  18. Property, Plant and Equipment/ Intangible Assets IPSAS 17 and IPSAS31 IAS 16 and IAS 38 • IPSAS does not require or prohibit the recognition of heritage assets. • PPE and Intangible assets may be accounted for using either: • Cost model; or • Revaluation model • Revaluation increases and decreases are offset on a class of asset basis • No guidance is provided on how to account for heritage assets. • PPE and Intangible assets may be accounted for using either: • Cost model; or • Revaluation model • Revaluation increases and decreases may only be matched on an individual item basis

  19. Agriculture IPSAS 27 IAS 41 • The definition of “agricultural activity” includes transactions for the distribution of biological assets at no charge or for a nominal charge. • IPSAS 27 requires entities to provide a quantified description of each group of biological assets. • IAS 41 does not deal with such transactions. • IAS 41 encourages, but does not require, entities to provide a quantified description of each group of biological assets

  20. Segment Reporting IPSAS 18 IFRS 8 • IPSAS 18 does not specify quantitative thresholds that must be applied in identifying reportable segments. • Guidance is provided on which segments are reportable.

  21. Impairment of non-cash generating assets IPSAS 21 IAS 36 • IPSAS 21 deals with the impairment of non-cash-generating assets. • IPSAS 21 measures the value in use of a non-cash-generating asset as the present value of the asset’s remaining service potential using a number of approaches. • Impairment testing is applied to individual assets. • IAS 36 deals with the impairment of non-financial assets. • IAS 36 measures the value in use of a non financial asset as the present value of future cash flows from the asset. • IAS 36 uses the concept of cash generating unit.

  22. Impairment of cash generating assets IPSAS 26 IAS 36 • IPSAS 26 does not apply to cash-generating assets carried at revalued amounts. at the reporting date. • Goodwill is outside the scope of IPSAS 26. • IAS 36 does not exclude from its scope assets carried at revalued amounts. • IAS 36 includes extensive requirements and guidance on the impairment of goodwill.

  23. IPSAS 23- Revenue from Non-exchange transactions • Non-exchange transactions are transactions wherein an entity either receives value from another entity without directly giving approximately equal value in exchange. • An entity shall recognize an asset in respect of taxes when the taxable event occurs and the asset recognition criteria are met. • Taxation revenue shall be determined at a gross amount. It shall not be reduced for expenses paid through the tax system

  24. IPSAS 24- Presentation of Budget Information in FS • An entity shall present a comparison of the budget amounts either as a separate additional financial statement or as additional budget columns in the financial statements currently presented in accordance with IPSAS

  25. Service Concession Arrangements IPSAS 32- Grantor IFRIC 12- Operator • The grantor recognizes a service concession asset and either a financial liability or unearned revenue. • A financial liability is recognized to the extent that the grantor has an unconditional contractual right to pay cash or another financial asset. • An unearned revenue is recognized to the extent that the grantor gives the grantor a right to charge users for the public service. • The operator either recognizes a financial asset or an intangible asset. • A financial asset is recognized to the extent that the operator has an unconditional contractual right to receive cash or another financial asset. • An intangible asset is recognized to the extent that the operator receives a right or license to charge users for the public service.

  26. Cash basis • Basic financial statements shall include: • Statement of Cash Receipts and Payments • Explanatory Notes • Comparison of Budget and Actual • IPSAS encourages entities to disclose accrual basis information.

  27. -End of Presentation- THANK YOU!!!

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