1. IPSASB Update INTOSAI PSC Steering Committee, Brasilia, Brazil
Presented by: Stuart Barr June 9, 2017

2. 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

3. IPSAS 40 Public Sector Combinations: Classification
Amalgamation or Acquisition
Control essential for acquisition, but not conclusive
Economic substance
Consideration
Decision Making
Carrying amounts for amalgamations vs fair value for acquisitions
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

4. Current IPSASB work programme: Key projects 2016 - 2018
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)

5. 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.”

6. 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

7. Non-Exchange Expenses
e.g. Defense, Education and Health expenses, transfers / grants
Non-exchange expenses outside Social Benefits project
No current IPSAS
Consistency / links with Social Benefits and existing IPSASs
Obligating event approach (IPSAS 19 - based)
IFRS15 – performance obligation approach (reverse of revenue)
IPSAS 23 reverse
Three potential approaches:
No obligating event for Collective Goods and Services, or Other Transfers in Kind?
Obligating event limited to transfers /grants to other entities?

8. 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.

9. 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

10. 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

11. 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
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
IPSASB view that IFRS 16 lessor accounting inappropriate for public sector

12. 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

13. Public Sector Specific Financial Instruments
The IPSASB Conceptual Framework
IPSASB policy paper for considering statistical reporting guidelines
IPSASB CP decisions influenced by:
Currency in Circulation
Monetary Gold
IMF quota subscription & Special Drawing Rights
CP Topics
IPSASB initial consideration of responses at June 2017 meeting
Project output not yet determined by IPSASB
Project – Next Steps

14. Public Sector Measurement: Conceptual Framework Measurement Bases
Assets
Liabilities
Historical Cost
Current Value measures
Market Value
Replacement Cost
Net Selling Price
Value in Use
Cost of Fulfilment
Cost of Release
Assumption Price

15. 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

16. 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 – Finalise H

17. Developing the next IPSASB Strategy and Work Plan
IAASB Agenda Item 6
March 2014
Developing the next IPSASB Strategy and Work Plan
Stakeholder outreach 2017
Public consultation 2018
CAG input
PIC advice
PIC and CAG will be consulted and included in entire process, however, most significantly in final advice and ‘approval’
Multi-year Strategy ( ), Work Plan to implement/operationalize Strategy

18. Questions, discussion & further information
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