The International Public Sector Accounting Standards Board (IPSASB) has released for comment the fourth Exposure Draft (ED) related to its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. The Conceptual Framework continues to be the IPSASB’s key strategic objective and is of fundamental importance to the future of global public sector standard setting.

Conceptual Framework Exposure Draft 4, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Presentation in General Purpose Financial Reports, further develops and modifies the conceptual approach highlighted in the Consultation Paper (CP) published in 2012 and reflects the IPSASB’s consideration of the responses to that CP. It builds on the first four chapters of the Conceptual Framework, which were published last January.

The ED describes presentation as the selection, location and organization of information that is displayed and disclosed in General Purpose Financial Reports (GPFRs). GPFRs include both financial statements and other reports providing additional information that enhances, complements, and supplements the financial statements.

The ED also describes display and disclosure, and identifies three presentation decisions—information selection, location, and organization. Presentation decisions are made at two levels:

• High-level decisions that may result in development of a new report, movement of information between reports, or the amalgamation of existing reports; and
• Detailed decisions related to information selection, location, and organization within a report.

Presentation decisions are made:

• In response to the needs of users for information about economic or other phenomena;
• To support the financial reporting objectives; and
• Through application of the qualitative characteristics and constraints on information in financial reports.

Presentation concepts are strongly linked to other parts of the Conceptual Framework and the ED explains those linkages.

“This Exposure Draft is a further step in the development of a Conceptual Framework that reflects public sector circumstances and, when finalized, will underpin IPSASB’s standard-setting activities for many years to come,” said IPSASB Chair Andreas Bergmann. “It proposes presentation concepts applicable to all GPFRs. This is the first time that an international standard setter has developed presentation concepts applicable to both financial statements and additional information and reports that enhance, complement, and supplement the financial statements. Therefore this ED explores new ground and we strongly encourage all stakeholders to submit comments on the proposals in it.”

How to Comment
To access the Exposure Draft and the At-a-Glance document, which provides a summary of the Exposure Draft, or to submit a comment, visit the IPSASB website.

Comments on the Exposure Draft are requested by August 15, 2013. The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of this document to their members and employees.

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Thank you for subscribing to the eNews from the International Public Sector Accounting Standards Board (IPSASB). This edition provides a summary of decisions made at the IPSASB’s meeting held March 11-14, 2013, in Abu Dhabi. Please go to the IPSASB Meeting Page for the meeting highlights and relevant agenda items.

1. Conceptual Framework  ED 4, Presentation in General Purpose Financial Reports
2. The Preface to the Conceptual Framework
3. Financial Statement Discussion and Analysis
4. Reporting on the Long-Term Sustainability of an Entity’s Finances
5. Public Sector Combinations
6. First-Time Adoption of Accrual Basis IPSASs
7. Next Meeting
8. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

1.     Conceptual Framework ED 4, Presentation in General Purpose Financial Reports

The IPSASB approved the Conceptual Framework–Exposure Draft 4 (CF–ED4), Presentation in General Purpose Financial Reports, which describes presentation, display, and disclosure. It proposes an approach to presentation of decisions involving a two-level application of the concepts developed in chapters 1–4 of the Conceptual Framework.

In finalizing CF–ED4, the IPSASB confirmed:

• The description of key terminology, including presentation, display, and disclosure; and
• The decision-focused approach to presentation, involving decisions on information selection, location, and organization.

The IPSASB also confirmed application of both the qualitative characteristics and constraints on information included in general purpose financial reports (GPFRs) when making presentation decisions. The IPSASB also confirmed its decision not to include specific presentation objectives, relying on the direct application of the objectives of financial reporting identified in chapter 2 of the Framework.

The ED will have a four-month exposure period. The ED and the At-a-Glance document, which provides a summary of the ED, will be published shortly.

2.     The Preface to the Conceptual Framework

The IPSASB also discussed the approach to incorporation of the Preface into the Conceptual Framework. While it confirmed that the Preface should be included in the Framework, it decided to defer approval and publication until the Framework is being finalized. This will allow the linkages between the characteristics identified in the Preface and the concepts in the Framework chapters to be made more explicit.

The IPSASB reviewed the draft Preface presented by staff and gave directions for amendments to some of the sections, particularly those dealing with involuntary transfers and non-exchange transactions, and the longevity of the public sector.

3.     Financial Statement Discussion and Analysis

Consistent with a decision earlier in the meeting to issue non-authoritative guidance for pronouncements relating to general purpose financial reports (GPFRs), the IPSASB confirmed that the draft International Public Sector Accounting Standard (IPSAS), Financial Statement Discussion and Analysis, which has been developed from Exposure Draft 47, should be revised to become a Recommended Practice Guideline (RPG).

The IPSASB reviewed the current draft, acknowledging that specific wording may change due to the decision to change its status, and gave directions for amendments. A draft RPG with a Basis for Conclusions will be considered for approval at the June 2013 meeting.

4.     Reporting on the Long-Term Sustainability of an Entity’s Finances

The IPSASB reviewed a draft Recommended Practice Guideline (RPG) 1, Reporting on the Long-Term Sustainability of an Entity’s Finances, which has been developed from Exposure Draft 46 and provided directions for amendments. In particular, it directed staff to revise the section relating to the dimensions of long-term fiscal sustainability to directly refer to the dimensions of service, revenue, and debt and to explain that there are two aspects to each dimension: capacity and vulnerability. Capacity is the ability of the entity to influence or change the service, revenue, or debt dimensions, and vulnerability is the extent of the entity’s dependence on factors outside its control or influence. The draft RPG will be revised and presented at the June 2013 meeting with a view to approval.

5.     Public Sector Combinations

The IPSASB considered the responses received to Consultation Paper (CP), Public Sector Combinations. The CP was issued in June 2012 and received 26 responses.

The IPSASB agreed that the project should continue with the scope proposed in the CP, which includes guidance on (a) the de-recognition and recognition of assets for the transferor, (b) the definition of an operation, (c) disclosure requirements for combining entities relating to the going concern basis, (d) subsequent measurement requirements similar to that included in International Financial Reporting Standard (IFRS) 3, Business Combinations, and (e) distinguishing between asset acquisitions, entity and operation acquisitions, and amalgamations using relevant text from IFRS 3.

The IPSASB had an initial discussion about whether the approach used in the CP of distinguishing acquisitions and amalgamations, with a further distinction for public sector combinations not under common control and under common control, is appropriate. Staff was directed to outline the possible consequences of such distinctions for review at its June 2013 meeting. The IPSASB will also conduct a detailed analysis of the responses to the CP and preliminary views during that meeting.

6.     First-Time Adoption of Accrual Basis IPSASs

The IPSASB discussed an analysis of the transitional provisions related to IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers), IPSAS 25, Employee Benefits, and IPSAS 32, Service Concession Arrangements: Grantor, and provided directions to staff on various aspects including categorization. The IPSASB agreed to adopt a transition period of three years as a general guideline, acknowledging that this could be changed at the standards level if determined appropriate.

At the June 2013 meeting, an analysis of the transitional provisions for the financial instruments standards will be considered. The IPSASB thanks Ernst & Young for providing staff support up to this point in the project. The South African Accounting Standards Board is now providing staff resources for the project and will be developing an exposure draft for review, with a view to approval in September 2013.

7.     Next Meeting

The next IPSASB meeting will be held in Toronto, Canada, on June 17–20, 2013. Members of the public may register to observe the meetings. Registration will close one week before the first day of the meeting.

8.  World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy, in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this can’t-miss IFAC event, held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will set the tone for the future.

The WCOA also affords an unparalleled opportunity for organizations and firms to share their projects and visions with the world by taking advantage of one of our carefully crafted sponsorship packages. There are numerous options so you’ll be able to select the one that best suits your organization’s unique strategy and goals. For more information, please contact info@wcoa2014rome.com or Dimarco@wcoa2014rome.com. 

The International Federation of Accountants (IFAC), the global organization for the accountancy profession with 172 members and associates in 129 countries, today applauded the release of the proposed International Integrated Reporting Framework by the International Integrated Reporting Council (IIRC). The Framework is expected to be a critical tool for businesses as they create integrated reports and drive integrated thinking in their organizations.

Integrated reporting is the next step in the evolution of corporate reporting and communications, helping organizations to communicate a clear and candid picture of their performance to investors.

“The accountancy profession plays a vital facilitating role in bringing integrated reporting to more organizations, and the Framework will help guide organizations and professional accountants in this process,” said IFAC President Warren Allen, who is also a member of the IIRC Council. “Feedback from individual accountants and the profession on the proposed Framework is critical.”

IFAC has been a proactive participant in the development of the Framework, and is a co-founder of the IIRC. In addition to Mr. Allen serving on the IIRC Council, Ian Ball, former IFAC CEO and current principal advisor, chairs the IIRC Working Group. IFAC also has a staff member who has been seconded to the IIRC on a full-time basis.

The IIRC is asking all stakeholders to provide feedback on the International Integrated Reporting Framework during its public consultation period, which closes July 15, 2013. The Framework has been released in English but will also be available soon in additional languages.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Presentation given to the Federation of Accounting Professionals in Thailand during a seminar on the IFAC Statements of Membership Obligations (SMOs). The presentation includes information what the SMOs are, their importance, the November 2012 revisions, and what organizations need to understand and do to apply the SMOs.

Small- and medium-sized entities (SMEs) might think that sustainability is only relevant to large companies. Maybe they think they cannot afford to be sustainable, that measuring and managing environmental performance amounts to a costly and unnecessary burden. Moreover their accountants, both those employed by the business (accountants in business) and those providing services to the business (accountants in practice), will tell you it is a hard sell getting SMEs to embrace sustainability. However, SMEs that integrate sustainability into their core business strategy can benefit from lower costs, reduced risk, and new opportunities. And their accountants, typically operating in small- and medium-sized practices (SMPs), can play a key role in their journey.

SMEs and the Benefits of Sustainability

SMEs are crucially important to the health and stability of the global economy: they account for over 95% of all businesses and for the majority of private sector gross domestic product (GDP), wealth and employment creation, and social and environmental impacts. Meanwhile, there is immense pressure on the natural environment and a recognition that finite resources are fast depleting. Today, SMEs are increasingly being faced with pressure to measure and manage their impact on the environment. They are an integral part of the supply chain where there is a growing demand for sustainability management both from customers and suppliers, especially for those SMEs seeking to secure contracts with governments or larger companies. SMEs also need to ensure they have access to the resources they need to be able to continue offer their products and services in the future.

That said, many SMEs may still feel they can delay addressing sustainability issues. Our global SMP poll indicates there are other more urgent issues preoccupying businesses, including economic concerns and keeping up with new standards, prompting sustainability to slide down their list of priorities. This may explain why few SMPs are presently offering sustainability services. But in the longer term, the sustainability issue is here to stay.

The good news is that there is growing evidence that sustainability initiatives, such as those to reduce an SME’s carbon footprint, can also help improve their bottom line. SMEs of all shapes and sizes—for profits and not-for-profits, public or private, across all industrial sectors—stand to yield significant benefits from adopting sustainable business practices. The initial cost of integrating sustainability into the core business strategy, and reporting on it, can be more than offset by cost savings, reduced risk, positive brand association, and the ability to meet consumer, investor, and supplier demand for environmentally conscientious products and services. In this way, the initial cost is more an investment.

Opportunities for SMPs

Accountants working in SMEs can help their employers at each step of the way, from advising on the costs/benefits of behavioral changes aimed at reducing waste, to investment in new equipment and alternate sources of energy, to developing a comprehensive environmental management system (EMS). However, many SMEs lack the capability to this without outside help. They will likely seek the help of someone they trust, their accounting firm, a demand that can generate new revenue opportunities for SMPs. But first SMEs need to know that they can expect assistance of this nature from their accountants.

Given that SMEs are keen to realize the financial benefits of adopting more sustainable practices, a starting point for SMPs might be to offer to help their clients implement the plan-do-check-act method for the control and continuous improvement of processes and products. This advisory service could include improving business opportunities and creating efficiencies, identifying the risks to cash flow that social, economic, and environmental change will present, and ensuring that clients or employers take advantage of the cost reductions, minimize any cost increases, and maximize the potential revenue by adopting business strategies that identify and address those sustainability issues that are most relevant to their particular business circumstances. In addition, SMPs might wish to encourage their SME clients or employers to have an EnviroReady Report, an engagement based on ISRS 4400 that confirms that the business has an environmental management system (EMS) in place that meets the requirements in ISO 14001:2004.

Some accountants might also help SMEs do some form of sustainability reporting, such as the Global Reporting Initiative’s Level C. They could employ a step-by-step approach of making a public commitment to take action, assessing the business’s impact, setting targets for reducing impact, acting to reduce impact, and publishing the business’s policies and actions. Some SMPs are already helping their clients to develop metrics and the systems needed to capture and report on the metrics. If reporting is deemed valuable, SMPs could progressively do more, culminating in getting some form of assurance on what the client/employer reports, perhaps using the IAASB’s ISAE 3000 series of engagement standards, such as ISAE 3410 for greenhouse gas emissions.

Initial Steps in Offering a Sustainability Service

An ACCA report suggests that SMPs take the following steps to ensure they have the prerequisite expertise to offer a sustainability service:

1. Build partnerships—SMPs should establish collaboration with local environmental sustainability experts in order to gain local access to credible knowledge.

2. Gain experience—This begins in the SMP’s own business. Practitioners should review the environmental sustainability of their own business and then use that valuable experience to have rounded, relevant conversations, based on genuine experience, with their clients.

3. Seek information—Practitioners should familiarize themselves with information sources that they could recommend to others or use to broaden their own knowledge.

4. Formalize commitment—Where appropriate, practitioners should formalize their commitment to offering environmental sustainability advice through marketing and awareness raising in newsletters, their documentation, and website.

Ultimately, offering a sustainability service can help SMPs both add value to the services they offer and help their clients/employers improve the way they run their businesses. Applying the same principles to the practice itself can help accountants improve the way they run their own businesses as well. Does your practice offer a sustainability service? If so, we’d love to hear about it. Please describe your experience and any advice you would give.

Thank you for signing up to receive eNews from the International Ethics Standards Board for Accountants (IESBA). This edition of IESBA eNews provides a summary of decisions made at the IESBA’s meeting held March 11-13, 2013, in New York, USA. See the Meeting Page for the meeting highlights, including a podcast summary, and agenda papers.

IN THIS ISSUE:

1. Responding to a Suspected Illegal Act
2. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client
3. Review of Part C of the Code
4. Structure of the Code
5. Definition of Those Charged with Governance
6. Emerging Issues and Outreach
7. Non-Assurance Services
8. Next Meetings
9. EC Statutory Audit Directive vs. IESBA Code: FEE Compares Independence Requirements
10. IESBA is Hiring
11. 2013 IESBA Handbook
12. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

1. Responding to a Suspected Illegal Act

The IESBA considered the significant comments received from over 70 respondents on its Exposure Draft (ED), Responding to a Suspected Illegal Act. Topics discussed included: disclosure of a suspected illegal act to an appropriate authority; disclosure to the external auditor; right with an expectation to disclose to an appropriate authority; the “public interest” reporting test and escalation threshold; the requirement to confirm or dispel the suspicion; types of suspected illegal acts to be disclosed; and the interaction of the proposed standard with the International Standards on Auditing (ISAs).

The IESBA will continue its consideration of key issues and future actions at its June 2013 meeting.

2. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client

The IESBA received an update on the project to review the long association provisions in Section 290 of the Code of Ethics for Professional Accountants (the Code) to ensure that they continue to provide robust and appropriate safeguards against the familiarity and self-interest threats arising from long association with an audit client. Among other matters, the IESBA discussed the approach to research into the partner rotation provisions in major jurisdictions and canvassing the views of stakeholders on the threats associated with long association.

3. Review of Part C of the Code
The IESBA approved a proposal to commence a project to review Part C of the Code addressing professional accountants in business (PAIBs) to ensure that the provisions in that part of the Code are robust and remain appropriate. Phase I of the project will review Sections 300, 320, 330, and 340 of the Code. This phase will, in particular, address pressure by superiors and others to engage in unethical or illegal acts, the responsibility of PAIBs to produce financial reports that are faithful representations of the economics of transactions, and associated matters. Phase II of the project will address Section 350, which is related to facilitation payments and bribes. The IESBA will discuss the project further at its June 2013 meeting.

4. Structure of the Code

The IESBA considered draft terms of reference for, and an initial status report from, the working group formed to advise the Board on ways to improve the readability, understandability, and accessibility of the Code. Among other matters, the IESBA discussed the objectives, scope, and timing of the initiative, as well as the approach to the work. The board agreed that careful thought should be given to distinguishing clearly between options that could be considered on a short term basis and longer term options that could address a more fundamental review of the structure of the Code. The board asked the working group to explore these options and to undertake the research to support the way forward.

5. Definition of Those Charged with Governance

The IESBA considered significant comments received on its ED of a proposed change to the definition of the term “those charged with governance.” The IESBA agreed in principle to amend the proposed definition in the light of respondents’ significant comments. The IESBA will consider the final definition for approval at its June 2013 meeting after consulting with its Consultative Advisory Group (CAG) on the meaningful ED comments in April 2013.

6. Emerging Issues and Outreach

The IESBA agreed to the establishment of an Emerging Issues and Outreach Working Group to advise the board on emerging issues and international developments of relevance to the IESBA’s work, and on the board’s strategy for outreach. The IESBA will consider draft terms of reference for the Working Group at its June 2013 meeting.

7. Non-Assurance Services

The IESBA received a brief update on the Task Force’s approach to information gathering for purposes of scoping out the project. The IESBA will consider the information gathered and the Task Force’s proposals regarding the scope of the project at the June 2013 IESBA meeting.

8. Next Meetings

Meetings of the IESBA and the IESBA CAG are open to the public. The IESBA CAG will next meet in New York, USA on April 10, 2013. The next IESBA meeting will be held in New York, USA, on June 10–12, 2013.

For more information and to register to attend an IESBA or IESBA CAG meeting as an observer, visit IESBA Meetings  or IESBA CAG Meetings respectively.

9. EC Statutory Audit Directive vs. IESBA Code: FEE Compares Independence Requirements

In a study released in February 2013, the Fédération des Experts Comptables Européens (FEE) compared provisions in the EU frameworks on auditor independence (the 2006 Statutory Audit Directive and the 2002 Recommendation on Statutory Auditor’s Independence in the EU) and the Independence provisions of the IESBA Code.

Among other matters, the study found that the Code is more robust with respect to audits of public interest entities.  In particular, the Code includes strict provisions for those non-audit services that are incompatible with the provision of audit services. The study also found that the Code tackles other matters that may be considered for inclusion in future EU audit legislation.

10. IESBA is Hiring

The IESBA is searching for a technical manager to join its staff team based in New York. Qualified candidates should have experience at the manager or senior manager level in professional practice, a professional accounting body, the office of a public sector auditor, or similar. For a complete job description and required skills and experience, see Working at IFAC. Qualified candidates should send a resume to jobs@ifac.org. 

11. 2013 IESBA Handbook

The IESBA is developing the 2013 Handbook of the Code of Ethics for Professional Accountants. It will contain the final pronouncements addressing breaches of provisions in the Code and conflicts of interest, and the revised definition of “engagement team.” The 2013 Handbook is expected to be released in the second quarter of 2013. For the current edition, see 2012 IESBA Handbook.   

12. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this IFAC event, which is held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will shape the future of the profession.

The WCOA also provides a global platform for organizations and firms to share their projects and visions via various sponsorship opportunities. For more information, please contact info@wcoa2014rome.com or Dimarco@wcoa2014rome.com.