The International Public Sector Accounting Standards Board® (IPSASB®) has released a Consultation Paper (CP), Accounting for Revenue and Non-exchange Expenses.
The IPSASB seeks constituent views on potential recognition and measurement approaches for revenue and non-exchange expenses. Conceptually robust and understandable accounting treatments of taxes, transfers and other major sources of public sector income as well as expenses on universally accessible and collective services are fundamental to high-quality financial reporting. The publication of IFRS 15, Revenue from Contracts with Customers, by the International Accounting Standards Board, has provided the IPSASB with an impetus to consider its approaches both to commercial transactions and public sector specific transactions. The CP also considers recognition approaches for significant non-exchange expense transactions, such as the provision of education, healthcare and defense.
“This Consultation Paper is an important first step in addressing some key IPSAS implementation issues while seeking to maintain IFRS convergence,” said Ian Carruthers, IPSASB Chair. “It also provides an opportunity to address gaps in literature that have been identified in accounting for non-exchange expenses and the measurement of non-contractual receivables and non-contractual payables—such as taxes, fines and licenses.”
The CP proposes updating existing IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers), to address issues identified by users, as well as to replace current IPSAS dealing with revenue arising from exchange transactions and construction contracts with an IPSAS based on IFRS 15.
For non-exchange transactions with performance obligations the CP discusses two potential revenue recognition approaches.
(a) Exchange/non-exchange approach – Under this approach the CP identifies five options for updating IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers); and
(b) The Public Sector Performance Obligation Approach for Revenue – Under this approach revenue would be recognized when identified performance obligations have been fulfilled, drawing upon the approach in IFRS 15 adapted for the public sector.
The CP discusses two potential approaches to the recognition of non-exchange expenses.
(a) The Extended Obligating Event Approach – this approach would rely on the IPSASB’s Conceptual Framework to determine when a resource provider has a liability and expense; and
(b) The Public Sector Performance Obligation Approach for Expenses – this approach would mirror the equivalent approach for revenue, and adapt it for non-exchange expense transactions.
The CP also discusses:
- Implementation issues regarding the recognition of revenue from capital grants and services in-kind;
- Initial and subsequent measurement of non-contractual receivables; and
- Subsequent measurement of non-contractual payables.
How to Comment
To access the Consultation Paper and its summary At-a-Glance document, or to submit a comment, visit the IPSASB website, www.ipsasb.org. Comments on the Consultation Paper are requested by January 15, 2018. The IPSASB encourages IFAC® members, associates, and regional accountancy organizations to promote the availability of this Consultation Paper to their members and employees.
About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through the development of accrual-based International Public Sector Accounting Standards® (IPSAS®) and other guidance for use by governments and other public sector entities. It receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.
About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.
