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Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency
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Danielle Jeffries IPSAS/IFRS Presentation to Delegates of the Nigerian Government's Petroleum Products Pricing Regulatory Agency

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  1. “Accountants are the linguists of business transactions.” -Danielle O. Jeffries
  2. “We are the translators; We are the truth tellers.” -Danielle O. Jeffries
  3. IFAC (International Federation of Accountants) IAASB (International Assurance and Audit Standards Board) Institute of Chartered Accountants of Nigeria IPSAS (International Public Sector Accounting Standards
  4. International Federation of Accountants (IFAC) is the global organization for the accountancy profession. IFAC has 173 members and associates in 129 countries and jurisdictions, representing more than 2.5 million accountants employed in public practice, industry and commerce, government, and academe. The organization, through its independent standard-setting boards, establishes international standards on ethics, auditing and assurance, accounting education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business. Founded in 1977, IFAC celebrated its 30th anniversary in 2007.
  5. Nigeria’s Implementation Dates Cash Basis IPSAS – January 2014 Accrual Basis IPSAS – January 2016
  6. Membership in IFAC is open to professional accountancy organizations that have an interest in the international accountancy profession and meet the criteria set out in the IFAC Bylaws. Members and associates are required to support IFAC's mission and programs, participate in the IFAC Member Body Compliance Program, and make financial contributions as required by the IFAC Constitution.
  7. A REGULATORY BODY.
  8. I have no use for bodyguards, but I have very specific use for two highly trained certified public accountants. - Elvis Presley
  9. IFAC’s vision is that the global accountancy profession be recognized as a valued leader in the development of strong and sustainable organizations, financial markets and economies.
  10. IFAC’s mission is to serve the public interest by: Contributing to the development, adoption and implementation of highquality international standards and guidance Contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants Promoting the value of professional accountants worldwide Speaking out on public interest issues where the accountancy profession’s expertise is most relevant
  11. IFAC’s mission is to serve the public interest by:  Contributing to the development, adoption and implementation of high-quality international standards and guidance  Contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants  Promoting the value of professional accountants worldwide  Speaking out on public interest issues where the accountancy profession’s expertise is most relevant
  12. IFAC’s values are integrity, expertise and transparency. These values are the guiding principles that IFAC as an organization through its Council, Board, boards and committees, volunteers, and staff seeks to exemplify.
  13. “An urgent focus on improved public sector financial reporting Problems with public sector fiscal management and reporting are not confined to a small handful of European countries, but are widespread. There is a real danger of the current sovereign debt crisis, coupled with the fiscal challenges of aging populations, deepening into a global fiscal crisis. It is therefore more urgent than ever that IFAC act in concert with other key financial and economic institutions to bring about a radical transformation in public financial management. A key element of this transformation is that governments must provide clear, comparable, and comprehensive information regarding the financial consequences of their economic, political and social decisions. As noted in IFAC’s submission to the G-20 in April 2012, this would include: High-quality and timely accrual-based financial reporting Audited financial statements released within six months of year end Budgeting, appropriation, and reporting on the same accrual basis Full transparency in fiscal positions ahead of general elections, ensuring that voters are fully informed, and Limitations on deficit spending, or at least full transparency around the resources for deficit spending and explanations of how, over an economic cycle, fiscal balance will be restored. Much of this information can be provided through high-quality, robust and effective accrual-based financial reporting systems based on International Public Sector Accounting Standards (IPSASs). IFAC will work in partnership with governments and others to support enhanced transparency and accountability in public sector accounting. In particular, the IPSASB will aim to lead the change for longterm reform in this area. The IPSASB will continue to work with the IASB to strengthen cooperation in developing public and private sector accounting standards.” IFAC’s 2013 – 2016 Strategic Plan
  14. First Time Adoption The IPSASB has identified a project on First-time adoption of IPSASs as a high priority towards the implementation of IPSASs. The absence of a standard focusing on the first-time adoption is viewed as a gap in the body of IPSASs. The project proposes to develop an IPSAS that will provide guidance for entities adopting IPSASs for financial reporting for the first time. -International Public Sector Accounting Standards Board
  15. IPSASB The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities - Phase I “IPSASs are developed to apply across countries and jurisdictions with different political systems, different forms of government and different institutional and administrative arrangements for the delivery of services to constituents. The International Public Sector Accounting Standards Board (IPSASB) recognizes the diversity of forms of government, social and cultural traditions, and service delivery mechanisms that exist in the many jurisdictions that may adopt IPSASs. In developing this Conceptual Framework, the IPSASB has attempted to respond to and embrace that diversity.” The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  16. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities The Accrual Basis of Accounting “The Conceptual Framework deals with concepts that apply to general purpose financial reporting (financial reporting) under the accrual basis of accounting. Under the accrual basis of accounting, transactions and other events are recognized in financial statements when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate. Financial statements prepared under the accrual basis of accounting inform users of those statements of past transactions involving the payment and receipt of cash during the reporting period, obligations to pay cash or sacrifice other resources of the entity in the future, the resources of the entity at the reporting date and changes in those obligations and resources during the reporting period. Therefore, they provide information about past transactions and other events that is more useful to users for accountability purposes and as input for decision making than is information provided by the cash basis or other bases of accounting or financial reporting.” The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  17. Accrual Based Accounting and the Matching Principle Accrual based accounting is rooted in the “matching principle.” Revenue is recognized during the period in which it is earned and expenses are recognized during the period in which they are incurred. Example: On January 1st, Petroleum Agency enters into a sales contract to deliver 50 million barrels of oil to Customer B over a 5 month period at 10 million barrels per month commencing February 1st. The sales price per barrel is $100. Payment of $5,000,000,000 for the entire oil contract is made on January 1st. What is the accrual entry for this transaction?
  18. Accrual Based Accounting and the Matching Principle Cash $5,000,000,000 Unearned Oil Revenue $5,000,000,000 Journal entry to record the January 1st cash received as a result of the oil contract entered into with Customer B and the related unearned revenue. Unearned revenue is a balance sheet account which carries a credit balance. It indicates payment in advance for goods or services owed to customers. It reduces equity and is referred to as a “contra asset” account.
  19. Accrual Based Accounting and the Matching Principle On February 1st, the first 10,000,000 barrels of oil is delivered to Customer B. Unearned Oil Revenue Oil Revenue $1,000,000,000 $1,000,000,000 To recognize revenue earned on February 1st and to reduce the contra asset (liability) unearned oil revenue by the same amount. Note: At February 1st, the balance in unearned oil revenue is now $4,000,000,000.
  20. Accrual Based Accounting and the Matching Principle On March 1st, the second 10,000,000 barrels of oil is delivered to Customer B. Unearned Oil Revenue Oil Revenue $1,000,000,000 $1,000,000,000 To recognize revenue earned on March 1st and to reduce the contra asset (liability) unearned oil revenue by the same amount. Note: At March 1st, the balance in unearned oil revenue is now $3,000,000,000.
  21. Accrual Based Accounting and the Matching Principle Customer B asks Petroleum Agency to deliver the remaining 30,000,000 barrels of oil on April 1st. Petroleum Agency wants to keep the customer happy and has the capacity to complete the order. On April 1st 30,000,000 barrels of oil is delivered to Customer B. Unearned Oil Revenue Oil Revenue $3,000,000,000 $3,000,000,000 To recognize revenue earned on April 1st and to reduce the contra asset (liability) unearned oil revenue by the same amount. Note: At April 1st, the balance in unearned oil revenue is now $0 because Petroleum Agency has earned the entire $5,000,000,000 upon delivery of the last 30,000,000 barrels of oil in fulfillment of this contract. Note: Unearned revenue is also called deferred revenue.
  22. Objectives of General Purpose Financial Reporting • The objectives of financial reporting by public sector entities are to provide information about the entity that is useful to users of GPFRs for accountability purposes and for decision-making purposes. • Financial reporting is not an end in itself. Its purpose is to provide information useful to users of GPFRs. The objectives of financial reporting are therefore determined by reference to the users of GPFRs, and their information needs. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  23. Users of General Purpose Financial Reports (GPFRs) Governments and other public sector entities raise resources from taxpayers, donors, lenders and other resource providers for use in the provision of services to citizens and other service recipients. These entities are accountable for their management and use of resources to those that provide them with resources, and to those that depend on them to use those resources to deliver necessary services. Those that provide the resources and receive, or expect to receive, the services also require information as input for decision-making purposes. The legislature (or similar body) are also primary users of GPFRs, and make extensive and ongoing use of GPFRs when acting in their capacity as representatives of the interests of service recipients and resource providers. Therefore, for the purposes of the Conceptual Framework, the primary users of GPFRs are service recipients and their representatives and resource providers and their representatives). The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  24. Users of General Purpose Financial Reports (GPFRs) Organizations that have the authority to require the preparation of financial reports tailored to meet their own specific information needs may also use the information provided by GPFRs for their own purposes―for example, regulatory and oversight bodies, audit institutions, subcommittees of the legislature or other governing body, central agencies and budget controllers, entity management, rating agencies and, in some cases, lending institutions and providers of development and other assistance. While these other parties may find the information provided by GPFRs useful, they are not the primary users of GPFRs. Therefore, GPFRs are not developed to specifically respond to their particular information needs. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  25. Information Provided by General Purpose Financial Reports Financial Position, Financial Performance and Cash Flows Information about the financial position of a government or other public sector entity will enable users to identify the resources of the entity and claims to those resources at the reporting date. This will provide information useful as input to assessments of such matters as: • The extent to which management has discharged its responsibilities for safekeeping and managing the resources of the entity; • The extent to which resources are available to support future service delivery activities, and changes during the reporting period in the amount and composition of those resources and claims to those resources; and • The amounts and timing of future cash flows necessary to service and repay existing claims to the entity’s resources. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  26. Information Provided by General Purpose Financial Reports Financial Position, Financial Performance and Cash Flows Information about the financial performance of a government or other public sector entity will help form assessments of matters such as whether the entity has acquired resources economically, and used them efficiently and effectively to achieve its service delivery objectives. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  27. Information Provided by General Purpose Financial Reports Financial Position, Financial Performance and Cash Flows Information about the cash flows of a government or other public sector entity contributes to assessments of financial performance and the entity’s liquidity and solvency. It indicates how the entity raised and used cash during the period, including its borrowing and repayment of borrowing and its acquisition and sale of, for example, property, plant, and equipment. It also identifies the cash received from, for example, taxes and investments and the cash transfers made to, and received from, other governments, government agencies or international organizations. Information about cash flows can also support assessments of the entity’s compliance with spending mandates expressed in cash flow terms, and inform assessments of the likely amounts and sources of cash inflows needed in future periods to support service delivery objectives. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  28. Budget Information and Compliance with Legislation or Other Authority Governing the Raising and Use of Resources Typically, a government or other public sector entity prepares, approves and makes publicly available an annual budget. The approved budget provides interested parties with financial information about the entity’s operational plans for the forthcoming period, its capital needs and, often, its service delivery objectives and expectations. It is used to justify the raising of resources from taxpayers and other resource providers, and establishes the authority for expenditure of resources. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  29. Explanatory Information/Notes to the Financial Statements Information about the major factors underlying the financial and service delivery performance of the entity during the reporting period and the assumptions that underpin expectations about, and factors that are likely to influence, the entity’s future performance may be presented in GPFRs in notes to the financial statements or in separate reports. Such information will assist users to better understand and place in context the financial and non-financial information included in GPFRs, and enhance the role of GPFRs in providing information useful for accountability and decision-making purposes. Typically, a government or other public sector entity prepares, approves and makes publicly available an annual budget. The approved budget provides interested parties with financial information about the entity’s operational plans for the forthcoming period, its capital needs and, often, its service delivery objectives and expectations. It is used to justify the raising of resources from taxpayers and other resource providers, and establishes the authority for expenditure of resources. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  30. Qualitative Characteristics of Financial Reporting • • • • • • Relevance Faithful Representation Understandability Timeliness Comparability Verifiability The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  31. Pervasive Constraints on Information Included in the GPFRs • • • Materiality Cost Benefit Achieving an appropriate balance between the qualitative characteristics What are some examples of pervasive constraints? – – Information is material if its omission or misstatement could influence the discharge of accountability by the entity, or the decisions that users make on the basis of the entity’s GPFRs prepared for that reporting period. Materiality depends on both the nature and amount of the item judged in the particular circumstances of each entity. Financial reporting imposes costs. The benefits of financial reporting should justify those costs. The costs of providing information include the costs of collecting and processing the information, the costs of verifying it and/or presenting the assumptions and methodologies that support it, and the costs of disseminating it. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities IPSASB Final Pronouncement January 11, 2013
  32. Cash vs. Accrual Accounting Cash Basis Accrual Basis Expenses and revenues are recognized and recorded when they are paid and received respectively. This results in transparency of financial reporting of cash receipts, payments and balances, under the cash basis of accounting. Revenue and expenses are recorded when they are earned and incurred respectively. This places emphasis on revenue, expenses, assets, liability and equity, instead of primarily cash flow. Financials statement under the cash basis of accounting is: Financial statements presented under the accrual basis of accounting are: • The statement of financial position • The statement of financial performance • The cash flow statement • The statement of changes in equity/net assets • The statement of cash receipts and payments. Cash received is treated as revenue for the period in which it is collected. Processes must be in place to record and allocate collections and revenue activity in the appropriate general ledger accounts ie., cash, revenue, unearned (or deferred) revenue, accounts receivable, bad debt expense, allowance for bad debts, etc. The financial data accumulated for purposes of financial reporting does not provide the decision makers (financial statement users) with the necessary tools required for an optimal decision-making process. The financial information provided to users facilitates a more optimal decision-making process. For example: (1) the cost of capital assets is spread over the useful life of these assets, (2) accrual accounting facilitates a more effective and reliable assessment of the health of the government’s finances. Operational requirements are relatively simple. Operational requirements are relatively complex.
  33. Cash vs. Accrual Accounting Cash Basis Accrual Basis Fewer estimates are involved. Accrual accounting requires sophisticated professional judgments regarding physical assets, long term social programs, receivables, debt, etc. Also, accrual accounting generally requires more complex IT systems than cash basis accounting. Cash basis of accounting is relatively simple. The accrual basis is more complex than traditional cash basis accounting. The matching concept applies requiring revenues and expenses be recognized in the period in which are earned or incurred. Links to the traditional budget and revenue systems are relatively strong. Links to the traditional budget and revenue systems are relatively weak. Record only transactions that result in cash receipts and cash payments. Record estimates and non-cash transactions as well. Record only transactions that occur within the accounting period. Record the estimated future effects of current transactions and policy changes. Audit and control is relatively simple. Audit and control is relatively demanding.
  34. IPSAS 10 Financial Reporting in Hyperinflationary Economies Ties Back Into Qualitative Characteristics of Financial Reporting: Relevance, Faithful Representation, Understandability, Timeliness, Comparability, Verifiability
  35. Highest Monthly Inflation Rates in History Country Currency name Month with highest inflation rate Daily inflation rate Time required for prices to double Hungary Hungarian Pengo July 1946 207.19% 15 hours Zimbabwe Zimbabwe Dollar November 2008 98.01% 24.7 hours Yugoslavia Yugoslav Dinar January 1994 64.63% 1.4 days Republika Srpska Republika Srpska Dinar January 1994 64.3% 1.4 days Germany German Papiermark October 1923 20.87% 3.7 days Greece Greek drachma October 1944 17.84% 4.3 days Wikipedia
  36. IPSAS 10 Financial Reporting in Hyperinflationary Economies Objective The objective of this Standard is to prescribe the accounting treatment in the consolidated and individual financial statements of an entity whose functional currency is the currency of a hyperinflationary economy. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  37. IPSAS 10 Financial Reporting in Hyperinflationary Economies Elements of the IPSAS 10 Scope • An entity that prepares and presents financial statements under the accrual basis of accounting shall apply this Standard to the primary financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy. • This Standard applies to all public sector entities other than Government Business Enterprises. • In a hyperinflationary economy, reporting of operating results and financial position in the local currency without restatement is not useful. Money loses purchasing power at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same reporting period, is misleading. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  38. IPSAS 10 Financial Reporting in Hyperinflationary Economies Elements of the IPSAS 10 Scope • This Standard does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgment when restatement of financial statements in accordance with this Standard becomes necessary. Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:  The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.  The general population regards monetary amounts, not in terms of the local currency, but in terms of a relatively stable foreign currency. Prices may be quoted in that currency.  Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.  Interest rates, wages, and prices are linked to a price index.  The cumulative inflation rate over three years is approaching, or exceeds, 100%. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  39. IPSAS 10 Financial Reporting in Hyperinflationary Economies The Restatement of Financial Statements • Prices change over time as the result of various specific or general political, economic, and social forces. Specific forces such as changes in supply and demand and technological changes may cause individual prices to increase or decrease significantly and independently of each other. In addition, general forces may result in changes in the general level of prices, and therefore in the general purchasing power of money. • In a hyperinflationary economy, financial statements are useful only if they are expressed in terms of the measuring unit current at the reporting date. As a result, this Standard applies to the primary financial statements of entities reporting in the currency of a hyperinflationary economy. Presentation of the information required by this Standard as a supplement to unrestated financial statements is not permitted. Furthermore, separate presentation of the financial statements before restatement is discouraged. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  40. IPSAS 10 Financial Reporting in Hyperinflationary Economies The Restatement of Financial Statements • The restatement of financial statements in accordance with this Standard requires the application of certain procedures as well as judgment. The consistent application of these procedures and judgments from period to period is more important than the precise accuracy of the resulting amounts, included in the restated financial statements. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  41. Disclosure Requirements: IPSAS 20 – Related Party Disclosures IPSAS 20 “speaks to” transparency. Objective The objective of this Standard is to require the disclosure of the existence of related party relationships where control exists, and the disclosure of information about transactions between the entity and its related parties in certain circumstances. This information is required for accountability purposes, and to facilitate a better understanding of the financial position and performance of the reporting entity. The principal issues in disclosing information about related parties are (a) identifying which parties control or significantly influence the reporting entity, and (b) determining what information should be disclosed about transactions with those parties. Handbook of International Public Sector Accounting Pronouncements 2013 Edition
  42. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Scope 1. 2. An entity that prepares and presents financial statements under the accrual basis of accounting shall apply this Standard in disclosing information about related party relationships and certain transactions with related parties. This Standard applies to all public sector entities other than Government Business Enterprises. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  43. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Definitions 1. Close members of the family of an individual are close relatives of the individual or members of the individual’s immediate family who can be expected to influence, or be influenced by, that individual in their dealings with the entity. 2. Key management personnel are: a) All directors or members of the governing body of the entity; and b) Other persons having the authority and responsibility for planning, directing, and controlling the activities of the reporting entity. 3. Oversight means the supervision of the activities of an entity, with the authority and responsibility to control, or exercise significant influence over, the financial and operating decisions of the entity. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  44. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Definitions 4. Related party means parties are considered to be related if one party has the ability to (a) control the other party, or (b) exercise significant influence over the other party in making financial and operating decisions, or if the related party entity and another entity are subject to common control. 5. Related party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged. Related party transactions exclude transactions with any other entity that is a related party solely because of its economic dependence on the reporting entity or the government of which it forms part. Remuneration of key management personnel is any consideration or benefit derived directly or indirectly by key management personnel from the reporting entity for services provided in their capacity as members of the governing body, or otherwise as employees of the reporting entity. 6. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  45. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Definitions 4. Significant influence (for the purpose of this Standard) is the power to participate in the financial and operating policy decisions of an entity, but not control those policies. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  46. Disclosure Requirements: IPSAS 20 – Related Party Disclosures A Few Key Concepts
  47. Disclosure Requirements: IPSAS 20 – Related Party Disclosures In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. Substance over form is an accounting principle used "to ensure that financial statements give a complete, relevant, and accurate picture of transactions and events". If an entity practices the 'substance over form' concept, then the financial statements will show the overall financial reality of the entity (economic substance), rather than the legal form of transactions (form). In accounting for business transactions and other events, the measurement and reporting is for the economic impact of an event, instead of its legal form. Substance over form is critical for reliable financial reporting. Handbook of International Public Sector Accounting Pronouncements-2013 Edition; Wikipedia
  48. Disclosure Requirements: IPSAS 20 – Related Party Disclosures EXAMPLES OF SUBSTANCE OVER FORM • • • A lease might not transfer ownership of the leased property to the lessee. In some circumstances, the lessee might nevertheless be required to record the leased item as an asset if the lessee intends to use the asset for a major portion of its useful life, or where the present value of the future lease payments is nearly equal to the fair value of the asset. Although the lessee is not the owner, the lessee may be required to record the asset as being owned by the lessee based on the underlying economic reality. Another example is the situation where a company short of cash sells its machinery to the bank and then leases the same property from the bank. This arrangement is called “sale and leaseback". Although the legal ownership has been transferred to the bank, the underlying economic reality for the company remains the same. Under the substanceover-form principle, the sale and subsequent leaseback are considered one transaction. Similarly, if two companies swap their inventories, then they will not be allowed to record sales because in substance no sales have occurred, even if they have entered into valid enforceable contracts. Wikipedia
  49. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Materiality IPSAS 1 requires the separate disclosure of material items. The materiality of an item is determined with reference to the nature or size of that item. When assessing the materiality of related party transactions, the nature of the relationship between the reporting entity and the related party, and the nature of the transaction, may mean that a transaction is material regardless of its size. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  50. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Disclosure of Control Related party relationships where control exists shall be disclosed, irrespective of whether there have been transactions between the related parties. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  51. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Disclosure of Related Party Transactions In respect to transactions between related parties, other than transactions that would occur within a normal supplier or client/recipient relationship on terms and conditions no more or less favorable than those which it is reasonable to expect the entity would have adopted if dealing with that individual or entity at arm’s length in the same circumstances, the reporting entity shall disclose: a) The nature of the related party relationships; b) The types of transactions that have occurred; and c) The elements of the transactions necessary to clarify the significance of these transactions to its operations and sufficient to enable the financial statements to provide relevant and reliable information for decision making and accountability purposes. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  52. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Examples of situations where related party transactions may lead to disclosures by a reporting entity: (a) Rendering or receiving of services; Example: One of the businesses top customers is closely related to the CEO. (b) Purchases or transfers/sales of property and other assets; Example: A piece of real estate owned by the organization is sold to a related party below market. (c) Transfer of research and development; Example: Research and development rights are transferred to the CEO’s daughter. Not an arms length transaction and needs to be scrutinized and documented in the financials.
  53. Disclosure Requirements: IPSAS 20 – Related Party Disclosures Examples of situations where related party transactions may lead to disclosures by a reporting entity: (d) Finance (including loans, capital contributions, grants whether in cash or in kind, and other financial support, including cost-sharing arrangements) Example: A board member loans the organization money and is repaid.
  54. Disclosure Requirements: IPSAS 30 – Financial Instruments: Disclosures Objective 1. The objective of this Standard is to require entities to provide disclosures in their financial statements that enable users to evaluate: a) The significance of financial instruments for the entity’s financial position and performance; and b) The nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks. 2. The principles in this Standard complement the principles for recognizing, measuring, and presenting financial assets and financial liabilities in IPSAS 28, Financial Instruments: Presentation and IPSAS 29, Financial Instruments: Recognition and Measurement. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  55. Disclosure Requirements: IPSAS 30 – Financial Instruments: Disclosures Definitions The following terms are used in this Standard with the meanings specified: Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  56. Disclosure Requirements: IPSAS 30 – Financial Instruments: Disclosures Definitions Loans payable are financial liabilities, other than short-term trade payables on normal credit terms. Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. A financial asset is past due when a counterparty has failed to make a payment when contractually due. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  57. Disclosure Requirements: IPSAS 30 – Financial Instruments: Disclosures Nature and Extent of Risks Arising from Financial Instruments An entity shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  58. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor A Service Concession Arrangement (SCA) in the public sector generally refers to a negotiated contract which gives an entity the right to do business with government assets, with some specific requirements. Objective The objective of this Standard is to prescribe the accounting for service concession arrangements by the grantor, a public sector entity. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  59. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Why do Service Concession Arrangements exist? In the public sector, SCAs typically occur between a government and a private operator. The private operator makes a lump sum upfront payment or, for a combination of revenue sharing and other compensation, receives the right to take operation of a capital asset (or develop a capital asset and then operate the asset) and collect fees from third parties for a significant period of time. In turn the operator is bound by a set of operating standards and an agreed-upon rate schedule. Typically, the operator is responsible to return the asset at the end of the agreement in a condition similar to that in which it was received. An example of an SCA in the public sector includes the Indiana Toll Road being leased for 75 years for a sum of $3.8 billion.
  60. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor As one would imagine, there are definite benefits to such arrangements. They allow: • The government entity to provide specialized service to the citizens by having qualified private operators manage the operations of the asset; • The government to receive significant compensation that could be used for various purposes such as debt reduction, infrastructure improvements, and enhancing reserves; • Financial risks to be transferred to the operator.
  61. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Definitions The following terms are used in this Standard with the meanings specified: A binding arrangement, for the purposes of this Standard, describes contracts and other arrangements that confer similar rights and obligations on the parties to it as if they were in the form of a contract. A grantor, for the purposes of this Standard, is the entity that grants the right to use the service concession asset to the operator. An operator, for the purposes of this Standard, is the entity that uses the service concession asset to provide public services subject to the grantor’s control of the asset. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  62. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Definitions A service concession arrangement is a binding arrangement between a grantor and an operator in which: 1) The operator uses the service concession asset to provide a public service on behalf of the grantor for a specified period of time; and 2) The operator is compensated for its services over the period of the service concession arrangement. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  63. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Definitions A service concession asset is an asset used to provide public services in a service concession arrangement that: (a) Is provided by the operator which: (i) The operator constructs, develops, or acquires from a third party; or (ii) Is an existing asset of the operator; or (b) Is provided by the grantor which: (i) Is an existing asset of the grantor; or (ii) Is an upgrade to an existing asset of the grantor. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  64. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Disclosure All aspects of a service concession arrangement shall be considered in determining the appropriate disclosures in the notes. A grantor shall disclose the following information in respect of service concession arrangements in each reporting period: (a) A description of the arrangement; (b) Significant terms of the arrangement that may affect the amount, timing, and certainty of future cash flows (e.g., the period of the concession, re-pricing dates, and the basis upon which re-pricing or re-negotiation is determined); (c) The nature and extent (e.g., quantity, time period, or amount, as appropriate) of: (i) Rights to use specified assets; Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  65. Disclosure Requirements: IPSAS 32 – Service Concession Arrangements: Grantor Disclosure (ii) Rights to expect the operator to provide specified services in relation to the service concession arrangement; (iii) Service concession assets recognized as assets during the reporting period, including existing assets of the grantor reclassified as service concession assets; (iv) Rights to receive specified assets at the end of the service concession arrangement; (v) Renewal and termination options; (vi) Other rights and obligations (e.g., major overhaul of service concession assets); and (vii) Obligations to provide the operator with access to service concession assets or other revenuegenerating assets; and (d) Changes in the arrangement occurring during the reporting period. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  66. Disclosure Requirements: IPSAS 22 – Disclosure of Financial Information About the General Government Sector Objective The objective of this Standard is to prescribe disclosure requirements for governments that elect to present information about the general government sector (GGS) in their consolidated financial statements. The disclosure of appropriate information about the GGS of a government can enhance the transparency of financial reports, and provide for a better understanding of the relationship between the market and non-market activities of the government, and between financial statements and statistical bases of financial reporting. Scope A government that prepares and presents consolidated financial statements under the accrual basis of accounting and elects to disclose financial information about the general government sector shall do so in accordance with the requirements of this Standard. Handbook of International Public Sector Accounting Pronouncements; 2013 Edition
  67. Disclosure Requirements: IPSAS 22 – Disclosure of Financial Information About the General Government Sector Definitions • The General Government Sector comprises all organizational entities of the general government as defined in statistical bases of financial reporting. • Government Business Enterprises (GBEs) include both trading enterprises, such as utilities, and financial enterprises, such as financial institutions. GBEs are, in substance, no different from entities conducting similar activities in the private sector. GBEs generally operate to make a profit, although some may have limited community service obligations under which they are required to provide some individuals and organizations in the community with goods and services at either no charge or a significantly reduced charge. Handbook of International Public Sector Accounting Pronouncements ;2013 Edition
  68. Disclosure Requirements: IPSAS 22 – Disclosure of Financial Information About the General Government Sector Disclosures Disclosures made in respect of the GGS shall include at least the following: a. b. c. d. e. f. g. h. i. j. Assets by major class, showing separately the investment in other sectors; Liabilities by major class; Net assets/equity; Total revaluation increments and decrements and other items of revenue and expense recognized directly in net assets/equity; Revenue by major class; Expenses by major class; Surplus or deficit; Cash flows from operating activities by major class; Cash flows from investing activities; and Cash flows from financing activities. The manner of presentation of the GGS disclosures shall be no more prominent than the government’s financial statements prepared in accordance with IPSASs. Handbook of International Public Sector Accounting Pronouncements ;2013 Edition
  69. Mapping of IPSAS to IFRS IPSAS 1 Presentation of Financial Statements IAS 1 Presentation of Financial Statements IPSAS 2 Cash Flow Statements IAS 7 Cash Flow Statements IPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors IAS 8 Accounting Policies, Changes In Accounting Estimates And Errors IPSAS 4 The Effects of Changes in Foreign Exchange Rates IAS 21 The Effects Of Changes In Foreign Exchange Rates IPSAS 5 Borrowing Costs IAS 23 Borrowing Costs IPSAS 6 Consolidated and Separate Financial Statements IAS 27 Consolidate & Separate Financial Statements IPSAS 7 Investments in Associates IAS 28 Investments In Associates IPSAS 8 Interests in Joint Ventures IAS 31 Interests in Joint Ventures IPSAS 9 Revenue from Exchange Transactions IAS 18 Revenue IPSAS 10 Financial Reporting in Hyperinflationary Economies IAS 29 Financial Reporting in Hyperinflationary Economies IPSAS 11 Construction Contracts IAS 11 Construction Contracts
  70. Mapping of IPSAS to IFRS IPSAS 12 Inventories IAS 2 Inventories IPSAS 13 Leases IAS17 Leases IPSAS 14 Events after the Reporting Date IAS 10 Events after the Reporting Date IPSAS 15 Financial Instruments: Disclosure and Presentation (Superseded) IAS 32 Financial Instruments: Disclosure and Presentation IPSAS 16 Investment Property IAS 40 Investment Property IPSAS 17 Property, Plant, and Equipment IAS 16 Property, Plant, and Equipment IPSAS 18 Segment Reporting IAS 14 Segment Reporting IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets IPSAS 20 Related Party Disclosures IAS 24 Related Party Disclosure IPSAS 21 Impairment of Non-Cash-Generating Assets IAS 36 Impairment of Assets IPSAS 25 Employee Benefits IAS 19 Employee Benefits
  71. Mapping of IPSAS to IFRS IPSAS 26 Impairment of Cash-Generating Assets IAS 36 Impairment of Assets IPSAS 27 Agriculture IAS 41 Agriculture IPSAS 28 Financial Instruments: Presentation IAS 32 Financial Instruments: Presentation IPSAS 29 Financial Instruments: Recognition and measurement IAS 39 Financial Instruments: Recognition and measurement IPSAS 30 Financial Instruments: Disclosures IFRS 7 Financial Instruments: Disclosures IPSAS 31 Intangible Assets IAS 38 Intangible Assets
  72. Danielle O. Jeffries, CPA daniellejeffries@yahoo.com

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