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Public Sector Combinations: An Introduction to IPSAS 40

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In this webinar, IPSASB Technical Director John Stanford and IPSASB Principal Paul Mason provide an introduction to IPSAS 40, Public Sector Combinations, including the project history, key definitions, approach to classification of combinations, and key changes since the Combinations Exposure Draft.

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Public Sector Combinations: An Introduction to IPSAS 40

  1. 1. Page 1 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Public Sector Combinations: An Introduction to IPSAS 40 John Stanford, Technical Director, IPSASB Paul Mason, Principal, IPSASB
  2. 2. Page 2 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Project History ED 41 (Exchange Only) Consultation Paper ED 60 (Basis for IPSAS 40)
  3. 3. Page 3 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 The bringing together of separate operations into one public sector entity Nationalizations: Purchases Seizures Bailouts Reorganizations of local or regional governments Transfers of operations from one government to another. Restructurings of central government ministries Outside Scope Transactions that do not include operations Joint arrangements Public Sector Combinations
  4. 4. Page 4 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 • Amalgamation or Acquisition • Control essential for acquisition, but not conclusive • Economic substance – Consideration – Decision Making Classification No Yes NoYes Does one party to the public sector combination gain control of operations? Is the economic substance of the public sector combination that of an amalgamation? Amalgamation Acquisition
  5. 5. Page 5 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Acquisition Amalgamation • Consideration – Other than to compensate for transfer of net assets – No consideration paid – No (former) owners • Decision Making – Under common control – Imposed by third party – Approval by referenda Assessing the Economic Substance
  6. 6. Page 6 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 • An integrated set of activities and related assets and/or liabilities that is capable of being conducted and managed for the purpose of achieving an entity’s objectives, by providing goods and/or services Operation • Gives rise to a resulting entity and is either: • A public sector combination in which no party to the combination gains control of one or more operations; or • A public sector combination in which one party to the combination gains control of one or more operations, and in which there is evidence that the combination has the economic substance of an amalgamation Amalgamation • A public sector combination in which one party to the combination gains control of one or more operations, and there is evidence that the combination is not an amalgamation Acquisition Key Definitions
  7. 7. Page 7 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 • An integrated set of activities and related assets and/or liabilities that is capable of being conducted and managed for the purpose of achieving an entity’s objectives, by providing goods and/or services Operation • Gives rise to a resulting entity and is either: • A public sector combination in which no party to the combination gains control of one or more operations; or • A public sector combination in which one party to the combination gains control of one or more operations, and in which there is evidence that the combination has the economic substance of an amalgamation Amalgamation • A public sector combination in which one party to the combination gains control of one or more operations, and there is evidence that the combination is not an amalgamation Acquisition Key Definitions Entity Function Geographical Area Restructures of Government ministries Combinations of Municipalities Transfers of operations between different Governments
  8. 8. Page 8 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Amalgamation Modified Pooling Resulting Entity Recognized by Combining Operations Carrying Amount Difference / Reserves Net Assets / Equity Acquisition Acquisition Method Acquirer Identifiable Assets and Liabilities Fair Value Difference Goodwill, Loss or Gain Accounting for Amalgamations and Acquisitions
  9. 9. Page 9 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Amalgamations Acquisitions Method Modified Pooling Acquisition Entity Resulting Entity Acquirer Assets and Liabilities Recognized Those recognized by combining operations Identifiable assets and liabilities Measurement Carrying Amount Fair Value Difference between consideration (if any), assets and liabilities transferred Recognized in Net Assets/Equity Components not specified Goodwill (consideration); Loss; Gain on Bargain Purchase Accounting for Amalgamations and Acquisitions
  10. 10. Page 10 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 • Remove reverences to “rebuttable presumption” Classification approach • No longer specify components of net assets/equity • Permit presentation of prior period information (not restated) Accounting for amalgamations Changes since ED 60, Public Sector Combinations
  11. 11. Page 11 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Issued • January 2017 Effective Date • Reporting periods beginning on or after January 1, 2019 (early application permitted) Application • Applied prospectively, no restatement Application of IPSAS 40
  12. 12. Page 12 | Proprietary and Copyrighted Information Public Sector Combinations: An Introduction to IPSAS 40 Further Information • Visit our webpage http://www.ipsasb.org/ • Or contact us by e-mail : Chair IPSASB: IanCarruthers@ipsasb.org Technical Director: johnstanford@ipsasb.org

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