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

“Accountants are the linguists of business transactions.”
-Danielle O. Jeffries

“We are the translators;
We are the truth tellers.”
-Danielle O. Jeffries

IFAC
(International
Federation of
Accountants)

IAASB
(International
Assurance and
Audit Standards
Board)

Institute of
Chartered
Accountants of
Nigeria

IPSAS
(International Public
Sector Accounting
Standards

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.

Nigeria’s Implementation Dates

Cash Basis IPSAS – January 2014
Accrual Basis IPSAS – January 2016

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.

I have no use for bodyguards,
but I have very specific use for
two highly trained certified public
accountants.
- Elvis Presley

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.

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

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

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.

“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

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

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

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.”

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?

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.

On February 1st, the first 10,000,000 barrels of oil is delivered to
Customer B.
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.

On March 1st, the second 10,000,000 barrels of oil is delivered to
Customer B.
Oil Revenue

$1,000,000,000
$1,000,000,000

To recognize revenue earned on March 1st and to reduce the contra asset
Note: At March 1st, the balance in unearned oil revenue is now
$3,000,000,000.

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.
Oil Revenue

$3,000,000,000
$3,000,000,000

To recognize revenue earned on April 1st and to reduce the contra asset
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.

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.


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).

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.


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.


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.


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.


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.


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.


Qualitative Characteristics of Financial Reporting
•
•
•
•
•
•

Relevance
Faithful Representation
Understandability
Timeliness
Comparability
Verifiability


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.


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.

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.

IPSAS 10
Financial Reporting in Hyperinflationary Economies

Ties Back Into

Qualitative Characteristics of Financial Reporting:
Relevance, Faithful Representation, Understandability,
Timeliness, Comparability, Verifiability

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

IPSAS 10
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

IPSAS 10
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.

2013 Edition

IPSAS 10
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%.

2013 Edition

IPSAS 10
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.

2013 Edition

IPSAS 10
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.

2013 Edition

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.

2013 Edition

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

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.


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.


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.



A Few Key Concepts

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

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

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.


Disclosure of Control
Related party relationships where control exists shall be disclosed, irrespective of
whether there have been transactions between the related parties.


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.


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.

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.

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.


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.


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.


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.


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.


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.

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.

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.


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.


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.


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;


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.

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.


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

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

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

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

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

Danielle O. Jeffries, CPA
daniellejeffries@yahoo.com

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

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