This document summarizes an article that reviews conceptual and institutional issues with the International Public Sector Accounting Standards (IPSAS). It discusses how IPSAS has become the international benchmark for evaluating government accounting practices. However, the document notes that IPSAS faces challenges in developing a strong conceptual framework, fully addressing differences between public and private sector accounting, and balancing representation from various countries and systems in its standard-setting body. The conclusion calls for strengthening the conceptual framework underpinning IPSAS and addressing outstanding issues rather than ignoring them.

1. IPSAS
Article review: IPSAS: Conceptual &
Institutional Issues
B y J ame s L C h a n
A Z I Z A Z A L D A R R I AGA S A D A I N C E A 1 0 0 7 0 8
V I D A D H A K A C E A 0 0 9 7 0 0

2. INTRODUCTION
• IPSAS has became the de facto international bench mark for
evaluating gov’t. accounting practices.
• It is currently being directed towards developing countries, using
financial assistance as enticements to adopt the system.
• It is becoming a global effort to standardize and harmonize public
sector accounting all over.

3. CONTENTS
1 Nature of IPSAS
• General characteristics
• Scope
• Premises
• Structure
2 Conceptual Issues
• System Capability and Internal Accountability
• Conceptual Framework
• Emulation of Business Accounting
• Cash VS Accrual Measurement
• Level of Aggregation
3 Institutional Issues
• Standard Setting Issue
• Oversight Structure

4. GENERAL
CHARACTERISTICS
Anglo-American Model of
gov’t. accounting elevated to
an international level
Routinely issued consolidated
of/s produced by accrual
accounting systems
IPSAS is considered as:
1. International version of national standards
2. Government version of business accounting standards
3. Professional version of laws and regulations

5. General purpose
financial
statement
Accrual financial
accounting
system
Statement of
Financial
Position
Statement of
Financial
performance
Cash accounting
system Statement of
Cash Flows
SCOPE
Outside the scope of IPSAS
1. No financial measure used in budgeting
2. No contents of reports to demonstrate compliance with laws and regulations
3. No measures to compare budget execution and plans
* 2 and 3 are considered as special purpose reports

6. PREMISES: 4 Assumptions
There are many transactions among private and public sectors
Because business firms annually prepare consolidated statements under
accrual basis, governments should do the same
Accounting standards are more objective and of higher quality if they are
set by an independent expert group
Accounting standards should be produced through due process which means
that research and deliberations must be done before deciding
1
2
3
4

7. STRUCTURE
• 1996 – 2002
• Standards made from
modifying corresponding IFRS
Phase
1
• 2002 - present
• Focus on public sector specific
issues
Phase
2
Structure
General standards on
accounting recognition and
measurement
(no. of standards 3)
No. 23 Revenues from non-exchange
transactions
General standards on
reporting
(11)
No. 22 General gov’t. sector
No. 24 Budget information
disclosure
Standards on specific
elements of f/s
(13)
No. 21 Impairment of non-cash
generating assets

8. Conceptual issues
System capability
and internal
accountability
Emulating of
business accounting
Level of
aggregation
Conceptual
framework
Cash
VSAccrual
accounting

9. Conceptual Issues
1 System Capability and Internal Accountability
• Consolidated f/s based on accrual basis can only be produced by a sophisticated accounting system
• But IPSAS neglected to pay attention to the operating procedures and inputs needed to make a
comprehensive accounting system.
2 Conceptual Framework
• Lack of a conceptual framework
• This is because IPSAS bases it’s concepts on business accounting theories (from IFRS conceptual framework)
• Lack of a thorough understanding of government accountability theory
3 Emulating of Business Accounting
• Following contemporary business financial accounting has given positive results such as: consolidated f/s,
statement of financial performance, position and cash flows; emphasis on assets and liabilities,
accomplishments in terms of sales (accrual basis)
• However years of hard work have only created a slightly modified IFRS
• IPSAS failed to address real public sector issues

10. Conceptual Issues
4 Cash VS Accrual Accounting
• IPSAS still has an unclear opinion on whether to fully use accrual or cash basis accounting.
• All standards except one is done under accrual basis (only one for cash basis to help those in transition)
• Having two basis in the standards confuses people
• IPSAS must take in consideration that governments can still apply accrual accounting without using it for
full accrual accounting in revenue recognition
5 Level of Aggregation
• Controversial issues: (1) What does a gov’t. consist of? (2) Should the gov’t as a reporting entity be
presented as a whole in one column of figures?
• What a consolidated f/s revels is interesting but what it conceals is vital.

11. Institutional issues
Political and
Economic
Systems
Culture
and Legal
Traditions
Government
Authority
IPSAS ignores the diversities
in the following systems:

12. Institutional issues
IFAC (International Federation of Accountants)
*IPSAS Board is it’s senior technical committee*
Composed of 157 national association of
professional accountants in 123 nations.
ATTRIBUTES
Professional
experience in gov’t.
or in public sector
ATTRIBUTES
Different regions of
the world
ATTRIBUTES
Nominees of national
accounting/auditing
bodies and public
members
ATTRIBUTES
Developed nations
and developing
nations
ATTRIBUTES
Countries whose
practices are likely
to be embodies in
IPSAS
ATTRIBUTES
Democracies and
other political
systems

13. Institutional issues
1 Standard-Setting Structure
• The larger the board the more costly the meetings are
• How does one balance the attributes? There is always a danger of under or over representing
one attribute.
• The ultimate dilemma is that the greater the diversity of participants, the less coherent their
work products are likely to be
2 Oversight Structure
• Should the IFAC remain the sole oversight body for the IPSAS board?
• Bodies and organizations funding IPSAS and donating services also serve as an oversight to some extent
• INTOSAI (International organization of supreme audit institution) is entering the picture to promote IPSAS to
auditors general.
• There is a fear of politicizing accounting.

14. conclusion
1 Construction Building Concept
• There is a need to have architects to fortify the framework. (Conceptual Framework)
• A structural engineer is needed to make sure that the concepts are strong enough to build a structure on.
• Financing is very important as it comes along with assessing the economic factors that might affect the
framework itself.
2 Putting Out All The Issues
• This paper was made to create awareness about IPSAS and it’s issues and not to solve the issues or provide a
professional and subjective opinion.
3 Issues Cannot be Continually Ignored
• “There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to
handle, than to initiate a new order of things. For the reformer has enemies in all who profit by the
old order, and only lukewarm defenders in all those who would profit by the new order. This
lukewarmness arises partly from fear of their adversaries, who have the law in their favour, and
partly from the incredulity of mankind, who do not truly believe in anything new until they have to
have actual experience of it”. _- Nicolas Machiavelli