john stanford technical director, ipsasb public sector ... · project initiated in 2016 to update...

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Overview – Recent Developments IPSASB Projects

John StanfordTechnical Director, IPSASB

Public Sector Standard Setters ForumWinterthur, SwitzerlandJuly 3-4, 2017

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Current IPSASB work programme:Key projects 2016 - 2018

Project Public sector specific

IFRS convergence

Social Benefits

Revenue & Non-Exchange Expenditure

Heritage

Leases

Financial Instruments

Public Sector Measurement

Infrastructure Assets (starting September 2017)

Cash Basis IPSAS (limited-scope update)

Public Sector Standards Setters Forum Winterthur 2017

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Two Financial Instruments

Projects

Update of IPSASB 28-30 (IFRS

Convergence)

Public Sector Specific Financial

Instruments

Financial Instruments


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IPSAS 28, Financial Instruments: Presentation, IPSAS 29, Financial Instruments: Recognition and Measurement and IPSAS 30, Financial Instruments: Disclosures

•Issued in 2010, based on the IASB’s financial instruments standards as at December 31, 2008. •Original IPSAS 28-30 project identified several items with public sector characteristics•Includes guidance for public sector transactions:•Concessionary loans•Financial guarantees issued through non-exchange transactions

Project initiated in 2016 to update for IFRS 9, Financial Instruments

•Phase 3 of the IASB’s project to replace IAS 39, with IFRS 9 completed in 2014•IPSASB project initiated to maintain convergence with IFRS•Main IFRS 9 changes include: •Principle-based classification and measurement requirements for financial assets and liabilities•Introduction of the expected credit loss impairment model to replace the incurred loss model•More flexible hedge accounting principles

Financial Instruments – Update of IPSAS 28-30


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Public Sector Specific Financial Instruments Issues Identified


Monetary GoldSpecial Drawing RightsIMF Quota SubscriptionCurrency in Circulation

Public Sector Financial Instruments Project – July 2016 Consultation Paper

Concessionary Loans Application Guidance included in IPSAS 29 (retained in ED 62)

Financial Guarantees Application Guidance included in IPSAS 29 (retained in ED 62)

Statutory Payables and Receivables Revenue and Non-Exchange Expenses Project – CP Summer 2017

Public Sector Specific Securitizations Application Guidance in ED 62

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Public Sector Specific Financial Instruments Consultation Paper


• The IPSASB Conceptual Framework

• IPSASB policy paper for considering statistical reporting guidelines

IPSASB CP decisions influenced by:

• Currency in circulation• Monetary gold• IMF quota subscription• Special drawing rights

CP topics

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Public Sector Specific Financial Instruments – Next Steps

Public Sector Specific Financial Instruments

• Key issue relates to the scope of the project and what the output should be – variety of views received on next steps from respondents

• IPSASB to consider responses and way forward for project in Q1 2018

Public Sector Specific Financial

Instruments Project

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Financial Instruments - June 2017 IPSASB Meeting Update


IPSASB Meeting Update

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• Consultation Paper approved at June 2017 IPSASB meeting• To be issued August 2017, comments due December 2017• Revenue approaches identified

– Approach 1: Revised IPSAS 23 so that revenue recognized over time– Approach 2: Public Sector Performance Obligation Approach (PSPOA)

drawn from IFRS 15 – revenue linked to performance obligations

IPSASB Preliminary View Approach 2

Revenue and Non-Exchange Expenses


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• Non-exchange Expenses proposals– Extended Obligating Event Approach – same approach as social benefits project + reverse

IPSAS 23– Public Sector Performance Obligation Approach – reverse of Approach 2 for Revenue

IPSASB Preliminary View PSPOA



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• Measurement approaches identified– Non-contractual receivables

• Initial measurement– Best estimate of the discounted cash flow

– Face value (legislated value) of transaction with uncollectible amounts identified (PV reflects)

• Subsequent measurement– Fair value approach (PV reflects)

– Amortized cost approach

– Cost approach

– Non-contractual payables (No PV)– Cost of Fulfillment approach

– Amortized cost approach

– Hybrid approach

– IPSAS 19



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Revenue and Non-Exchange Expenses - June 2017 IPSASB Meeting Update


IPSASB Meeting Update

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Social Benefits

Paul Mason, Principal, IPSASB

Public Sector Standard Setters ForumWinterthur, SwitzerlandJuly 3–4, 2017

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History of the Project

Invitation to Comment,

Accounting for Social Policies of

Government(2004)

Exposure Draft 34, Social Benefits:

Disclosure of Cash Transfersto Individuals or

Households(2008)

Consultation Paper, Social

Benefits: Issues in Recognition

and Measurement

(2008)

RPG 1,Reporting on the

Long-Term Sustainability of

an Entity’s Finances

(2013)

Conceptual Framework

(2014)

Consultation Paper,

Recognition and Measurement of Social Benefits

(2015)

Social Benefits

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Scope and Relationship with other Projects

Category Contracts for Goods & Services

Contractsfor

Insurance

Employee Benefits

Social Benefits UniversallyAccessible

Services

Collective Goods &Services

Grants, Contributions

& Other Transfers

Examples Purchase of goods

Payment for services

Vehicleinsurance

Private medical

insurance

SalariesHealthcareEmployeepensions

State pensionsUnemployment

benefitsIncome support

UniversalHealthcareUniversal Education

DefenseStreet lighting

Grants to other public

sector entitiesGrants to charities

Disaster relief

Scope of Social Benefits in GFS

Non-Exchange ExpensesOther IPSAS / IFRS

Social Benefits

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Insurance ApproachIF

RS

17 • Applied by analogy where:

• The social benefit scheme is intended to be fully funded from contributions; and

• There is evidence that the entity manages the scheme in the same way as an issuer of insurance contracts, including assessing the financial performance and financial position of the scheme on a regular basis.

Social Benefits

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Obligating Event Approach

Eligibility criteria met to receive next benefit

Social Benefits

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“.... the ability of an entity to meet service delivery and financial commitment now and in the future.”

RPG 1 definition:Long-term financial sustainability…..

Social Benefits

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Social Benefits

RPG 1: Reporting on long-term financial sustainability

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Social Benefits

RPG 1: Approach summary

Projections based on decisions to date, current policy assumptions, and assumptions on future conditions

Assessments based on broad range of financial and non-financial information e.g. demographics, productivity etc.

Choice of reporting format and where information presented

Length of projection time horizon reflect entity characteristics

Three inter-related dimensions:•Service•Revenue•Debt

Capacity and vulnerability aspects of each dimension

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Information on amounts in balance sheet only

Undiscounted cash flows – long term benefits only

Undiscounted cash flows – all benefits

Actuarial valuations – long term benefits only

Actuarial valuations – all benefits

Issue for Feedback 1: What Additional Information will Users Need?

Social Benefits

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Leases

João Carlos Fonseca Manager, Standards Development and Technical Projects, IPSASB

Public Sector Standard Setters ForumWinterthur, SwitzerlandJuly 3-4, 2017

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• Focus on specific issues: IFRS 16, Leases• Discussion items

– #1–Lack of symmetry between lessee and lessor accounting in IFRS 16

– #2–The subsidized component of a concessionary lease

Outline

Leases

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• The need for change– US$3.3 trillion of lease commitments*, of which 85% do not appear

on the balance sheet– Difficult to:

• Understand the entity’s assets and liabilities; and• Compare entities that lease assets with those that buy

assets.

IFRS 16, Leases

Leases

* Listed companies using IFRS or US GAAP – Source: IASB

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• What’s changed?

IFRS 16, Leases

Leases

Lessee LessorAccounting model

• New single accounting model―right-of-use model

• Retains the dual accounting model―risks and rewards model

Focus • Lease versus Service • Finance Lease versus Operating Lease

Financial reporting

• All leases on balance sheet (with exceptions): Right-of-use asset and

lease liability

• Improved disclosures:(a) Table of lease income(b) Exposure to residual asset

risk…

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• Discussion Item #1

Public Sector Specific Issues

Leases

Lessee and lessor are public sector entities

Lessor’s lease classification

• The underlying asset is neither recognized by the lessor nor by the lessee because the lessee recognizes a right-of-use asset not the underlying asset

Finance Lease

• The lessor does not recognize a lease receivable while the lessee always recognizes a lease liability

Operating Lease

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• Discussion Item #2

Public Sector Specific Issues

Leases

Repayment obligation

Lease below market value, but above

nominal consideration


Concessionary loan

Loan below market value

Concessionary lease

Transferor (lessor)

• Expense• Except, if it is a

transaction with owners

Recipient (lessee)

• Revenue• Except, if there is a

present obligation

Subsidy


www.ipsasb.org

www.srs-cspcp.ch

SRS-CSPCP

http://www.ipsasb.org/

http://www.srs-cspcp.ch/

john stanford technical director, ipsasb public sector ... · project initiated in 2016 to update...

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