IPSAS 1 – Presentation of and

Financial Statements
IPSAS: Background information (1)

► IPSASs are high quality global financial reporting standards for

application by public sector entities

► IPSASs set out

► recognition,
► measurement,
► presentation and disclosure requirements
dealing with transactions and events in general purpose financial statements.
► IPSASs are designed to apply to general purpose financial
statements for all public entities
► Several IPSASs on the accrual basis are based on IFRSs but
adapted to the public sector context where appropriate => trend
towards decoupling from IFRS and “alignment” with GFS
► Importance of the Conceptual Framework for the development of new
standards as well as updating of existing IPSAS

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IPSAS: Background information (2)
General Purpose Financial Statements (GPFS)
► General Purpose Financial Statements are financial statements
issued for users that are unable to demand financial information to
meet their specific information needs.
► Accrual based GPFS include:
► Statement of financial position
► Statement of financial performance
► Cash flow statement
► Statement of changes in net assets/equity
► A comparison of budget and actual amounts (when the entity
makes publicly available its approved budget)
► Notes
► Comparative information in respect of the preceding period

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IPSAS: Background information (1/4)

No. Name IFRS Eq. WEF:

IPSAS 1 Presentation of Financial Statements IAS 1 01.01.2008

IPSAS 2 Cash Flow Statements IAS 7 01.07.2001

Accounting Policies, Changes in Accounting Estimates and IAS 8 01.01.2008
IPSAS 3 Errors
IPSAS 4 The Effect of Changes in Foreign Exchange Rates IAS 21 01.01.2008

IPSAS 5 Borrowing Costs IAS 23 01.07.2001

Consolidated Financial Statements and Accounting for IAS 27 01.01.2008
IPSAS 6 Controlled Entities
IPSAS 7 Accounting for Investments in Associates IAS 28 01.01.2008

IPSAS 8 Financial Reporting of Interests in Joint Ventures IAS 31 01.01.2008

IPSAS 9 Revenue from Exchange Transactions IAS 18 01.07.2002

IPSAS 10 Financial Reporting in Hyperinflationary Economies IAS 29 01.07.2002

IPSAS 11 Construction Contracts IAS 11 01.07.2002

IPSAS 12 Inventories IAS 2 01.01.2008

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IPSAS: Background information (2/4)

No. Name IFRS Eq. WEF:

IPSAS 13 Leases IAS 17 01.01.2008

IPSAS 14 Events After the Reporting Date IAS 10 01.01.2008

IPSAS 15 Financial Instruments: Disclosure and Presentation IAS 32 01.01.2003

IPSAS 16 Investment Property IAS 40 01.01.2008

IPSAS 17 Property, Plant and Equipment IAS 16 01.01.2008

IPSAS 18 Segment Reporting IAS 14 01.01.2003

IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets IAS 37 01.01.2004

IPSAS 20 Related Party Disclosures IAS 24 01.01.2004

IPSAS 21 Impairment of Non-Cash Generating Assets IAS 36 01.01.2006

Disclosure of Financial Information about the General -* 01.01.2008
IPSAS 22 Government Sector
Revenue from Non-Exchange Transactions (Taxes and -* 30.06.2008
IPSAS 23 Transfers)
IPSAS 24 Presentation of Budget Information in Financial Statements -* 01.01.2009

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IPSAS: Background information (3/4)

No. Name IFRS Eq. WEF:

IPSAS 25 Employee Benefits IAS 19 01.01.2011

IPSAS 26 Impairment of Cash-Generating Assets IAS 36 01.04.2009

IPSAS 27 Agriculture IAS 41 01.04.2011

Financial Instruments: Presentation IAS 32/ 01.01.2013

IPSAS 28 IFRIC 2
IAS
Financial Instruments: Recognition and Measurement 39/IFRIC 01.01.2013
IPSAS 29 9/ IFRIC
16
IPSAS 30 Financial Instruments: Disclosures IFRS 7 01.01.2013

Intangible Assets IAS 38/ 01.04.2011

IPSAS 31 SIC 32
IPSAS 32 Service Concession Arrangements -* 01.01.2014

IPSAS 33 First-time Adoption of Accrual-Basis IPSAS IFRS 1 01.01.2017

IPSAS 34 Separate Financial Statements IAS 27 01.01.2017

IPSAS 35 Consolidated Financial Statements IFRS 10 01.01.2017

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IPSAS: Background information (4/4)

No. Name IFRS Eq. WEF:

IPSAS 36 Investments in Associates and Joint Ventures IFRS 11 01.01.2017

IPSAS 37 Joint Arrangements IAS 28 01.01.2017

IPSAS 38 Disclosure of Interests in Other Entities IFRS 12 01.01.2017

IPSAS 39 Employee Benefits IAS 19 01.01.2018

IPSAS 40 Public Sector Combinations IFRS 3 01.01.2019

IPSAS 41 Financial Instruments IFRS 9 01.01.2023

IPSAS 42 Social Benefits N/A 01.01.2023

IPSAS 43 Leases IFRS 16 01.01.2025

IPSAS 44 Non-current Assets Held for Sale and Discontinued IFRS 5 01.01.2025
Operations

Reporting on the Long-Term Sustainability of a Public N/A N/A

RPG 1 Sector Entity’s Finances
RPG 2 Financial Statement Discussion and Analysis (FSDA) N/A N/A

RPG 3 Reporting Service Performance Information N/A N/A

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Components of financial statements (1)
(IPSAS 1.21)

► Statement of financial position

► Statement of financial performance
► Statement of changes in net assets
► When the entity makes publicly available its approved budget, a
comparison of budget and actual amounts either as a separate
additional financial statement or as a budget column in the financial
statements. (this is encouraged by IPSAS 1)
► Cash flow statement
► Notes
► Accounting policies
► Explanatory notes

► Note: difference to IFRS – No Statement of Comprehensive Income

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Components of financial statements (2)

“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)..” (Conceptual Framework, Introduction, 2013)

Cash flow statement Statement of financial

Cash inflows ./. cash outflows performance
Net increase/(decrease) in Revenues ./. expenses
cash and cash equivalents Surplus or deficit

Statement of financial position

Assets Liabilities
PP&E Accounts payable
…. …
Cash and cash
Net assets/equity
equivalents

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Overall consideration for the presentation
of financial statements (IPSAS 1.27-1.30)
► Overall consideration
► Fair presentation & compliance with IPSAS
► Annual financial statements should comply with all the
standards of IPSAS that are issued and effective
► Make an explicit and unreserved statement
► Fair presentation override unlikely
► Commercially sensitive information is politically not an excuse for
non disclosure
► Inappropriate accounting treatment is not rectified by disclosure

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Fair presentation and IPSAS compliance

Principle of fair presentation

(cf. IPSAS 1.27)

‘The application of IPSASs […] is presumed to result

in financial statements that achieve a fair presentation’

Does the
entity comply
with all the
requirements
by IPSASs?

The entity is in
compliance with IPSASs The entity is not in
compliance with IPSASs

The entity shall make an explicit and

unreserved statement of compliance
with IPSASs in the notes (cf. IPSAS 1.28)

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Compliance with IPSASs (IPSAS 1.32)

► When an entity departs from a requirement of a Standard, it shall

disclose:
► That management has concluded that the financial statements fairly
present the entity’s financial position, financial performance and cash
flows;
► That it has complied with applicable IPSASs, except that it has departed
from a particular requirement to achieve a fair presentation;
► The Standard from which the entity has departed,
► Its title
► the nature of the departure,
► the treatment required,
► the reason why that treatment would be so misleading; and
► and the treatment adopted;
► Impact of the departure on surplus and deficit
► Not applicable to departures due to legislative/statutory departures, but if
material, can’t claim compliance with IPSAS
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Fair presentation and qualitative
characteristics of financial reporting (1)

► According to IPSAS 1.29(b) fair presentation implies to

present information in a manner that provides „relevant,
reliable, comparable and understandable information“
► Appendix A of IPSAS 1 specifies these four principle
qualitative characteristics („QCs“) and outlines them
► QCs are „the attributes that make the information provided in
financial statements useful to users“
► Despite of the already published Chapter 3, Qualitative
Characteristics of the Conceptual Framework Appendix A
continues to apply to existing IPSASs
► In addition to QCs: Going concern principle, consistency of
presentation, materiality and aggregation, offsetting and
comparative information
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Fair presentation and qualitative
characteristics of financial reporting (2)
Qualitative Description
characteristic

Understandability Information is considered as understandable when

users might reasonably be expected to
comprehend its meaning.
Relevance Information is relevant to users if it can be used to
assist in evaluating past, present, or future events or in
confirming, or correcting, past evaluations.
Materiality Relevance of information is determined by its nature
and materiality. Information is material if its omission or
misstatement could influence the decisions of users or
assessments made on the basis of the financial
statements.
Comparability Users should be able to identify similarities and
differences between financial statements (over time
and between different entities)

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Fair presentation and qualitative
characteristics of financial reporting (3)
Qualitative Description
characteristic
Reliability Reliable information is free from material error and bias,
and can be depended on by users to represent faithfully
that which it purports to represent or could reasonably be
expected to represent.
Faithful Information needs to be presented in accordance with the
Representation substance of the transactions and other events, and not
merely their legal form
Substance Over Information needs to be accounted for and presented in
Form accordance with their substance and economic reality
Neutrality Information is neutral if it is free from bias
Prudence Prudence is the inclusion of a degree of caution in the
exercise of the judgments needed in making the estimates
required under conditions of uncertainty.
Completeness Information in financial statements should be complete
within the bounds of materiality and cost.
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Fair presentation and qualitative
characteristics of financial reporting (4)
Constraints on Description
relevant and reliable
Information
Timeliness In case that there is a delay in the reporting of information,
it may lose its relevance.
Balance between The benefits derived from information should exceed the
benefit and cost cost of providing it.
Balance between In practice a balancing, or trade-off, between qualitative
QCs characteristics is often necessary. The aim is to achieve an
appropriate balance among the characteristics in order to
meet the objectives of financial statements.

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Identification of financial statements
► Financial statements to be identified clearly and distinguished from
other information
► Display the following information prominently:
► The name of the reporting entity
► Whether the f/s cover the individual or the economic entity
► The reporting date or period covered
► The presentation currency
► The level of rounding
► F/S to be presented per year (i.e. 12 months).
► If presented for shorter or longer period, disclose the following:
► The reason for longer or shorter period
► The fact that comparative amounts in financial statements are not
entirely comparable

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Current vs. non-current distinction

► Encouraged to distinguish between current and non-current assets

and liabilities
► Order of liquidity also acceptable alternative, but only if provides more
useful information
► If presentation used combines current and non-current items on a
single line item, must disclose the portion to be recovered / settled
after 12 months separately

Current Settled / realised within

Current Settled / realised within
Asset 12 months Liability 12 months

Settled / realised within Settled / realised within

normal operating cycle normal operating cycle

Held for trading or cash No unconditional right

and cash equivalent to defer settlement
beyond 12 months

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Basic definitions (1)

► Asset:
► Resources controlled by an entity
► as a result of past events
► future economic benefits or service potential are expected to flow
to the entity.
► Example: Hospital purchases Intensive Care Unit (ICU) equipments
► Resources controlled by an entity: The ICU equipments are under the
control of the hospital
► as a result of past events: Purchasing of the equipment
► from which future economic benefits or service potential are expected
to flow to the entity: Fees charged to patients as the equipments are
used.
► Other examples are: Land, roads, electricity transmission
networks, motor vehicles, office equipment, etc.

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Basic definitions (2)

► Liability
Present obligations of the entity
►
► arising from past events
► the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits or service
potential.
► Example: A public hospital purchased medical stock on credit (30
days account)
► Present obligations of the entity: the hospital has a contractual
obligation to pay for purchases of stock.
► arising from past events: the credit purchase of medical stock
► the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits or service
potential: the payment in 30 days for the purchased stock will
results in outflow of cash.
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Minimum requirements of an IPSAS
statement of financial position (IPSAS 1.88)

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Statement of financial position - Notes

► Some items may either be presented on the face, or in the notes to

the statements, for e.g:
► Items of property, plant and equipment disaggregated into classes in
accordance with IPSAS 17;
► Receivables are disaggregated into amounts receivable from user
charges, taxes and other non-exchange revenues, receivables from
related parties, prepayments, and other amounts;
► Inventories are subclassified in accordance with IPSAS 12: supplies,
materials, work in progress, and finished goods;
► Taxes and transfers payable are disaggregated into tax refunds payable,
transfers payable, and amounts payable to other members of the
economic entity;
► Provisions are disaggregated into provisions for employee benefits and
other items; and
► Components of net assets/equity are disaggregated into contributed
capital, accumulated surpluses and deficits, and any reserves.

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Statement of financial performance (IPSAS
1.102)

► All items of revenue and expense to be included unless permitted by

other Standard of IPSAS
► Minimum line items to be presented on face of statement
► (a) Revenue;
► (b) Finance costs;
► (c) Share of the surplus or deficit of associates and joint ventures
accounted for using the equity method;
► (d) Pre-tax gain or loss recognized on the disposal of assets or
settlement of liabilities attributable to discontinuing operations; and
► (e) Surplus or deficit.

► Additional line items, headings and sub totals presented when such
presentation is relevant to an understanding of the entity’s
performance

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Statement of financial performance
Minimum requirements
Information to be presented on the face of the statement of financial performance

20X1 20X0
Revenue from operating activities X X
Surplus or deficit from operating activities X X
Finance costs (X) (X)

Share of net surpluses /deficits of associates and joint

ventures accounted for using the equity method X (X)
Surplus or deficit from ordinary activities X X
Extraordinary items (X) X
Minority interest share of net surplus or deficit X X
Net surplus or deficit for the period X X

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Statement of financial performance
Expense classification (IPSAS 1.112, 1.113)
The expenses are classified either by nature or by their function within the
entity (depends on which classification provides more reliable and relevant
information.)
If an entity decides to classify expenses by function, it must also provide a
presentation by nature of expense in the notes, including depreciation and
amortization expense and employee benefits expense.
Expenses classified by Expenses classified by nature
function (exemplary) (exemplary)
General public services Wages, salaries, and employee benefits

Defense Grants and other transfer payments

Public order and safety Supplies and consumables used

Education Depreciation and amortization expense

Health Impairment of PP&E

Culture Other expenses

Etc. Finance costs

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Statement of financial performance – Notes
(IPSAS 1.107)
► When items of revenue and expense are material, their nature and
amount shall be disclosed separately, e.g:
► Write-downs of inventories to net realizable value or of property, plant, and
equipment to recoverable amount or recoverable service amount as appropriate, as
well as reversals of such write-downs;
► Restructurings of the activities of an entity and reversals of any provisions for the
costs of restructuring;
► Disposals of items of property, plant, and equipment;
► Privatizations or other disposals of investments;
► Discontinuing operations;
► Litigation settlements; and
► Other reversals of provisions.
► Furthermore, must present sub-classification of revenue; and
► Analysis of expenditure (nature or function – whichever is most
relevant and reliable – management judgement)
► Where function is used, also provide analysis of nature in notes

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Statement of changes in net assets/equity

► Components to be presented on the face of the statement of net

assets/equity:
► The surplus or deficit for period
► Each item of revenue and expense recognised directly in net
assets (where permissible)
► For each component, the cumulative effects of changes in
accounting policy and correction of prior years’ error
► Components to be presented either on face or in the notes:
► The amounts of transactions with owners
► Reconciliation of accumulated surplus or deficit
► Reconciliation of each component of net assets/equity.

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Cash flow statement

► Refer to IPSAS 2 for detailed requirements

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Notes to the financial statements
(IPSAS 1.127 ff.)
► Basis of preparation

► Additional information
► Per standard
► Relevant to understanding

► Significant accounting policies

► Measurement basis for transactions, assets and liabilities
► Extent of use of transitional provisions

► The notes should be presented in a systematic manner

► Thus note references on the face of the statements should follow
sequentially

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Key sources of estimation uncertainty
(IPSAS 1.140)

► Often overlooked
► Must disclose key assumptions; and
► Other key sources of estimation uncertainty;
► That could materially impact the carrying amounts of
assets and liabilities within the next financial year.
► Nature
► Carrying amount as at reporting date

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Other disclosure

► Information about how entity manages its capital (IPSAS

1.148 A)
► To the extent not addressed elsewhere in the financial
statements (IPSAS 1.150):
► The domicile and legal form of the entity, and the jurisdiction within
which it operates;
► A description of the nature of the entity’s operations and principal
activities;
► A reference to the relevant legislation governing the entity’s
operations; and
► The name of the controlling entity and the ultimate controlling
entity of the economic entity (where applicable).

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Transitional provisions

► No transitional provisions.

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Audit implications of IPSAS 1

► Verify whether the financial statements are

presented in accordance with IPSAS 1
(refer to EY’s “Model Public Sector Group”
for a set of illustrative financial statements)

► Determine that the required disclosures

have been made (refer to EY’s
“IPSAS Disclosure Checklist”)

► Understand the nature of all material components

recognized directly within the statement of changes in
net assets/equity.
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++Thank you very much for
listening++

++The End++