KWAME NKRUMAH UNIVERSITY OF SCIENCE & TECHNOLOGY

INSTITUTE OF DISTANCE LEARNING (IDL)

SCHOOL OF GRADUATE STUDIES

GROUP ASSIGNMENT

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October 2022
Introduction
Financial reporting is the process of identifying, evaluating, and distributing data that gives users
a knowledgeable view of an entity's financial condition and performance. This should enable
users to make educated decisions and hold a company accountable. Measurement, which is at the
core of financial reporting, can entail complicated models and judgments, making it extremely
arbitrary. In response to calls for more government financial responsibility and transparency, the
International Public Sector Accounting Standards (IPSAS) are at the center of the "global
revolution in government accounting" (Heald, 2003). IFRS are internationally recognized,
widely adopted, and designed for large profit-orientated companies. The wide adoption brings
about consistency in financial statements, facilitating cross-border comparability and
understandability (Shafi & Shafi, 2013). This makes them particularly suitable for globally listed
companies on public stock exchanges. On the other hand, IPSAS is designed for public sector
entities whose main objectives are to provide goods and services to benefit society and
redistribute wealth. They are entities primarily financed by taxation, not profit. It is fair to say
that IPSAS are not currently widely adopted and finding a definitive number of jurisdictions that
have adopted IPSAS is not easy since IPSAS are often only used as a reference point.
The suggestions made by the IPSAS Board while working under the direction of the
International Federation of Accountants are referred to as IPSAS. For an accounting of monies
supplied under World Bank Programs, IPSAS is approved. Developing countries are advised to
adopt IPSAS by international organizations which provide financial support to developing
countries. Regardless of their political or economic structures, other nations are urged to align
their national standards with IPSAS. As a result, IPSAS is now the de facto international
standard for assessing government accounting processes all around the world. When comparing
IFRS with IPSAS, there are a few discrepancies in the measurement methodologies. A helpful
summary of the most widely used measurement bases and procedures is provided by the
proposed IPSASB measurement standard. As opposed to IFRS, which only has one dedicated
fair value standard (IFRS 13), IFRS offers greater guidance on measurement inside other
standards.
# IFRS IPSAS
1. Conceptual Framework IFRS is primarily aimed IPSAS financial
at the private for-profit statements are designed to
sector, where commercial provide information about
transactions are presumed how an entity has utilized
 to take place subject to
market conditions (in
particular, there is a
presumption that entities
generally will not enter
transactions where one
party receives less value
than the other
(nonexchange
transactions) with an
unrelated third party)
2. Grant Accounting Only recognize grant
income when it is
reasonably certain that an
entity will comply with
the conditions of the
grant. In the case of grants
relating to assets, that
income is recognized over
the lives of the assets
concerned.
3. Service potential of assets IFRS defines an asset as a
resource that is controlled
by an entity because of
past events, and from
which future economic
benefits are expected to
flow to the entity.
4. Non-exchange transactions IFRS has no equivalent
standard and presumes
that such transactions are
unlikely for a private
its resources, and about
the cost-of-service
delivery.
IPSAS is moving away
from using conditions,
instead basing the
accounting on whether the
transaction contains
performance obligations
or present obligations.
IPSAS introduces the
concept of service
potential into this def-
inition, defining assets as
resources controlled by an
entity because of past
events and from which
future economic benefits
or service potential is
expected to flow to the
entity. The inclusion of
these additional words in
the definition of an asset
is highly significant in
that it recognizes that an
item can be an asset even
though it might not be
expected to generate
future cash flows for the
entity. Similarly, the def-
initions of liabilities,
income (revenue),
expenditure, and the
corresponding recognition
criteria, have all been
amended under IPSAS to
accommodate the concept
of service potential in
addition to economic
benefits.
IPSAS recognizes the
concept of non-exchange
transactions and includes
a public sector-specific
 sector entity. One
exception to this is
government grants: IAS
20 Government Grants
recognizes that entities
may receive various
forms of government
assistance and, as such,
deals with the accounting
treatment thereof
5. Budget information The disclosure of budget
information is not
required under IFRS
6. Non-cash-generating assets There is no equivalent
guidance under IFRS.
Similarities
There are numerous parallels between IPSAS and IFRS. Both are accounting standards aimed at
improving financial reporting. Both employ accrual accounting, which requires income and costs
to be recognized when they are earned or incurred rather than when cash is received or paid.
standard that has not been
derived from IFRS -
IPSAS 23: Revenue from
Non-exchange
Transactions. IPSAS 23
covers revenue arising
from transfers, grants,
taxes, fines, and levies.
In line with the increased
focus on stewardship of
and accountability for,
public funds, IPSAS 24
Presentation of Budget
Information in the
financial statements
requires that entities make
their annual budgets
publicly available to
present a comparison of
the budgeted and actual
information as part of
their financial statements
(either as a separate
statement or in the notes).
IPSAS recognizes the
concept of service
potential as an alternative
to future economic
benefits to identify and
recognize an asset. This
presents certain
challenges when it comes
to determining whether
the recognized assets are
impaired. A separate
standard, IPSAS 21
Impairment of Non-Cash-
Generating Assets deals
with this matter. It
provides additional
guidance on the valuation
methods that should be
used when determining
the value-in-use of non-
cash-generating assets.
Both standards require substantial financial information, such as income, expenses, assets, and
liabilities, to be disclosed. Both sets of guidelines are intended to increase financial reporting
openness and comparability. IPSAS, on the other hand, are specifically designed for usage by
public sector entities, and as such, they consider the public sector's distinctive characteristics.
Conclusion
There are certainly many other important differences between the two reporting frameworks.
However, the differences highlighted above are intended to be of use to finance professionals
who are already familiar with IFRS, by providing an outline of some of the key differences
between IPSAS and IFRS. In addition, it is worth noting that the IPSASB sees its role as
evolving to address not only general-purpose financial statements but also general-purpose
financial reporting more broadly, including presentation and disclosure outside of the financial
statements, such as the presentation of long-term fiscal sustainability information
and service performance information.
 References
Heald, D. (2003). The Global Revolution in Government Accounting: Introduction to Theme
Articles. Public Money and Management, 23(1), 11–12. https://doi.org/10.1111/1467-
9302.00335
Shafi, B. N., & Shafi, N. (2013). Comparison of IPSAS with IFRS.