CHAPTER TWO

INTERNATIONAL PUBLIC SECTOR ACCOUNTING

STANDARD (IPSAS)
IPSAS 1
Presentation of Financial Statements
OBJECTIVE
The objective of this Standard is to prescribe the manner in which general purpose financial
statements should be presented in order to ensure comparability both with the entity’s own
financial statements of previous periods and with the financial statements of other entities.
To achieve this objective, this Standard sets out overall considerations for the presentation of
financial statements, guidance for their structure, and minimum requirements for the content of
financial statements prepared under the accrual basis of accounting. The recognition,
measurement and disclosure of specific transactions and other events are dealt with in other
International Public Sector Accounting Standards.

SCOPE
1. This Standard should be applied in the presentation of all general purpose financial
statements prepared and presented under the accrual basis of accounting in accordance with
International Public Sector Accounting Standards.

General purpose financial statements are those intended to meet the needs of users who are not in
a position to demand reports tailored to meet their specific information needs. Users of general
purpose financial statements include taxpayers and ratepayers, members of the legislature,
creditors, suppliers, the media, and employees. General purpose financial statements include
those that are presented separately or within another public document such as an annual report.
This Standard does not apply to condensed interim financial information. This Standard applies
equally to the financial statements of an individual entity and to consolidated financial
statements for an economic entity, such as whole-of-government financial statements.
4. This Standard applies to all public sector entities other than Government Business
Enterprises.

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5. Government Business Enterprises (GBEs) are required to comply with International
Accounting Standards (IASs) issued by the International Accounting Standards Committee.

COMPONENTS OF FINANCIAL STATEMENTS

A complete set of financial statements includes the following components:
(a) Statement of financial position;
(b) Statement of financial performance;
(c) Statement of changes in net assets/equity;
(d) Cash flow statement; and
(e) Accounting policies and notes to the financial statements.
The statement of financial position may also be referred to as a balance sheet or statement of
assets and liabilities.
OVERALL CONSIDERATIONS
Fair Presentation and Compliance with International Public Sector Accounting Standards
Financial statements should present fairly the financial position, financial performance and cash
flows of an entity. The appropriate application of International Public Sector Accounting
Standards, with additional disclosures when necessary, results, in virtually all circumstances, in
financial statements that achieve a fair presentation.
An entity whose financial statements comply with International Public Sector Accounting
Standards should disclose that fact.
In virtually all circumstances, a fair presentation is achieved by compliance in all material
respects with applicable International Public Sector Accounting Standards. A fair presentation
requires:
(a) selecting and applying appropriate accounting policies;
(b) presenting information, including accounting policies, in a manner which provides relevant,
reliable, comparable and understandable information; and
(c) providing additional disclosures when the requirements in International Public Sector
Accounting Standards are insufficient to enable users to understand the impact of particular
transactions or events on the entity’s financial position and financial performance.

Going Concern

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When preparing financial statements an assessment of an entity’s ability to continue as a going
concern should be made. This assessment should be made by those responsible for the
preparation of the financial statements. Financial statements should be prepared on a going
concern basis unless there is an intention to liquidate the entity or to cease operating, or if there
is no realistic alternative but to do so. When those responsible for the preparation of the financial
statements are aware, in making their assessment, of material uncertainties related to events or
conditions which may cast significant doubt upon the entity’s ability to continue as a going
concern, those uncertainties should be disclosed.
When the financial statements are not prepared on a going concern basis, that fact should be
disclosed, together with the basis on which the financial statements are prepared and the reason
why the entity is not considered to be a going concern.
Consistency of Presentation
The presentation and classification of items in the financial statements should be retained from
one period to the next unless:
(a) a significant change in the nature of the operations of the entity or a review of its financial
statement presentation demonstrates that the change will result in a more appropriate
presentation of events or transactions; or
(b) a change in presentation is required by an International Public Sector Accounting Standard.
A significant acquisition or disposal, or a review of the financial statement presentation, might
suggest that the financial statements should be presented differently. For example, an entity may
dispose of a savings bank that represents one of its most significant controlled entities and the
remaining economic entity conducts mainly administrative and policy advice services.
In this case, the presentation of the financial statements based on the principal activities of the
economic entity as a financial institution is unlikely to be relevant for the new economic entity.
Materiality and Aggregation
Items that are material by virtue of their nature should be presented separately in the financial
statements. Items that are material by virtue of their size but which have the same nature may be
aggregated. Immaterial amounts should be aggregated with amounts of a similar nature or
function and need not be presented separately.
Offsetting

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Assets and liabilities should not be offset except when offsetting is required or permitted by
another International Public Sector Accounting Standard. It is important that both assets and
liabilities, and revenue and expenses, when material, are reported separately.

Comparative Information
Unless an International Public Sector Accounting Standard permits or requires otherwise,
comparative information should be disclosed in respect of the previous period for all numerical
information in the financial statements, except in respect of the financial statements for the
reporting period to which this Standard is first applied. Comparative information should be
included in narrative and descriptive information when it is relevant to an understanding of the
current period’s financial statements.
In some cases narrative information provided in the financial statements for the previous
period(s) continues to be relevant in the current period. For example, details of a legal dispute,
the outcome of which was uncertain at the last reporting date and is yet to be resolved, are
disclosed in the current period. Users benefit from knowing that the uncertainty existed at the last
reporting date, and the steps that have been taken during the period to resolve the uncertainty.
When the presentation or classification of items in the financial statements is amended,
comparative amounts should be reclassified, unless it is impracticable to do so, to ensure
comparability with the current period, and the nature, amount of, and reason for any
reclassification should be disclosed. When it is impracticable to reclassify comparative amounts,
an entity should disclose the reason for not reclassifying and the nature of the changes that would
have been made if amounts were reclassified.

STRUCTURE AND CONTENT

This Standard requires certain disclosures on the face of the financial statements, requires other
line items to be disclosed either on the face of the financial statements or in the notes, and sets
out recommended formats as an appendix to the Standard which an entity may follow as
appropriate in its own circumstances.
This Standard uses the term disclosure in a broad sense, encompassing items presented on the
face of each financial statement as well as in the notes to the financial statements. Disclosures
required by other International Public Sector Accounting Standards are made in accordance with

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the requirements of those Standards. Unless this or another Standard specifies to the contrary,
such disclosures are made either on the face of the relevant financial statement or in the notes.

Identification of Financial Statements

Financial statements should be clearly identified and distinguished from other information in the
same published document.
International Public Sector Accounting Standards apply only to the financial statements, and not
to other information presented in an annual report or other document. Therefore, it is important
that users are able to distinguish information that is prepared using International Public Sector
Accounting Standards from other information which may be useful to users but is not the subject
of Standards.
Each component of the financial statements should be clearly identified. In addition, the
following information should be prominently displayed, and repeated when it is necessary for a
proper understanding of the information presented:
(a) the name of the reporting entity or other means of identification;
(b) whether the financial statements cover the individual entity or the economic entity;
(c) the reporting date or the period covered by the financial statements, whichever is appropriate
to the related component of the financial statements;
(d) the reporting currency; and
(e) the level of precision used in the presentation of figures in the financial statements.
Reporting Period
Financial statements should be presented at least annually. When, in exceptional circumstances,
an entity’s reporting date changes and annual financial statements are presented for a period
longer or shorter than one year, an entity should disclose, in addition to the period covered by the
financial statements:
(a) the reason for a period other than one year being used; and
(b) the fact that comparative amounts for certain statements such as the statement of financial
performance, changes in net assets/equity, cash flows and related notes are not comparable.
Timeliness
The usefulness of financial statements is impaired if they are not made available to users within a
reasonable period after the reporting date. An entity should be in a position to issue its financial

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statements within six months of the reporting date. Ongoing factors such as the complexity of an
entity’s operations are not sufficient reason for failing to report on a timely basis. More specific
deadlines are dealt with by legislation and regulations in many jurisdictions.

IPSAS 2—CASH FLOW STATEMENTS

Objective
The cash flow statement identifies the sources of cash inflows, the items on which cash was
expended during the reporting period, and the cash balance as at the reporting date. Information
about the cash flows of an entity is useful in providing users of financial statements with
information for both accountability and decision making purposes. Cash flow information allows
users to ascertain how a public sector entity raised the cash it required to fund its activities and
the manner in which that cash was used. In making and evaluating decisions about the allocation
of resources, such as the sustainability of the entity’s activities, users require an understanding of
the timing and certainty of cash flows.
The objective of this Standard is to require the provision of information about the historical
changes in cash and cash equivalents of an entity by means of a cash flow statement which
classifies cash flows during the period from operating, investing and financing activities.
Scope
1. An entity which prepares and presents financial statements under the accrual basis of
accounting should prepare a cash flow statement in accordance with the requirements of this
Standard and should present it as an integral part of its financial statements for each period for
which financial statements are presented.
2. Information about cash flows may be useful to users of an entity’s financial statements in
assessing the entity’s cash flows, assessing the entity’s compliance with legislation and
regulations (including authorized budgets where appropriate) and for making decisions about
whether to provide resources to, or enter into transactions with an entity. They are generally
interested in how the entity generates and uses cash and cash equivalents.
This Standard applies to all public sector entities other than Government Business Enterprises
(GBEs).

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Benefits of Cash Flow Information
5. Information about the cash flows of an entity is useful in assisting users to predict the future
cash requirements of the entity, its ability to generate cash flows in the future and to fund
changes in the scope and nature of its activities. A cash flow statement also provides a means by
which an entity can discharge its accountability for cash inflows and cash outflows during the
reporting period.
6. A cash flow statement, when used in conjunction with other financial statements, provides
information that enables users to evaluate the changes in net assets/equity of an entity, its
financial structure (including its liquidity and solvency) and its ability to affect the amounts and
timing of cash flows in order to adapt to changing circumstances and opportunities. It also
enhances the comparability of the reporting of operating performance by different entities
because it eliminates the effects of using different accounting treatments for the same
transactions and other events.
7. Historical cash flow information is often used as an indicator of the amount, timing and
certainty of future cash flows. It is also useful in checking the accuracy of past assessments of
future cash flows.

Cash and Cash Equivalents

Cash equivalents are held for the purpose of meeting short term cash commitments rather than
for investment or other purposes. For an investment to qualify as a cash equivalent it must be
readily convertible to a known amount of cash and be subject to an insignificant risk of
changes in value. Therefore, an investment normally qualifies as a cash equivalent only when it
has a short maturity of, say, three months or less from the date of acquisition. Equity investments
are excluded from cash equivalents unless they are, in substance, cash equivalents.
Presentation of a Cash Flow Statement
The cash flow statement should report cash flows during the period classified by operating,
investing and financing activities.
An entity presents its cash flows from operating, investing and financing activities in a manner
which is most appropriate to its activities. Classification by activity provides information that
allows users to assess the impact of those activities on the financial position of the entity and the

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amount of its cash and cash equivalents. This information may also be used to evaluate the
relationships among those activities.
A single transaction may include cash flows that are classified differently. For example, when
the cash repayment of a loan includes both interest and capital, the interest element may be
classified as an operating activity and the capital element is classified as a financing activity.
Operating Activities
The amount of net cash flows arising from operating activities is a key indicator of the extent to
which the operations of the entity are funded:
(a) By way of taxes (directly and indirectly); or
(b) From the recipients of goods and services provided by the entity.
The amount of the net cash flows also assists in showing the ability of the entity to maintain its
operating capability, repay obligations, pay a dividend or similar distribution to its owner and
make new investments without recourse to external sources of financing. The consolidated
whole-of government operating cash flows provide an indication of the extent to which a
government has financed its current activities through taxation and charges. Information about
the specific components of historical operating cash flows is useful, in conjunction with other
information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal cash-generating
activities of the entity. Some of the examples of cash flows from operating activities are:
(a) Cash receipts from taxes, levies and fines;
(b) Cash receipts from charges for goods and services provided by the entity;
(c) Cash receipts from royalties, fees, commissions and other revenue;
(d) Cash payments to other public sector entities to finance their operations (not including loans);
(e) Cash payments to suppliers for goods and services;
(f) Cash payments to and on behalf of employees;
(g) Cash receipts and payments from contracts held for dealing or trading purposes;
(h) Cash receipts or payments from discontinuing operations; and
(i) Cash receipts or payments in relation to litigation settlements.
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss which is
included in the determination of net surplus or deficit. However, the cash flows relating to such
transactions are cash flows from investing activities. An entity may hold securities and loans for

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dealing or trading purposes, in which case they are similar to inventory acquired specifically for
resale.
Therefore, cash flows arising from the purchase and sale of dealing or trading securities are
classified as operating activities. Similarly, cash advances and loans made by public financial
institutions are usually classified as operating activities since they relate to the main cash
generating activity of that entity.
Investing Activities
The separate disclosure of cash flows arising from investing activities is important because the
cash flows represent the extent to which cash outflows have been made for resources which are
intended to contribute to the entity’s future service delivery. Examples of cash flows arising from
investing activities are:
(a) Cash payments to acquire property, plant and equipment, intangibles and other long-term
assets. These payments include those relating to capitalized development costs and self-
constructed property, plant and equipment;
(b) Cash receipts from sales of property, plant and equipment, intangibles and other long-term
assets;
(c) Cash payments to acquire equity or debt instruments of other entities
(d) Cash receipts from sales of equity or debt instruments of other entities
Financing Activities
The separate disclosure of cash flows arising from financing activities is important because it is
useful in predicting claims on future cash flows by providers of capital to the entity. Examples of
cash flows arising from financing activities are:
(a) Cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or
long-term borrowings; and
(b) Cash repayments of amounts borrowed;

Noncash Transactions
Investing and financing transactions that do not require the use of cash or cash equivalents
should be excluded from a cash flow statement. Such transactions should be disclosed elsewhere
in the financial statements in a way that provides all the relevant information about these
investing and financing activities.

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Many investing and financing activities do not have a direct impact on current cash flows
although they do affect the capital and asset structure of an entity. The exclusion of noncash
transactions from the cash flow statement is consistent with the objective of a cash flow
statement as these items do not involve cash flows in the current period. Examples of noncash
transactions are:
(a) The acquisition of assets through the exchange of assets, and
(b) The conversion of debt to equity.

IPSAS 21—IMPAIRMENT OF NON-CASH-GENERATING ASSETS

Objective
1. The objective of this Standard is to prescribe the procedures that an entity applies to determine
whether a non-cash-generating asset is impaired and to ensure that impairment losses are
recognized. This Standard also specifies when an entity would reverse an impairment loss and

prescribes disclosures. An asset should not be measured at an amount greater than the entity
expects to recover from its sale or use.
Scope
2. An entity which prepares and presents financial statements under the accrual basis of
accounting shall apply this Standard in accounting for impairment of non-cash-generating assets.
This Standard applies to all public sector entities other than Government Business Enterprises
(GBEs). GBEs apply International Accounting Standard (IAS) 36 and therefore are not subject
to the provisions of this Standard.
Definitions
The following terms are used in this Standard with the meanings specified:
An active market is a market in which all the following conditions exist:
(a) The items traded within the market are homogeneous;
(b) Willing buyers and sellers can normally be found at any time; and
(c) Prices are available to the public.

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Carrying amount is the amount at which an asset is recognized in the statement of financial
position after deducting any accumulated depreciation and accumulated impairment losses
thereon.
Cash-generating assets are assets held with the primary objective of generating a commercial
return. Non-cash-generating assets are assets other than cash-generating assets.
Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length
transaction between knowledgeable, willing parties, less the costs of disposal.
An impairment is a loss in the future economic benefits or service potential of an asset, over
and above the systematic recognition of the loss of the asset’s future economic benefits or
service potential through depreciation.
An impairment loss of a non-cash-generating asset is the amount by which the carrying amount
of an asset exceeds its recoverable service amount.
Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs
to sell and its value in use. Value in use of a non-cash-generating asset is the present value of the
asset’s remaining service potential.
The main accounting issues of IPSAS 21
 How is it possible to identify when an impairment loss may have occurred?
 How should the recoverable amount of the asset be measured?
 How should an 'impairment loss' be reported in the accounts?
Identifying an asset that may be impaired
External sources
 decline in assets’ market value
 adverse changes in technological, market, economic or legal environment
 carrying amount of the net assets is more than market capitalisation, etc
Internal sources
 Obsolescence or physical damage of an asset
 Plans for a significant reorganisation/discontinuation or sale of an asset
 evidence that an asset’s performance is worse than expected

Measuring Recoverable Service Amount and recognizing impairment loss

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This Standard defines recoverable service amount as the higher of an asset’s fair value less costs
to sell and its value in use. It is not always necessary to determine both an asset’s fair value less
costs to sell and its value in use. If either of these amounts exceeds the asset’s carrying amount,
the asset is not impaired and it is not necessary to estimate the other amount. If, and only if, the
recoverable service amount of an asset is less than its carrying amount, the carrying amount of
the asset shall be reduced to its recoverable service amount. That reduction is an impairment
loss. After the recognition of an impairment loss, the depreciation (amortization) charge for the
asset shall be adjusted in future periods to allocate the asset’s revised carrying amount, less its
residual value (if any), on a systematic basis over its remaining useful life.
An impairment loss recognized in prior periods for an asset shall be reversed if, and only if,
there has been a change in the estimates used to determine the asset’s recoverable service amount
since the last impairment loss was recognized. If this is the case, the carrying amount of the asset
shall be increased to its recoverable service amount. That increase is a reversal of an impairment
loss. This Standard requires an entity to make a formal estimate of recoverable service amount
only if an indication of a reversal of an impairment loss is present. A reversal of an impairment
loss reflects an increase in the estimated recoverable service amount of an asset, either from use
or from sale, since the date when an entity last recognized an impairment loss for that asset.

IPSAS 22—DISCLOSURE OF FINANCIAL INFORMATION ABOUT THE GENERAL

GOVERNMENT SECTOR

Objective
1. The objective of this Standard is to prescribe disclosure requirements for governments which
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 nonmarket activities of the government and between
financial statements and statistical bases of financial reporting.
Scope

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2. 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.

Governments raise funds from taxes, transfers and a range of nonmarket and market activities to
fund their service delivery activities. They operate through a variety of entities to provide goods
and services to their constituents. Some entities rely primarily on appropriations or allocations
from taxes or other government revenues to fund their service delivery activities, but may also
undertake additional revenue generating activities including commercial activities in some cases.
Other entities may generate their funds primarily or substantially from commercial activities.
These include government business enterprises (GBEs) as defined in paragraph 15 of this
Standard.
Financial statements for a government prepared in accordance with IPSASs provide an overview
of the assets controlled and liabilities incurred by the government, the cost of services provided
by the government and the taxation and other revenues generated to fund the provision of those
services.
Financial statements for a government, which delivers services through controlled entities,
whether primarily dependent on the government budget to fund their activities or not, are
consolidated financial statements.
Accounting Policies
This Standard requires that when disclosures about the GGS are made in financial statements,
those disclosures are to be made in accordance with the requirements prescribed in this Standard.
This will ensure that an appropriate representation of the GGS is made in the financial statements
and that disclosures about the GGS satisfy the qualitative characteristics of financial information,
including understandability, relevance, reliability, and comparability.

IPSASs generally apply to all public sector entities. However, it is only possible to disclose a
meaningful representation of the GGS for a government – not its individual controlled entities.
Therefore, this Standard specifies requirements for application only by governments which
prepare consolidated financial statements under the accrual basis of accounting as prescribed by
IPSASs. These governments may include national, state/provincial and local governments.

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Definitions
The GGS consisting of all resident central, state and local government units, social security funds
at each level of government, and nonmarket nonprofit institutions controlled by government
units. The GGS encompasses the central operations of government and typically includes all
those resident nonmarket nonprofit entities that have their operations funded primarily by the
government and government entities. As such, the financing of these entities is sourced primarily
from appropriation or allocation of the government’s taxes, dividends from government
corporations, other revenues, and borrowings. The GGS typically includes entities such as
government departments, law courts, public educational institutions, public health care units and
other government agencies.

Disclosures
IPSAS 1, “Presentation of Financial Statements” identifies a complete set of financial statements
(under the accrual basis) as a statement of financial position, statement of financial performance,
statement of changes in net assets/equity, cash flow statement and accounting policies and notes
to the financial statements.
This Standard requires disclosure of the major classes of assets, liabilities, revenues, expenses
and cash flows reflected in the financial statements. This Standard does not specify the manner in
which the GGS disclosures shall be made. Governments electing to make GGS disclosures in
accordance with this Standard may make such disclosures by way of note disclosure, separate
columns in the primary financial statements, or otherwise as considered appropriate in their
jurisdiction. However, the manner of presentation of the GGS disclosures will be no more
prominent than the consolidated financial statements prepared in accordance with IPSASs.
IPSAS 23―REVENUE FROM NON-EXCHANGE TRANSACTIONS (TAXES AND
TRANSFERS)

Objective

1. The objective of this Standard is to prescribe requirements for the financial reporting of
revenue arising from non-exchange transactions, other than non-exchange transactions
that give rise to an entity combination. The Standard deals with issues that need to be
considered in recognizing and measuring revenue from non-exchange transactions including
the identification of contributions from owners.

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Scope
2. An entity which prepares and presents financial statements under the accrual basis of
accounting shall apply this Standard in accounting for revenue from non-exchange
transactions. This Standard applies to all public sector entities other than Government
Business Enterprises.
3. This Standard addresses revenue arising from non-exchange transactions. Revenue arising
from exchange transactions is addressed in IPSAS 9, “Revenue from Exchange
Transactions.” While revenues received by public sector entities arise from both exchange
and non-exchange transactions, the majority of revenue of governments and other public
sector entities is typically derived from non-exchange transactions such as: Taxes; and
Transfers (whether cash or non-cash), including grants, debt forgiveness, fines, gifts,
donations, and goods and services in-kind.

Revenue
Revenue comprises gross inflows of economic benefits or service potential received and
receivable by the reporting entity, which represents an increase in net assets/equity, other
than increases relating to contributions from owners. Amounts collected as an agent of the
government or another government organization or other third parties will not give rise to an
increase in net assets or revenue of the agent. This is because the agent entity cannot control
the use of, or otherwise benefit from, the collected assets in the pursuit of its objectives.

Taxes
Taxes are the major source of revenue for many governments and other public sector entities.
Taxes are defined as economic benefits compulsorily paid or payable to public sector entities,
in accordance with laws or regulation, established to provide revenue to the government,
excluding fines or other penalties imposed for breaches of laws or regulation. Non-
compulsory transfers to the government or public sector entities such as donations and the
payment of fees are not taxes, although they may be the result of non-exchange transactions.
A government levies taxation on individuals and other entities, known as taxpayers, within
its jurisdiction by use of its sovereign powers. Tax laws and regulations can vary
significantly from jurisdiction to jurisdiction, but they have a number of common
characteristics. Tax laws and regulations establish a government’s right to collect the tax,

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 identify the basis on which the tax is calculated, and establish procedures to administer the
tax, that is, procedures to calculate the tax receivable and ensure payment is received. Tax
laws and regulations often require taxpayers to file periodic returns to the government agency
that administers a particular tax. The taxpayer generally provides details and evidence of the
level of activity subject to tax, and the amount of tax receivable by the government is
calculated. Tax laws are usually rigorously enforced and often impose severe penalties on
individuals or other entities breaching the law. Advance receipts, being amounts received in
advance of the taxable event, may also arise in respect of taxes.

Recognition and Measurement of Revenue from Non-Exchange Transactions

Revenue from non-exchange transactions shall be measured at the amount of the increase in
net assets recognized by the entity. When, as a result of a non-exchange transaction, an entity
recognizes an asset, it also recognizes revenue equivalent to the amount of the asset
measured, unless it is also required to recognize a liability. When a liability is subsequently
reduced, because the taxable event occurs, or a condition is satisfied, the amount of the
reduction in the liability will be recognized as revenue.

Measurement of Assets Arising from Taxation Transactions

Taxes
An entity shall recognize an asset in respect of taxes when the taxable event occurs and the
asset recognition criteria are met. Resources arising from taxes satisfy the criteria for
recognition as an asset when it is probable that the inflow of resources will occur and their
fair value can be reliably measured. Taxation revenue arises only for the government that
imposes the tax, and not for other entities. Taxes satisfy the definition of “non-exchange
transaction” because the taxpayer transfers resources to the government, without receiving
approximately equal value directly in exchange.

Assets arising from taxation transactions be measured at their fair value as at the date of
acquisition. Assets arising from taxation transactions are measured at the best estimate of the
inflow of resources to the entity.

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Transfers
An entity shall recognize an asset in respect of transfers when the transferred resources meet
the definition of an asset and satisfy the criteria for recognition as an asset. Transfers include
grants, debt forgiveness, fines, gifts, donations and goods and services in-kind. All these
items have the common attribute that they transfer resources from one entity to another
without providing approximately equal value in exchange and are not taxes as defined in this
Standard.

In certain circumstances, such as when a creditor forgives a liability, a decrease in the

carrying amount of a previously recognized liability may arise. In these cases, instead of
recognizing an asset as a result of the transfer, the entity decreases the carrying amount of the
liability.

Measurement of Transferred Assets

Transferred assets are measured at their fair value as at the date of acquisition. Entities
develop accounting policies for the recognition and measurement of assets that are consistent
with IPSASs. As noted previously, inventories, property, plant, equipment or investment
property acquired through non-exchange transactions are to be initially measured at their fair
value as at the date of acquisition in accordance with the requirements of IPSASs 12, 16 and
17.

Debt Forgiveness and Assumption of Liabilities

Lenders will sometimes waive their right to collect a debt owed by a public sector entity,
effectively canceling the debt. For example, a national government may cancel a loan owed
by a local government. In such circumstances, the local government recognizes an increase in
net assets because a liability it previously recognized is extinguished. Revenue arising from
debt forgiveness is measured at the fair value of the debt forgiven. This will normally be
the carrying amount of the debt forgiven.

Fines
Fines are economic benefits or service potential received or receivable by a public sector
entity, from an individual or other entity, as determined by a court or other law enforcement
body, as a consequence of the individual or other entity breaching the requirements of laws

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 or regulations. As such, fines are recognized as revenue when the receivable meets the
definition of an asset and satisfies the criteria for recognition as an asset. Assets arising from
fines are measured at the best estimate of the inflow of resources to the entity.

Gifts and Donations, including Goods In-kind

Gifts and donations are voluntary transfers of assets including cash or other monetary assets,
goods in-kind and so on that one entity makes to another, normally free from stipulations.
The transferor may be an entity or an individual. Gifts and donations are recognized as assets
and revenue when it is probable that the future economic benefits or service potential will
flow to the entity and the fair value of the assets can be measured reliably. With gifts and
donations, the making of the gift or donation and the transfer of legal title are often
simultaneous, in such circumstances, there is no doubt as to the future economic benefits
flowing to the entity.
Goods in-kind are recognized as assets when the goods are received, or there is a binding
arrangement to receive the goods. If goods in-kind are received without conditions attached,
revenue is recognized immediately. If conditions are attached, a liability is recognized, which
is reduced and revenue recognized as the conditions are satisfied. On initial recognition, gifts
and donations including goods in-kind are measured at their fair value as at the date of
acquisition, which may be ascertained by reference to an active market, or by appraisal.

IPSAS 24―PRESENTATION OF BUDGET INFORMATION IN FINANCIAL

STATEMENTS
Objective
This Standard requires a comparison of budget amounts and the actual amounts arising from
execution of the budget to be included in the financial statements of entities which are required
to, or elect to, make publicly available their approved budget(s) and for which they are,
therefore, held publicly accountable. The Standard also requires disclosure of an explanation of
the reasons for material differences between the budget and actual amounts. Compliance with the
requirements of this Standard will ensure that public sector entities discharge their accountability
obligations and enhance the transparency of their financial statements by demonstrating
compliance with the approved budget(s) for which they are held publicly accountable and, where

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the budget(s) and the financial statements are prepared on the same basis, their financial
performance in achieving the budgeted results.

Scope
An entity that prepares and presents financial statements under the accrual basis of accounting
shall apply this Standard. This Standard applies to public sector entities, other than Government
Business Enterprises (GBEs), that are required or elect to make publicly available their approved
budget(s).
Definitions
The following terms are used in this Standard with the meanings specified:
Annual budget means an approved budget for one year. It does not include published forward
estimates or projections for periods beyond the budget period.
Appropriation is an authorization granted by a legislative body to allocate funds for purposes
specified by the legislature or similar authority.
Approved budget means the expenditure authority derived from laws, appropriation bills,
government ordinances and other decisions related to the anticipated revenue or receipts for the
budgetary period.
Budgetary basis means the accrual, cash or other basis of accounting adopted in the budget that
has been approved by the legislative body.
Comparable basis means the actual amounts presented on the same accounting basis, same
classification basis, for the same entities and for the same period as the approved budget.
Final budget is the original budget adjusted for all reserves, carry over amounts, transfers,
allocations, supplemental appropriations, and other authorized legislative, or similar authority,
changes applicable to the budget period.
Multiyear budget is an approved budget for more than one year. It does not include published
forward estimates or projections for periods beyond the budget period.
Original budget is the initial approved budget for the budget period.

Presentation of a Comparison of Budget and Actual Amounts

An entity shall present a comparison of the budget amounts for which it is held publicly
accountable and actual amounts either as a separate additional financial statement or as

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additional budget columns in the financial statements currently presented in accordance with
IPSASs. The comparison of budget and actual amounts shall present separately for each level of
legislative oversight:
(a) The original and final budget amounts;
(b) The actual amounts on a comparable basis; and
(c) By way of note disclosure, an explanation of material differences between the budget for
which the entity is held publicly accountable and actual amounts, unless such explanation is
included in other public documents issued in conjunction with the financial statements and a
cross reference to those documents is made in the notes.

Presentation in the financial statements of the original and final budget amounts and actual
amounts on a comparable basis with the budget which is made publicly available will complete
the accountability cycle by enabling users of the financial statements to identify whether
resources were obtained and used in accordance with the approved budget. Differences
between the actual amounts and the budget amounts, whether original or final budget (often
referred to as the variance in accounting), may also be presented in the financial statements for
completeness.

An explanation of the material differences between actual amounts and the budget amounts will
assist users in understanding the reasons for material departures from the approved budget for
which the entity is held publicly accountable.

Presentation and Disclosure

An entity shall present a comparison of budget and actual amounts as additional budget columns
in the primary financial statements only where the financial statements and the budget are
prepared on a comparable basis.
Comparisons of budget and actual amounts may be presented in a separate financial statement,
(Statement of Comparison of Budget and Actual Amounts or a similarly titled statement)
included in the complete set of financial statements as specified in IPSAS 1. When the budget
and financial statements are not prepared on a comparable basis, a separate Statement of
Comparison of Budget and Actual Amounts is presented. In these cases, to ensure that readers do

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not misinterpret financial information which is prepared on different bases, the financial
statements could usefully clarify that the budget and the accounting bases differ.
IPSAS 3 requires financial statements to provide information that meets a number of qualitative
characteristics, including that the information is:
(a) Relevant to the decision making needs of users; and
(b) Reliable in that the financial statements:
(i) Represent faithfully the financial position, financial performance and cash flows of the entity;
(ii) Reflect the economic substance of transactions, other events and conditions and not merely
the legal form;
(iii) Are neutral, that is, free from bias;
(iv) Are prudent; and
(v) Are complete in all material respects.

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