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Adoption of the

Philippine Public Sector


Accounting Standards
(PPSAS)
COA Resolution No. 2014-003
dated January 24, 2014

CREATION AND FUNCTIONS OF THE PSASB:


COA Resolution No. No. 2008-012 dated October 10,
2008

created the Public Sector Accounting Standard Board (PSASB)

pursuant to the 1987 Philippine Constitution, Section 2 Article IX-D,


which vest on the Commission on Audit the exclusive authority to
promulgate accounting rules and regulations.

The PSASB shall assist the Commission in formulating and

implementing public sector accounting standards and establish and


maintain linkages with international bodies, professional
organizations and academe on accounting related fields on financial
management.

APPLICATION OF THE PPSAS


The PSASB shall determine the PPSAS for the following government agencies:
a. National Government Agencies(NGAs) which refer to departments, agencies, bureaus,
state universities and colleges, government instrumentalities and commissions
including the judiciary and constitutional commissions;
b. Local Government Unit(LGUs) which refer to provinces, cities, municipalities and
barangays; and
c. Government-Owned and/or Controlled Corporations (GOCCs) not considered as
GBEs
The PPSAS shall apply to all NGAs, LGUs, GOCCs not considered as Government
Business Enterprises(GBEs).
GBE is an entity that has all the following characteristics:
d. Is an entity with the power to contract in its own name;
e. Has been assigned the financial and operational authority to carry on a business;
f. Sells goods and services, in the normal course of its business, to other entities at a
profit or full cost recovery;
g. Is not reliant on continuing government funding to be a going concern;
h. Is controlled by a public sector entity.

SCOPE OF PPSAS
PPSAS should be read in the context of this Preface and the objective stated in each
Standard. Any exception from the scope of a Standard is likewise stated in that
Standard.
GUIDELINES/ISSUANCES ON PPSAS
The Standards on PPSAS shall set out the recognition, measurement, presentation
and disclosure requirements for financial reporting in the Philippine Government.
Transitional provisions shall be issued to address specific concerns not yet covered by
the PPSAS.
The Government Accounting Manual (GAM) shall provide guidelines to explain and
expand PPSAS, and provide practical assistance to agencies
Supplemental guidelines shall be issued when the need arises.

SETTING OF STANDARDS OF
PPSAS
In developing Standards of PPSAS, the PSASB considers and makes use of the existing
laws, financial reporting, accounting rules and regulations, and pronouncements issued
by the International Public Sector Accounting Standards Board (IPSASB).
The PSASB is also required to take into account all relevant factors, including:
a. Best accounting practices, both local and international;
b. The capacity of agencies to comply with Standards of PPSAS.
Standards of PPSAS are developed either:
.By adopting IPSASs issued by the IPSASB
.By developing a Standard of PPSAS to deal with a specific accounting issue that is
either not comprehensively dealt with the existing IPSAS or for which an IPSAS has
not been developed by the IPSASB.

The following are the processes and other


consideration in developing a Standard of PPSAS:
a. Applicability of IPSAS
b. Exposure draft of PPSAS
c. Fundamental issues
d. Statutory authority
e. Disclosure requirements
f. PPSAS Numbering
g. Financial reporting issues not dealt with by IPSAS
h. The draft of a PPSAS, developed from the exposure process, is
submitted to the PSASB for consideration of the Commission proper,
COA.

Timing of application of PPSAS


A Standard of PPSAS applies from the date determined in an issuance
by the Commission on Audit

Preface to International Public Sector Accounting


Standards

International Public Sector Accounting Standards (IPSAS) sets out the

objectives of the IPSASB and explains the scope and authority of the
IPSASs. This preface should be used as a reference for interpreting
Consultation papers, other discussion documents, Exposure drafts,
Recommended Practice Guidelines and Standards developed and issued by
IPSASB.

The mission of the International Federation of Accountants(IFAC), as set

out in its constitution, is to serve the public interest by contributing to


the development, adoption and implementation of high-quality
international standards and guidance; contributing to the development of
strong professional accountancy organization and accounting firms, and to
high quality practices by professional accountants, promoting the value of
professional accountants worldwide ; and speaking out on public interest
issues where the accountancy professions expertise is most relevant.

The IPSASB serves the public interest by developing and issuing, under its
own authority, accounting standards and other publications for use by
public sector entities other than GBEs.

OBJECTIVE OF IPSASB
-is to serve the public interest by developing high-quality accounting
standards and other publications for use by public sector entities around the
world in the preparation of general purpose financial reports.
- intended to enhance the quality and transparency of public sector financial
reporting by providing better information for public sector financial
management and the decision making.

In fulfilling its objective, the IPSASB develops and issues the


ff. publications:
a. IPSASs as the standards to be applied in the preparation of general purpose
financial reports of public sector entities other than GBEs.
b. Recommended Practice Guidelines to provide guidance on good practice
that public sector entities encourage to follow
c. Studies to provide advice on financial reporting issues in the public sector.
d. Other papers and research reports to provide information that contributes
to the body of knowledge about public sector financial reporting issues and
developments.

Scope and Authority of International Public Sector Accounting


Standards
Scope of the Standards

The IPSASB develops IPSASs which apply to the accrual basis and cash basis
of accounting.

IPSAs set out requirements dealing with transactions and other events in
general purpose financial reports.

The IPSAS are designed to apply to the general purpose financial reports of
all public sector entities other then GBEs. Public sector entities includes:
National Government, Regional, Local Governments, unless otherwise
stated.

Any limitation of the applicability of specific IPSASs is made clear in those


standards.

The IPSASB has adopted the policy that all paragraphs in IPSASs shall have
equal authority, and that the authority of a particular provision shall be
determined by the language used.

Scope and Authority of International Public Sector Accounting


Standards

IPSASs for the Accrual and Cash Bases


The IPSASB develops accrual IPSASs that:
Are

converged with International Financial Reporting Standards issued by


the IASB by adapting them to a public sector context where appropriate.
Deals

with public sector financial reporting issues that are either not
addressed by adapting IFRS or for which IFRS have not been developed by the
IASB.
The IPSASB has also issued a comprehensive Cash Basis IPSAS that includes
mandatory and encouraged disclosure sections.

Scope and Authority of International Public Sector Accounting


Standards

Moving from the Cash Basis to the Accrual Basis


The Cash Basis IPSAS encourages an entity to voluntarily disclose accrual
based information, although its core financial statements will nonetheless
be prepared under the cash basis of accounting.
The IPSASB also attempts to facilitate compliance with accrual based
IPSASs through the use of transitional provisions in certain standards.
IPSAS 1, Presentation of Financial Statements includes the ff.
requirement:

An entity whose financial statements comply with IPSAS shall make an


explicit and unreserved statement of such compliance in the Notes.

financial Statements shall not be describes as complying with IPSAS


unless they complied with all the requirements of IPSASs.

Scope and Authority of International Public Sector Accounting


Standards

Authority of the IPSAS


Within each jurisdiction, regulation may govern the issue of general purpose
financial reports by public sector entities.
The IPSASB believes that the adoption of IPSASs, together with disclosure of
compliance with them, will lead to a significant improvement in the quality of
general purpose financial reporting by the public sector entities.
The IPSASB strongly encourages the adoption of IPSASs and the harmonization of
national requirements with IPSASs.

LANGUAGE
The official text of the IPSASs and other publications is that approved by
the IPSASB in the English language. Member bodies of IFAC are authorized
to prepare, after obtaining IFAC approval, translation of such
pronouncements at their own cost, to be issued in the language of their
own jurisdiction as appropriate.

Objectives and Users of General Purpose Financial Reporting


Objectives of Financial Reporting
The objectives of financial reporting by public sector entities are to provide
information about he entity that is useful to users of GPFRs for accountability
purposes and for decision making purposes (hereafter referred to as useful for
accountability and decision making purposes).
Users of General Purpose Financial Reports
Governments and other public sector entities raise resources from taxpayers,
donors, lenders and other resource providers for use in the provision of
services to citizens and other service recipients. These entities are accountable
for their management and use of resources to those that provide them with
necessary services. Those that provide the resources and receive, or expect to
receive, the services also require information as input for decision making
purposes.

Information provide by General Purpose Financial Reports


Financial Position, Financial Performance and Cash Flows
Information about the financial position of a government or other
public sector entity will enable users to identify the resources of
the entity and claims to those resources at the reporting date.
Information about financial performance of a government or other
public sector entity will inform assessments of matters such as
whether the entity has acquired resources economically, and used
them efficiently and effectively to achieve its service delivery
objectives.
Information about the cash flows of a government or other public
sector entity contributes to assessments of financial performance

Qualitative Characteristics
GPFRs present financial and non-financial information about
economic and other phenomena. The qualitative characteristics of
information included in GPFRs are the attributes that make the
information useful to users and support the achievement of the
objectives of financial reporting. The objectives of financial
reporting are to provide information useful for accountability and
decision making purposes.
The qualitative characteristics of information included in GPFRs of
public sector entities are relevance, faithful representation,
understandability, timeliness, comparability and verifiability.
Pervasive constraints on information included in GPFRs are
materiality, cost benefit and achieving an appropriate balance
between the qualitative characteristics.

Faithful representation
To be useful in financial reporting, information must be faithful and representation of the
economic and other phenomena that is purports to represent. It is attained when the
depiction of the phenomenon is complete, neutral, and free fro, material error.
Information that is faithfully represents an economic or other phenomenon depicts the
substance of the underlying transaction, other event, activity of circumstance-which is
not necessarily always the same as its legal form.
Understandability
Understandability is the quality of information that enables users to comprehend its
meaning. GPFRs of public sector entities should present information in a manner that
responds to the needs and knowledge base of users, and to the nature of the information
presented.
Timeliness
Timeliness- means having information available for users before it loses its capacity to
be useful for accountability and decision making purposes.
Comparability
Comparability is the quality of information that enables users to identify similarities in,
and differences between, two sets of phenomena. It is not a quality of an individual item
of information, but rather a quality of the relationship between two or more items of
information.

Verifiability
Verifiability is the quality of information that helps assure users that information in
GPFRs faithfully represents the economic and other phenomena that purports to
represent.
Constraints on Information included in General Purpose Financial Reports
Materiality
Information is material if it is omission or misstatement could influence the discharge of
accountability by the entity, or the decisions that users make on the basis of the entitys
GPFRs prepared for that reporting period. It depends on both the nature and amount of
item judged in the particular circumstances of each entity.
Cost Benefit
Financial reporting imposes costs. The benefits of financial reporting should justify those
costs. Assessing, whether the benefits of providing information justify the related costs is
often a matter of judgment, because it is often not possible to identify and/or quantify all
the costs and all the benefits of information included in GPFRs.

Reporting Entity
A public sector reporting entity is a government or other public
sector organization, program or identifiable area of activity that
prepares GPFRs.
A public sector reporting entity may comprise two or more
separate entities that presents GPFRs as if they are single entitysuch as reporting entity is referred to as a group reporting entity.
Key characteristics of a reporting entity
It is an entity that raises resources from, or on behalf of,
constituents and/or uses resources to undertake activities for the
benefit of , or on behalf of, those constituents; and
There are service recipients or resource providers dependent on
GPFRs of the entity for information for accountability or decision

Presentation of Financial Statement


Philippine Application Guidance to IPSAS 1
Objective
Paragraph 1- states that the objective of this standard and sets out overall
considerations for the presentation of financial statements prepared under accrual basis
of accounting.
Scope
Paragraph 2- deals with the applicability of this standard to all public sector entities other
than Government Business Enterprises(GBE).
GBE is an entity that has all the ff. characteristics:
An entity with power to contract in its own name
Has been assigned the financial and operational authority to carry on a business
Sells goods and services, in the normal course of business to other entities
Is not reliant on continuing government funding to be a going concern
Is controlled by a public sector entity.
Responsibility of Financial Statements
The responsibility for the fair presentation and reliability of financial statements rests with
the management of the reporting agency, particularly the head of finance/accounting
office and the head of the agency or his authorized representative

Consistency of Presentation
Paragraphs 43 and 44 pertain to changes in the presentation of entitys financial
statements if the changed presentation provides information that is reliable and is more
relevant to users of the financial statements.
Cash Flow Statement
Background
This Philippine Public Sector Accounting Standard consists of international public sector
accounting standard (IPSAS)2, Cash Flow Statements, and the Philippine Application
Guidance (PAG) prepared to suit the Philippine Public sector situation.
Scope
PAG 1. Paragraph 3 deals with the applicability of this standard to all public sector entity
other than Government Business Enterprises.
Accounting Policies, Changes in Accounting Estimates and Errors
Background
This Philippine Public Sector Accounting Standard consists of international public sector
accounting standard (IPSAS) 3, Accounting Policies, Changes in Accounting Estimates
and Errors, and the Philippine Application Guidance (PAG) prepared to suit the
Philippine Public sector situation

Introduction to the PPSAS 3


IPSAS 3 prescribes the criteria for selecting and changing accounting policies, together
with the accounting treatment and disclosure of changes in accounting policies,
changes in accounting estimates , and the correction of errors.
This standard is intended to enhance the relevance and reliability of an entitys financial
statements and the comparability of those financial statements over time and with the
financial statements of other entities.
Scope
PAG1-Deals with the applicability of this standard to all public sector entities other than
Government Business Enterprise.
The Effects of Changes in Foreign Exchange Rates
Background
This Philippine Public Sector Accounting Standard consists of international public sector
accounting standard (IPSAS) 4, The Effects of Changes in Foreign Exchange Rates
, and the Philippine Application Guidance (PAG) prepared to suit the Philippine Public
sector situation.
Introduction to the IPSAS 4
IPSAS 4 prescribes the standards in including foreign currency transactions and foreign
operations in the financial statements, and translating financial statements into a
presentation currency.

THE END