INTRODUCTION TO THE

INTERNATIONAL PUBLIC
SECTOR ACCOUNTING
STANDARD
• Authoritative standards for preparation of
general purpose financial statements
• Designed to apply to public sector entities that
– are responsible for the delivery of services to benefit
the public and/or to redistribute income and wealth;
– mainly finance their activities, directly or indirectly, by
means of taxes and/or transfers from other levels of
government, social contributions, debt or fees; and
– do not have a primary objective to make profits.

*What are IPSAS?

* The International Public Sector Accounting
Standards Board (the IPSASB) develops
accounting standards for public sector entities
referred to as International Public Sector
Accounting Standards (IPSAS).
* The IPSASB issues IPSAS dealing with financial
reporting under the cash basis of accounting
and the accrual basis of accounting.

* International Public Sector

Accounting Standards
• Independent standard-setting board
• 18 members; international composition; meetings and materials
public
• Objective: Strengthening public financial management (PFM)
globally through increasing adoption of accrual-based IPSAS:
* Delivered through two main areas of activity, both of which have
a public interest focus:
– Developing and maintaining IPSAS and other high-quality
financial reporting guidance for the public sector; and
– Raising awareness of IPSAS and the benefits of their
adoption.

*Who is the IPSASB?

 IPSAS 1
PRESENTATION
OF FINANCIAL
STATEMENTS
* Financial
statements are written records that
convey the business activities and the financial
performance of a company.
* Financial statements are often audited by
government agencies, accountants, firms, etc.
to ensure accuracy and for tax, financing, or
investing purposes.

* What is Financial Statement

* Balance sheet
* Income statement
* Cash flow statement.

*Financial statements
include:
* The balance sheet provides an overview of
assets, liabilities, and stockholders' equity as a
snapshot in time.

*Balance sheet
* The income statement primarily focuses on a
company’s revenues and expenses during a
particular period. Once expenses are
subtracted from revenues, the statement
produces a company's profit figure called net
income.

* Income statement
* The cash flow statement (CFS) measures how
well a company generates cash to pay its debt
obligations, fund its operating expenses, and
fund investments.

*Cash flow statement.

* Objectives of IPSAS 1
Compatibility
Overall requirements
Minimum requirements
Instruction for structure and content

*Financial Statement
under IPSAS
* Financial Position
* Financial Performance
* Cash Flows
* Notes to Accounts

*Purpose of Financial
Statement
* Presentation of Financial statements
* Statement of Financial Position
* Statement of Financial performance
 statement of comprehensive income
Statement of change in equity
Cash flow statements
Notes

*Financial Statement
IPSAS-1
* Going concerns
* Fair presentation
* Materiality
* Aggregation – similar transaction
* Frequency of Reporting.
* Accrual Basis of Accounting
* Consistency
* Comparatives
* Consolidation

*Purpose of Financial
Statements
* Statement of Changes in Equity refers to the
reconciliation of the opening and closing
balances of equity in a company during a
particular reporting period.

*Statement of Change
in Equity
* This primary purpose of Statement of Changes in Equity is to
provide details about all the movements in the equity
 account during an accounting period, which is otherwise not
available anywhere else in the financial statements. As such,
it helps the shareholders and investors in making more
informed decisions about their investments. Further, it also
allows the analysts and other readers of the financial
statements to understand what factors resulted in the change
in the equity capital.

*Purpose
IPSAS 2—CASH FLOW
STATEMENTS
*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

*Objective
* 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.

*Benefits of Cash Flow

Information
* Accrual basis means a basis of accounting under which
transactions and other events are recognized when
they occur (and not only when cash or its equivalent is
received or paid).
* Assets are resources controlled by an entity as a result
of past events and from which future economic
benefits or service potential are expected to flow to
the entity.

*Definitions
* Cash comprises cash on hand and demand
deposits.
* Cash equivalents are short-term, highly liquid
investments that are readily convertible to
known amounts of cash and which are subject
to an insignificant risk of changes in value.
Cash flows are inflows and outflows of cash
and cash equivalents.

*Definitions
* Economic entity means a group of entities comprising
a controlling entity and one or more controlled
entities.
* Expenses are decreases in economic benefits or service
potential during the reporting period in the form of
outflows or consumption of assets or incurrences of
liabilities that result in decreases in net assets/equity,
other than those relating to distributions to owners.
* Financing activities are activities that result in
changes in the size and composition of the contributed
capital and borrowings of the entity.

*Definitions
* Investing activities are the acquisition and
disposal of long-term assets and other
investments not included in cash equivalents.
Liabilities are 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.

*Definitions
* Net assets/equity is the residual interest in
the assets of the entity after deducting all its
liabilities.
* Operating activities are the activities of the
entity that are not investing or financing
activities.
* Reporting date means the date of the last day
of the reporting period to which the financial
statements relate.

*Definitions
* 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.

* Presentation of a Cash Flow

Statement
* Operating Activities
* Investing Activities
* Financing Activities

* Component of Cash Flow

Statement
* 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.

*Operating Activities
* Cash flows from operating activities are primarily derived
from the principal cash-generating activities of the entity.
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 grants or transfers and other
appropriations or other budget authority made by central
government or other public sector entities;
* (d)Cash receipts from royalties, fees, commissions and
other revenue;

*Operating Activities
* (e) Cash payments to other public sector
entities to finance their operations (not
including loans);
* (f)Cash payments to suppliers for goods and
services;
* (g)Cash payments to and on behalf of
employees;
* (h) Cash receipts or payments in relation to
litigation settlements.

*Operating 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.

*Investing Activities
* (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;

*Investing Activities
* (c) Cash payments to acquire equity or debt
instruments of other entities and interests in
joint ventures (other than payments for those
instruments considered to be cash equivalents
or those held for dealing or trading purposes);
* Cash receipts from sales of equity or debt
instruments of other entities and interests in
joint ventures (other than receipts for those
instruments considered to be cash equivalents
and those held for dealing or trading purposes);

*Investing Activities
* (e)Cash advances and loans made to other
parties (other than advances and loans made
by a public financial institution);
* (f)Cash receipts from the repayment of
advances and loans made to other parties
(other than advances and loans of a public
financial institution);

*Investing 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.

*Financing Activities
* (a) Cash proceeds from issuing debentures,
loans, notes, bonds, mortgages and other short
or long-term borrowings;
* (b) Cash repayments of amounts borrowed; and
* (c) Cash payments by a lessee for the reduction
of the outstanding liability relating to a finance
lease.

*Financing Activities
*Cash Flow Statement
*Cash Flow Statement
*Cash Flow Statement
 IPSAS -3
ACCOUNTING POLICIES,
CHANGES IN ACCOUNTING
ESTIMATES AND ERRORS
*
* The objective of this Standard is to prescribe 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 corrections of errors.
* ThisStandard is intended to enhance the relevance
and reliability of an entity’s financial statements,
and the comparability of those financial statements
over time and with the financial statements of other
entities.

*Objective
* This Standard shall be applied in selecting and
applying accounting policies, and accounting
for changes in accounting policies, changes in
accounting estimates and corrections of prior
period errors.

*Scope
* When an IPSAS specifically applies to a transaction,
other event or condition, the accounting policy or
policies applied to that item shall be determined by
applying the Standard and considering any relevant
Implementation Guidance issued by the IPSASB for
the Standard.

*Accounting Policies
* An entity shall select and apply its accounting
policies consistently for similar transactions,
other events and conditions, unless an IPSAS
specifically requires or permits categorization
of items for which different policies may be
appropriate. If a Standard requires or permits
such categorization, an appropriate accounting
policy shall be selected and applied
consistently to each category.

*Consistency of
Accounting Policies
* An entity shall change an accounting policy
only if the change:
* (a) Is required by an IPSAS; or
* (b) Results in the financial statements
providing reliable and more relevant
information about the effects of transactions,
other events and conditions on the entity’s
financial position, financial performance or
cash flows.

*Changes in
Accounting Policies
TO BE CONTINUED……