International

PublicSector
Accounting Standard
(IPSAS)
 Introduction….
International Public Sector Accounting
Standard (IPSAS) was prepared by the
International Public Sector Accounting
Standards Board (IPSASB), an
independent standard-setting body within
the International Federation of
Accountants (IFAC).
The objective of the IPSASB is to serve the
public interest by developing high quality
accounting standards for use by public
sector entities around the world in the
preparation of general purpose financial
statements. This will enhance the quality
and transparency of public sector financial
reporting and strengthen public confidence
in public sector financial management
 IPSAS 1—PRESENTATION OF
FINANCIAL STATEMENTS
 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.
 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.
 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.
 IPSAS 3—NET SURPLUS OR DEFICIT FOR THE
PERIOD,FUNDAMENTAL ERRORS AND CHANGES IN
ACCOUNTING POLICIES
 The objective of this Standard is to prescribe the
classification, disclosure and accounting treatment of
certain items in the financial statements so that all
entities prepare and present these items on a consistent
basis. This enhances comparability both with the entity’s
financial statements of previous periods and with the
financial statements of other entities.
 Accordingly, this Standard requires the classification and
disclosure of extraordinary items and the separate
disclosure of certain items in the financial statements. It
also specifies the accounting treatment for changes in
accounting estimates, changes in accounting policies and
the correction of fundamental errors.
 The disclosure of extraordinary items in the cash flow
statement is required by International Public Sector
Accounting Standard (IPSAS) 2, “Cash Flow
Statements.”
IPSAS 4―THE EFFECTS OF CHANGES
IN FOREIGN EXCHANGE RATES

An entity may carry on foreign activities in

two ways. It may have transactions in
foreign currencies or it may have foreign
operations. In addition, an entity may
present its financial statements in a foreign
currency. The objective of this Standard is to
prescribe how to include foreign currency
transactions and foreign operations in the
financial statements of an entity and how to
translate financial statements into a
presentation currency.
The principal issues are which exchange rate
(s) to use and how to report the effects of
changes in exchange rates in the financial
statements.
IPSAS 5—BORROWING COSTS
 This Standard prescribes the
accounting treatment for borrowing
costs. This Standard generally requires
the immediate expensing of borrowing
costs. However, the Standard permits,
as an allowed alternative treatment,
the capitalization of borrowing costs
that are directly attributable to the
acquisition, construction or production
of a qualifying asset.
 IPSAS 6—CONSOLIDATED FINANCIAL
STATEMENTS AND ACCOUNTING FOR
CONTROLLED ENTITIES

 This Standard applies to the preparation and

presentation of consolidated financial statements, and
accounting for controlled entities, by all public sector
entities other than Government Business Enterprises.
 Government Business Enterprises (GBEs) are required
to comply with International Accounting Standards
(IASs) issued by the International Accounting
Standards Committee. The Public Sector Committee’s
Guideline No. 1, “Financial Reporting by Government
Business Enterprises” notes that IASs are relevant to
all business enterprises, regardless of whether they
are in the private or public sector. Accordingly,
Guideline No. 1 recommends that GBEs should present
financial statements that conform, in all material
respects, to IASs.
 IPSAS 6—CONSOLIDATED FINANCIAL
STATEMENTS AND ACCOUNTING FOR
CONTROLLED ENTITIES cont…
 This Standard establishes requirements for the
preparation and presentation of consolidated
financial statements, and for accounting for
controlled entities in the separate financial
statements of the controlling entity. Although GBEs
are not required to comply with this Standard in their
own financial statements, the provisions of this
Standard will apply where a public sector entity that
is not a GBE has one or more controlled entities that
are GBEs. In these circumstances, this Standard
should be applied in consolidating GBEs into the
financial statements of the economic entity, and in
accounting for investments in GBEs in the controlling
entity’s separate financial statements.
 IPSAS 7—ACCOUNTING FOR
INVESTMENTS IN ASSOCIATES
 This Standard provides the basis for accounting
for ownership interests in associates. That is, the
investment in the other entity confers on the
investor the risks and rewards incidental to an
ownership interest. The Standard applies only to
investments in the formal equity structure (or its
equivalent) of an investee. A formal equity
structure means share capital or an equivalent
form of unitized capital, such as units in a
property trust, but may also include other equity
structures in which the investor’s interest can be
measured reliably. Where the equity structure is
poorly defined it may not be possible to obtain a
reliable measure of the ownership interest.
 IPSAS 8—FINANCIAL REPORTING
OF INTERESTS IN JOINT VENTURES
 In respect of its interest in jointly controlled assets, a
venture should recognize in its separate financial
statements and consequently in its consolidated financial
statements:
(a) Its share of the jointly controlled assets, classified
according to
the nature of the assets;
(b) Any liabilities which it has incurred;
(c) Its share of any liabilities incurred jointly with the other
ventures in relation to the joint venture;
(d) Any revenue from the sale or use of its share of the output
of the joint venture, together with its share of any
expenses incurred by the joint venture; and
(e) Any expenses which it has incurred in respect of its
interest in
the joint venture
 IPSAS 10— FINANCIAL REPORTING IN
HYPER-INFLATIONARYECONOMIES

1. An entity which prepares and presents financial

statements under the accrual basis of accounting
should apply this Standard to the primary financial
statements, including the consolidated financial
statements, of any entity that reports in the currency
of a hyperinflationary economy.
2. This Standard applies to all public sector entities
other than
Government Business Enterprises.
3. In a hyperinflationary economy, reporting of
operating results and financial position in the local
currency without restatement is not useful. Money
loses purchasing power at such a rate that
comparison of amounts from transactions and other
events that have occurred at different times, even
within the same reporting period, is misleading.
 IPSAS 11—CONSTRUCTION
CONTRACTS
 The objective of this Standard is to
prescribe the accounting treatment of
costs and revenue associated with
construction contracts. The Standard:
• Identifies the arrangements that are to be
classified as construction contracts;
• Provides guidance on the types of
construction contracts that can arise in the
public sector; and
• Specifies the basis for recognition and
disclosure of contract expenses and, if
relevant, contract revenues.
 IPSAS 12—INVENTORIES
 The objective of this Standard is to prescribe the
accounting treatment for inventories under the
historical cost system.
 A primary issue in accounting for inventories is
the amount of cost to be recognized as an asset
and carried forward until the related revenues are
recognized.
 This Standard provides practical guidance on the
determination of cost and its subsequent
recognition as an expense, including any write-
down to net realizable value. It also provides
guidance on the cost formulas that are used to
assign costs to inventories.
 IPSAS 12—INVENTORIES
Measurement of Inventories
11. Inventories should be measured at the
lower of cost and net realizable value,
except where paragraph 12 applies.
12. Inventories should be measured at the
lower of cost and current replacement cost
where they are held for:
(a) Distribution at no charge or for a nominal
charge; or
(b) Consumption in the production process of
goods to be distributed at no charge or for a
nominal charge.
 IPSAS 13—LEASES
An entity which prepares and presents financial statements under
the accrual basis of accounting should apply this Standard in
accounting for all leases other than:
(a) Lease agreements to explore for or use natural resources,
such as oil, gas, timber, metals and other mineral rights; and
(b) Licensing agreements for such items as motion picture films,
video recordings, plays, manuscripts, patents and copyrights.
However, this Standard should not be applied to the
measurement by:
(a) Lessees of investment property held under finance leases; or
(b) Lessors of investment property leased out under operating
leases (see International Public Sector Accounting Standard
(IPSAS) 16, “Investment Property”).
2. This Standard applies to all public sector entities other than
Government Business Enterprises.
IPSAS 14—EVENTS AFTER THE
REPORTING DATE
The objective of this Standard is to prescribe:
(a) When an entity should adjust its financial
statements for events after the reporting date;
and
(b) The disclosures that an entity should give about
the date when the financial statements were
authorized for issue and about events after the
reporting date.
The Standard also requires that an entity should
not prepare its financial statements on a going
concern basis if events after the reporting date
indicate that the going concern assumption is not
appropriate.
 IPSAS 15—FINANCIAL INSTRUMENTS:
DISCLOSURE AND PRESENTATION
The dynamic nature of international financial markets has
resulted in the widespread use of a variety of financial
instruments ranging from traditional primary
instruments, such as bonds, to various forms of
derivative instruments, such as interest rate swaps.
Public sector entities use a wide range of financial
instruments from simple instruments such as payables
and receivables to more complex instruments (such as
cross-currency swaps to hedge commitments in foreign
currencies) in their operations. To a lesser extent,
public sector entities may issue equity instruments or
compound liability/equity instruments. This may occur
where an economic entity includes a partly-privatized
Government Business Enterprise (GBE) that issues
equity instruments into the financial markets or where
a public sector entity issues debt instruments that
convert to an ownership interest under certain
conditions.
 IPSAS 15—FINANCIAL INSTRUMENTS:
DISCLOSURE AND PRESENTATION
The objective of this Standard is to
enhance financial statement users’
under standing of the significance of
on-balance-sheet and off-balance-
sheet financial instruments to a
government’s or other public sector
entity’s financial position,
performance and cash flows. In this
Standard, references to “balance
sheet” in the context of “on balance-
sheet” and “off-balance-sheet” have
the same meaning as “statement of
financial position
 IPSAS 16—INVESTMENT
PROPERTY
This Standard deals with accounting for investment property including
the measurement in a lessee’s financial statements of investment
property held under a finance lease and with the measurement in a
lessor’s financial statements of investment property leased out
under an operating lease.
This Standard does not deal with matters covered in International
Public Sector Accounting Standard (IPSAS) 13, “Leases,” including:
(a) Classification of leases as finance leases or operating leases;
(b) Recognition of lease revenue earned on investment property
(c) Measurement in a lessee’s financial statements of property held
under an operating lease;
(d) Measurement in a lessor’s financial statements of property leased
out under a finance lease;
(e) Accounting for sale and leaseback transactions; and
(f) Disclosure about finance leases and operating leases.
 IPSAS 17—PROPERTY, PLANT
AND EQUIPMENT
 An entity which prepares and presents financial
statements under the accrual basis of accounting
should apply this Standard in accounting for
property, plant and equipment, except:
 (a) When a different accounting treatment has been
adopted in accordance with another International
Public Sector Accounting Standard; and
 (b) In respect of heritage assets. However, the
disclosure requirements of paragraphs 73, 74 and 77
apply to those heritage assets that are recognized.
This Standard applies to all public sector entities other
than Government Business Enterprises.
 Paragraph--73
73. The financial statements should disclose, for each
class of property, plant and equipment recognized in
the financial statements:
(a) The measurement bases used for determining the
gross carrying amount. When more than one basis
has been used, the gross carrying amount for that
basis in each category should be disclosed;
(b) The depreciation methods used;
(c) The useful lives or the depreciation rates used;
(d) The gross carrying amount and the accumulated
depreciation (aggregated with
(e) accumulated impairment losses) at the beginning
and end of the period; and
 Paragraph—73 conti…
A reconciliation of the carrying amount at the beginning and end of
the period showing:
(i) Additions;
(ii) Disposals;
(iii) Acquisitions through business combinations;
(iv) Increases or decreases during the period resulting from
revaluations and from impairment losses (if any) recognized or
reversed directly in net assets/equity under the appropriate
international or national accounting standard adopted;
(v) Impairment losses (if any) recognized in the statement of
financial performance during the period under the appropriate
international or national accounting standard adopted;
(vi) Impairment losses (if any) reversed in the statement of financial
performance during the period under the appropriate international
or national accounting standard adopted;
(vii) Depreciation;
(viii) The net exchange differences arising on the translation of the
financial statements of a foreign entity; and
(ix) Other movements.
 Paragraph--74

74. The financial statements should also disclose for

each class of property, plant and equipment
recognized in the financial statements:
(a) The existence and amounts of restrictions on title
for property, plant and equipment pledged as
securities for liabilities;
(b) The accounting policy for the estimated costs of
restoring the site of items of property, plant and
equipment;
(c) The amount of expenditures on account of property,
plant and equipment in the course of construction;
and
(d) The amount of commitments for the acquisition of
property, plant and equipment.
 Paragraph--77
When a class of property, plant and equipment
is stated at revalued amounts the following
should be disclosed:
(a) The basis used to revalue the assets within
the class;
(b) The effective date of the revaluation;
(c) Whether an independent valuer was
involved;
(d) The nature of any indices used to determine
replacement cost;
(e) The revaluation surplus, indicating the
movement for the period and any restrictions
on the distribution of the balance to
shareholders or other equity holders;
 IPSAS 18—SEGMENT
REPORTING
The objective of this Standard is to establish
principles for reporting financial
information by segments. The disclosure
of this information will:
(a) Help users of the financial statements to
better understand the entity’s past
performance and to identify the resources
allocated to support the major activities of
the entity; and
(b) Enhance the transparency of financial
reporting and enable the entity to better
discharge its accountability obligations.
IPSAS 19—PROVISIONS, CONTINGENT
LIABILITIES AND CONTINGENT ASSETS
 The objective of this Standard is to define
provisions, contingent liabilities and contingent
assets, identify the circumstances in which
provisions should be recognized, how they should
be measured and the disclosures that should be
made about them.
 The Standard also requires that certain
information be disclosed about contingent
liabilities and contingent assets in the notes to
the financial statements to enable users to
understand their nature, timing and amount.
 IPSAS 20—RELATED PARTY
DISCLOSURES
 The objective of this Standard is to require the
disclosure of the existence of related party
relationships where control exists and the
disclosure of information about transactions
between the entity and its related parties in
certain circumstances. This information is
required for accountability purposes and to
facilitate a better understanding of the financial
position and performance of the reporting entity.
The principal issues in disclosing information
about related parties are identifying which parties
control or significantly influence the reporting
entity and determining what information should
be disclosed about transactions with those
parties.
IPSAS 21--IMPAIRMENT OF NON-CASH-GENERATING
ASSETS

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, except:
(a) Inventories
(b) Assets arising from construction contracts “Construction
Contracts”);
(c) Financial assets that are included in the scope of “Financial
Instruments: Disclosure and Presentation”;
(d) Investment property that is measured using the fair value model
(e) Non-cash-generating property, plant and equipment that is
measured at revalued amounts (f) Other assets in respect of which
accounting requirements for impairment are included in another
International Public Sector Accounting Standard.
This Standard applies to all public sector entities other than
Government Business Enterprises (GBEs). Public sector entities
that hold cash-generating assets shall apply International
Accounting Standard IAS 36“Impairment of Assets” to such assets.
Public sector entities that hold
 IPSAS22 — DISCLOSURE OF
FINANCIALINFORMATION ABOUT THE
GENERAL GOVERNMENT SECTOR

 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 non-market
activities of the government and between
financial statements and statistical bases of
financial reporting.
 IPSAS-- 23
REVENUE FROM NON-EXCHANGE TRANSACTIONS
(TAXES AND TRANSFERS )
 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:
 (a) Taxes; and
 (b) Transfers (whether cash or non-cash), including grants,
debt forgiveness, fines, bequests, gifts, donations, and
goods and services in-kind.
 IPSAS 24
PRESENTATION OF BUDGET INFORMATION IN
FINANCIAL STATEMENTS
 The Standard applies to public sector entities that
make their approved budget (s) publicly
available, whether in accordance with legislative
or other authoritative requirements imposed on
the entity or on a voluntary basis to enhance the
transparency of their financial reporting. It
requires such entities to make certain disclosures
about budget and actual amounts in their
financial statements or other reports. It does not
require that public sector entities make publicly
available their approved budgets, nor does it
specify requirements for the formulation or
presentation of approved budgets that are made
publicly available.
 IPSAS- 25
EMPLOYEE BENEFITS
 The Standard deals with four categories of employee
benefits:
(a) Short-term employee benefits, such as wages, salaries
and social security contributions, paid annual leave and
paid sick leave, profit-sharing and bonuses (if payable
within twelve months of the end of the period) and non-
monetary benefits (such as medical care, housing, cars and
free or subsidized goods or services) for current
employees;
(b) Post-employment benefits such as pensions, other
retirement benefits, post employment life insurance and
post-employment medical care;
(c) Other long-term employee benefits, which may include
long-service leave or sabbatical leave, jubilee or other
long-service benefits, long-term disability benefits and, if
they are payable twelve months or more after the end of
the period, performance related bonuses, profit-sharing
bonuses and deferred compensation; and
(d) Termination benefits.
 IPSAS-26 Impairment of Cash-
Generating Assets

 The Standard provides requirements for the identification of

assets that may be impaired, the impairment testing of
cash-generating assets and cash-generating units and the
accounting for impairment losses and the reversal of those
losses. It is based on IAS 36, “Impairment of Assets.”
 A cash-generating asset is an asset held with the primary
objective of generating a commercial return. The Standard
does not deal with the impairment of non-cash generating
assets. Requirements for impairment testing, the
accounting for impairment losses and the reversal of those
losses for non-cash-generating assets are provided in
IPSAS 21, “Impairment of Non-Cash-Generating Assets.”
The Standard and IPSAS 21 require entities to disclose the
criteria developed to distinguish cash-generating assets
and non-cash-generating assets
 IPSAS 27-Agriculture
 IPSAS 27 prescribes, among other things, the
accounting treatment for biological assets during
the period of growth, degeneration, production,
and procreation, and for the initial measurement
of agricultural produce at the point of harvest. It
requires measurement at fair value less costs to
sell from initial recognition of biological assets up
to the point of harvest, other than when fair
value cannot be measured reliably on initial
recognition.
 However, IPSAS 27 does not deal with processing
of agricultural produce after harvest; for
example, processing grapes into wine and wool
into yarn.
IPSAS 28-Financial Instruments:
Presentation
 The objective of this Standard is to establish principles for
presenting financial instruments as liabilities or net
assets/equity and for offsetting financial assets and financial
liabilities. It applies to the classification of financial
instruments, from the perspective of the issuer, into
financial assets, financial liabilities and equity instruments;
the classification of related interest, dividends or similar
distributions, losses and gains; and the circumstances in
which financial assets and financial liabilities should be
offset.

 2. The principles in this Standard complement the principles

for recognizing and measuring financial assets and financial
liabilities in IPSAS 29, ―Financial Instruments: Recognition
and Measurement, and for disclosing information about
them in IPSAS 30, ―Financial Instruments: Disclosures.
IPSAS 29- Financial Instruments:
Recognition and Measurement
 Financial instruments are contractual arrangements that
result in a financial asset for one entity and a financial
liability or equity instrument in another. Rights and
obligation arising out of non-contractual arrangements,
such as through the exercise of legislation or through
constructive obligations, are not financial instruments. The
recognition and measurement of rights and obligations
arising out of these transactions are addressed in other
IPSASs.
 Many contracts meet the definition of a ―financial asset or
a financial liability. Some of these are accounted for either
by using other IPSASs, or accounted for partly using other
IPSASs and partly using IPSAS 29. Some examples include
rights and obligations arising from employee benefits, lease
receivables and finance lease payables.
IPSAS 30- Financial Instruments:
Disclosures
 IPSAS 30 applies to all risks arising from all
financial instruments, except those instruments
listed in paragraph 3. IPSAS 30 applies to all
entities, including entities that have few financial
instruments (e.g., a government department
whose only financial instruments are accounts
receivable and accounts payable) and those that
have many financial instruments (e.g., a financial
institution most of whose assets and liabilities are
financial instruments). However, the extent of
disclosure required depends on the extent of the
entity‘s use of financial instruments and of its
exposure to risk.
 IPSAS 31 Intangible Assets
 IPSAS 31 covers the accounting for and
disclosure of intangible assets. It is primarily
drawn from IAS 38 Intangible Assets. It also
contains extracts from the SIC 32 Intangible
Assets-Web Site Costs, adding application
guidance and illustrations that have not yet been
incorporated into the IAS.
 At this point, IPSAS 31 does not deal with
uniquely public sector issues, such as powers and
rights conferred by legislation, a constitution, or
by equivalent means; the IPSASB will reconsider
the applicability of the standard to these powers
and rights in the context of its conceptual
framework project, which is currently in progress.
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