Accounting For Public Sectors and Civil Society

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Assosa university
8/19/2022
Complied by: Geleta D.
Post graduate study
Departments of Accounting and finance
Advance Accounting for public sectors and civil society
By:
Geleta D.
Chapter - Two 2
The Objective, underlying
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Concepts and Use of IPSAS for
financial reporting
Objectives of financial reporting 3
 The objectives of financial reporting by public sector
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entities are:
 to provide information about the reporting entity for
- accountability and
- decision making purpose.
Cont..

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Types of financial reporting
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 Special purpose financial reporting(SPFR)
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- Is designed to
- users that have the authority to require the reporting
entity to provide information for their purpose(needs)
- regulators
- tax authority
- donors
KEY Characteristics of public sectors
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IPSAS accrual* objective 8
 Designed for the GPFR by public sector entities other than
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those that are primarily profit oriented
- primary users = (i) service recipients and their
representatives (eg members of parliament); and
(ii) resource providers(gifts)
- assessments = accountability and decisions (eg provide or settle
a loan)
Cont..
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 IPSAS is applied mainly for:
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- national, regional, state/provincial and local governments
 government ministries, departments, programs, boards, commissions,
agencies;
- public sector social security funds, trusts, and statutory authorities; and
- international governmental organizations.
 IPSAS GPFRs:
- (i) support the discharging of obligation to be accountable; and
- (ii) provide information for decision-making purposes.
Cont..
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 IPSAS GPFRs provide information about a public sector entity’s:
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- Financial Position, Financial Performance and Cash Flows
- Budget Information and Compliance with Legislation or Governing the
Raising and Use of Resources
- Service Delivery Achievements
- Prospective Financial and Non-financial Information
- Explanatory Information
Test your understanding
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For each user below choose one of: 1) the user is a primary user; or 2)
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the user is not a primary user.
A. Ethiopian citizen
B. A member of the Ethiopian Parliament
C. A third party company supplier deciding whether to provide credit to
Ethiopian Airlines
D. The Ethiopian Government deciding whether to provide Ethiopian Airlines
with a capital injection to fund its further expansion
IPSAS cash basis*objective
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 Information about the
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 cash receipts,
 cash payments and
 cash balances of an entity & assessments of the ability of the entity
to generate adequate cash in the future &
 the timing and certainty of cash receipts and cash payments.
IPSAS*moving from cash basis to accrual basis of accounting
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 TheCash Basis IPSAS encourages an entity to voluntarily disclose
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accrual based information,
 An entity in the process of moving from cash accounting to accrual
accounting may wish to include particular accrual based disclosures
during this process.
 Having decided to adopt accrual accounting in accordance with
IPSASs, the transitional provisions would govern the length of time
available to make the transition.
 Onthe expiry of the transitional provisions, the entity reports in full
accordance with all accrual based IPSASs.
Selected differences between IPSAS accrual and IFRS
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 Borrowing costs: IPSAS allows choice, recognize
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borrowing costs incurred either as an expense or as an
asset (see IPSAS 5 Borrowing Costs).
 IFRS recognizes an asset for qualifying borrowing costs.
 Heritage assets: IPSAS neither requires nor prohibits the
recognition of heritage assets (see IPSAS 17 Property,
Plant and Equipment)
Cont..
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 Asset impairment:
- IPSAS provides specific guidance on how to determine the
value-in-use of non-cash-generating assets (see IPSAS 21
Impairment of Non-cash-generating Assets):
- IFRS does not imagine non-cash-generating assets.
Applicable GPFR framework : test your understanding
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Which GPFR framework claims to be most appropriate for each of the following entities? Choose
one of: 1) IPSAS accrual; 2) IFRS; or 3) the IFRS for SMEs.
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A. Addis Ababa’s 6 zones, 28 woredas, 328 house associations
(Kebeles)1
B. Addis Ababa University (State University)
C. Sky Bus Transport System Share Company (>3,400
shareholders)
D. Awash International Bank (joint stock company, private
commercial bank)
E. Ethiopian Airlines (partially owned by Government of Ethiopia)
IPSAS accrual & IFRS table of concordance
presentation relates issues 17
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IPSAS accrual IFRS table of concordance
- performance related issues 18
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- financial instruments 19
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- non-financial assets 20
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- non-financial liabilities 21
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IPSAS accrual IFRS table of concordance : 22
- investments in other entities and consolidation related
issues
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IPSAS active projects (January 2021 1):
public sector specific issues 23
 Social Benefits—relate to key social programs, for example old age pensions and unemployment benefits;
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(now completed)
 Non-exchange expenses—for example, such as universally accessible services including education and
health care and collective services such as defense spending. (aims to address inconsistent reporting);
 Public Sector Measurement—translating the principles in the Conceptual Framework on measurement into
more detailed guidance;
 Heritage—providing information on heritage items; and
 Infrastructure Assets—citizens rely on such assets which are extensive in the public sector.
- The lack of specific guidance on the recognition and measurement of these assets causes practical
difficulties for preparers (particularly those in the process of adopting IPSAS.
IPSAS accrual: implementation in Africa
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Source: ACCA, IPSAS implementation: current status and challenges, October 2017
IFAC’s assessment – Adoption of the standards 25
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Ethiopian GPFS framework decisions 26
Implementation road map:
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3 phase transition :
 Phase 1: Adoption of IFRS)-Gov’t business enterprise
(July 1, 2009)
 Phase 2:Adoption of IPSAS)- Charities and Societies &PIE(ECX)
(1July, 2010 E.c)
 Phase 3: adoption of the IFRS for SMEs
(1, July 2011 E.c)
Role and authority of the IPSAS conceptual framework
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 Role of conceptual framework
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Applicability of the conceptual framework
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Content of the conceptual framework
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Objective: General purpose financial reporting
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IPSAS accrual: accountability
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 obligations to requires provision of information about:
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- the entity’s management of the resources for the delivery of
services;
- the entity’s service delivery achievements during the reporting period, and
its capacity to continue to provide services in future periods.
 Compliance with approved budgets and other authority
governing its operations;
Cont..
 Donors need information to assess whether the entity is using resources 32
- economically
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- efficiently,
- effectively and
- as intended and about the entity’s anticipated future service
delivery activities and resource needs.
IPSAS accrual objective: test your understanding
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The objective of IPSAS accrual reporting is to provide financial
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information about the reporting entity that is useful to? Choose one of:
1) existing and potential service recipients and their representatives, and resource
providers;
2) existing and potential investors (including the controlling shareholder), lenders and
other creditors in making resource allocation decisions (buy, sell, hold, provide
loan/settle);
3) existing and potential investors, lenders and other creditors who cannot require
reporting entities to provide information directly to them in making resource
allocation decisions;
4) a broad range of users who are not in a position to demand reports tailored to meet
their particular information needs.
Qualitative characteristics: General purpose financial reporting
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Qualitative characteristics (QCs): relative importance
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 IFRS specifies that for financial information is to be
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useful, if its relevant and faithfully represent what it
importance to represent.
 Put another way, financial information without both relevance and faithful
representation is not useful, and it cannot be made useful by being more
comparable, verifiable, timely or understandable.
IPSAS accrual expresses the trade-off differently: each of the QCs is integral
to, and works with, the other characteristics to provide information useful for
achieving the objectives of financial reporting.
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8/19/2022

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1

The Objective, underlying

 The objectives of financial reporting by public sector

Complied by: Geleta D.

 Special purpose financial reporting(SPFR)

 Designed for the GPFR by public sector entities other than

 IFRS specifies that for financial information is to be

Complied by: Geleta D.

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