The International Public Sector Accounting Standards Board (IPSASB) has published an Exposure Draft (ED 53), First-Time Adoption of Accrual Basis International Public Sector Accounting Standards.
This proposed standard, which is applicable to entities that present accrual basis financial statements during the process of adopting and implementing International Public Sector Accounting Standards (IPSASs), provides exemptions during the transition period.
“Entities understand that adoption of accrual basis IPSASs is a complex process that requires time and detailed guidance,” said IPSASB Chair Andreas Bergmann. “This ED provides a helpful starting point for first-time adoption of accrual basis IPSASs. It grants specific transitional exemptions from the requirements in IPSASs where the cost of complying would likely exceed the benefits to users of financial statements. As a global standard setter, the IPSASB does not give entity specific guidance on how to manage the IPSAS implementation process. We have compiled good practices on relevant areas in Study 14 Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities, which is available from our website, free of charge, in English and Spanish.”
Specifically, ED 53 allows a first-time adopter three years to recognise certain assets and liabilities. This transition period acknowledges that entities may not have comprehensive information about the existence of assets and liabilities, and that considerable effort may be required to identify, measure, and classify assets and liabilities in accordance with IPSASs.
ED 53 also allows a first-time adopter to determine a surrogate for acquisition cost or depreciated cost of an asset when reliable information about the historical cost of an asset is not available.
ED 53 encourages, but does not require, entities to provide comparative information in their transitional IPSAS financial statements or their first IPSAS financial statements.
Where comparative information is presented, ED 53 states that the comparative information should be adjusted retrospectively to the extent that information is available. Where an entity elects not to present comparative information, ED 53 specifies those financial statements that an entity’s transitional IPSAS financial statements must, at a minimum, include.
The ED states that a reconciliation should be presented in the notes to an entity’s transitional IPSAS financial statements or first IPSAS financial statements. A reconciliation is not required where the entity previously applied the cash basis of accounting. A reconciliation is important for users to understand the relationship between information presented under the previous basis of accounting and the IPSAS information.
ED 53 identifies those transitional exemptions that impact fair presentation and an entity’s ability to assert compliance with accrual basis IPSASs, and separates them from those that do not.
The transitional exemptions in ED 53 will replace many of the existing transitional provisions contained in IPSASs. Future IPSASs will only prescribe transitional provisions to address changes to a standard where entities already apply that standard.