IPSAS: A global financial language for the government and public sector – Are you ready?
The International Public Sector Accounting Standards (IPSASs) have been developed to improve reporting by governments worldwide and manage public sector resources efficiently. Uniformity, consistency and transparency in the way transactions are recognised improves public sector decision making and makes the organisation more accountable to the various stakeholders.
The International Public Sector Accounting Standards Board (IPSASB) develops and issues IPSASs. There are currently 39 accruals standards and a cash basis standard. The adoption and implementation of IPSAS on an on-going basis goes beyond the accounting function. It requires support of senior management and close involvement of valuation experts, actuaries, IT staff and project management experts. It is a change beyond the accounting principles and affects the organisation’s decision-making.
A successful IPSAS implementation requires detailed planning. This is because some of the standards offer choices with regards to accounting policies and presentation and the management may need to understand the impact of those choices. There are certain assets like infrastructure assets, heritage assets, schools, hospitals etc. which, if they meet the recognition principles, may need to be valued according to the relevant IPSAS. The valuation can often be challenging for specialised assets like for example, military equipment, conservation parks, highways, satellites etc. which are not normally sold in the market. In addition, there are technical accounting issues to consider, for example, in areas like revenue from non-exchange transactions (transfers and taxes), financial instruments, provisions and employee benefits. The systems and processes necessary to generate information that is compliant with the standards may also need to be updated.
Due to the above mentioned requirements and potential challenges in implementing IPSAS, the management would need to plan for and recruit additional staff to work on the project. It is important for accountants and non-accountants to have a good understanding of the standards and implications for the financial statements. So, as you start the journey towards adoption of IPSAS, the key question is – are you ready?