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Accrual ipsas

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Information about Accrual ipsas
Finance

Published on February 24, 2014

Author: chidanandajena

Source: slideshare.net

Description

Accounting Standards for Government Entities other than Government Business Enterprises (GBEs). This accounting standard is international standard for Governments, Government Autonomous bodies, Government Financial Institutions (not commercial entities). IFRS is international standard for Corporates, which is applicable to Government Business Enterprises. Different nations have adopted and adapted the IPSAS, Cash or Accrual or modified Cash IPSAS. Governments has named the standards by the name of respective Governments. The presentation covers IPSAS 1: Presentation of Financial Statement
IPSAS 2: Cash Flow Statement
IPSAS 3: Accounting Policies, Changes in Accounting Estimates & Errors
IPSAS 4: Changes in Forex Rate
IPSAS 5: Borrowing Cost
IPSAS 6: Consolidated and separate FS
IPSAS 7: Investments in Associates
IPSAS 8: Interest in Joint Venture
IPSAS 9: Revenue from Exchange Transactions
IPSAS 10: Financial Reporting in Hyperinflationary Economies
IPSAS 11: Construction Contract
IPSAS 12: Inventories
IPSAS 13: Leases
IPSAS 14: Events after the Reporting Date
IPSAS 16: Investment Property
IPSAS 17: Property, plant & Equipment
IPSAS 18: Segment Reporting
IPSAS19: Provisions Contingent Liabilities & Assets
IPSAS 20: Related Party disclosures
IPSAS 21: Impairment of Non-Cash Generating Asset
IPSAS 22: Disclosure of Financial Information About the General Government Sector
IPSAS 23: Revenue from Non-Exchange Transactions(Tax & Transfer)
IPSAS 24: Presentation of Budget information in FS
IPSAS 25: Employee Benefits
IPSAS 26: Impairment of Cash Generating Asset
IPSAS 27: Agriculture
IPSAS 28: Financial Instrument Presentation
IPSAS 29: FI: Recognition & Measurement
IPSAS 30: Financial Instrument Disclosure
IPSAS 31: Intangible Asset
IPSAS 32: Service Concession Arrangements: Grantor
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ACCRUAL IPSAS Brief

Why IPSAS 2     Service Potential - absence of a profit driver for many public services where public policy objectives result in services being provided at no charge/ at loss, Capacity of an asset to provide goods & services as per desired objective without generating cash inflow Recognition of revenue from Government Grants/ non-exchange transactions Presentation and disclosures: The nature of government activities and the broader concept of accountability for outcomes demands a greater emphasis on information accountability for all resources the entity controls and the deployment of those resources, assess the financial position, financial performance, and cash flows  make decisions about providing resources to, or doing business with, the entity  accounting for all assets and liabilities support results-based management.  credible, independent accounting standards on a full accrual basis.  IPSAS is based on accrual based accounting, while IMF’s Government Finance Statistics(GFS), a standard for Government Budgeting is cash based  Cash IPSAS: part 1 mandatory, part 2 voluntary disclosure aligned with accrual IPSAS  financial statements under detail guideline provided in each standard IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

Prospective Outcome 3      Long Term Yield: Consequence of financial decisions known many year into future Decisions made in one period for services in future –planned programs Future service recipients and tax payers Anticipated future service delivery activities and objectives, their likely impact on the future resource needs of the entity and the likely sources of funding for such resources Service Delivery Achievements  Quantitative measures of the outputs and outcomes      Information about the cost, volume, and frequency of service delivery Relationship of services provided to the resource base Quality of particular services provided The outcome of certain programs measures how much an item contributes to or detracts from entity’s ability to deliver the desired goods & service IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

Nations following IPSAS 4  Bangladesh   IPSAS based financial statements for core ministries at first stage   Cash basis IPSAS Specialized Organizations at second stage India   accrual IPSAS for those transactions recorded on other than the cash basis  National and State Govts have accepted in principle to adopt IPSAS   limited adoption of cash-basis IPSAS for cash transactions Committee for local Government is studying the possibility Australia  Adopted accrual accounting standards from IFRS, suited for public sector and with additional disclosures  Consistent with IPSAS  France- Accrual based accounting consistent with IPSAS  Germany-Cash based, no plan to adopt IPSAS  Malaysia  Cash basis IPSAS  Accrual basis from 2015 IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

Nations following IPSAS 5  Israel     Japan   Govt. of Japan & Municipal of Tokyo follow full accrual based accounting in line with IPSAS Netherland      Government Ministries & Non-Commercial Statutory Corporations follow IPSAS Significant part of data of financial statement presented following IGAS and IPSAS Statement of Assets not reflect all the assets of the state Experimented accrual based accounting Adopted cash based accounting supplementary statement on commitments Studied experience of other nations on accrual accounting Accrual accounting by agencies, quangos, business like entities of government New Zealand   Follows NZ IFRS, with ‘Public Benefit Entity’ Amendment similar to IPSAS Considering two sets of standards, 1) for Profit & 2) for public benefit, later to follows IPSAS IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

Nations following IPSAS 6  South Africa     Sri Lanka     Modified Cash Basis Accounting by Government Depts GRAP based on IPSAS by Public & Trading entities IFRS by public/ widely held entities State accounts cash based IPSAS Additional disclosure Statements on accrual basis ICASl preparing Sri Lankan version of accrual based IPSAS UK    Central Govt and Entities follow IFRS IPSAS forms second level of standards, where IFRS/ IAs does not cover public sector context Local government bodies follow IPSAS IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS vs IFRS 7      Income Tax not for Govt. entity, in case liable to taxIAS 12 of IFRS Consolidations and Interests in associates & joint ventures IFRS 10,11&12, IPSAS( IAS 27,28 & 31)manner in which the control is determined Financial Instruments Classification- IFRS 9, IPSAS ( IAS 39) Budget vs Actual-Performance measurement in IPSAS, not in IFRS Private sector Concepts- Share based payments and Earnings per Share not in IPSAS A SNAPSHOT OF GAAP DIFFERENCES BETWEEN IPSAS AND IFRS, 2013, BY ERNST AND YOUNG

IPSAS vs IFRS 8 Sl No Sl No A Presentation of Accounts IPS AS IFR S Differenc es Financial Statement 1 Financial Statement √ √ Modert 2 Cash Flow Statement √ √ Minor 3 Accounting Policies, Changes in Accounting Estimates and Errors √ √ Minor 4 Presentation of Budget Information in Financial Statement √ x No Eqvt 5 Non-current Assets held for Sale or Discontinued Operations x √ No Eqvt 6 Accounting of Retirement Benefit Plan x √ No Eqvt 7 Interim Financial Reporting x √ No Eqvt 8 Effects of Changes in Forex Rate √ √ Modert B Revenue and Exchanges 1 Revenue √ √ Modert 2 Construction Contracts √ √ Minor 3 Revenue from non-Exchange Transactions (Taxes, Transfers, Government Grants) √ √ Signifnt 4 Income Tax x √ No Eqvt

IPSAS vs IFRS 9 Sl Sl B Presentation of Accounts IPSA S IFR S Diff Revenue and Exchanges 5 Leases √ √ Modert 6 Burrowing Costs √ √ Signifnt C Non-Financial Assets 1 Inventories √ √ Modert 2 Investment Property √ √ Modert 3 Property, Plant & Equipment √ √ Modert 4 Intangible Assets √ √ Modert 5 Agriculture √ √ Modert 6 Impairment of Cash Generating Assets √ √ Modert 7 Impairment of Non-Cash Generating Assets √ x No Eqvt 8 Exploration & Evaluation of Mineral Resources x √ No Eqvt D Non-Financial Liabilities 1 Employee Benefits √ √ Signifnt 2 Provisions, Contigent Liabilities & Contigent Assets √ √ Modert

IPSAS vs IFRS 10 Sl No Sl No E Presentation of Accounts IPS AS IFR S Differenc es Group Accounting 1 Consolidated & Group Accounting Statements √ √ Signifnt 2 Investments in Associates √ √ Modert 3 Interest in Joint Ventures √ √ Signifnt 4 Disclosure of Interests in Joint Ventures √ √ Signifnt 5 Business Combinations x √ No Eqvt F Financial Instruments 1 Presentation √ √ Modert 2 Recognition & Measurement √ √ Signifnt 3 Disclosure √ √ Modert 4 Share Based Payment x √ No Eqvt 5 Insurance Contracts x √ No Eqvt x √ Signifnt G Fair Value Measurement 1 Fair Value Measurement

IPSAS vs IFRS 11 Sl No Sl No H Presentation of Accounts IPS AS IFR S Differenc es Disclosure-only Standards 1 Segment Reporting √ √ Signifnt 2 Related Party Disclosures √ √ Signifnt 3 Financial Information about General Government Sector √ x No Eqvt 4 Earnings per Share x √ No Eqvt I Adjustments to Financial Statements 1 Events after the Reporting Date √ √ Minor 2 Financial Reporting in Hyper Inflationary Economies √ √ Minor A SNAPSHOT OF GAAP DIFFERENCES BETWEEN IPSAS AND IFRS, 2013, BY ERNST AND YOUNG

ACCRUAL IPSAS Outline

Accrual IPSAS 13  IPSAS 1: Presentation of Financial Statement  IPSAS 18: Segment Reporting  IPSAS 2: Cash Flow Statement  IPSAS19: Provisions Contingent Liabilities & Assets  IPSAS 3: Accounting Policies, Changes in Accounting Estimates & Errors   IPSAS 20: Related Party disclosures IPSAS 21: Impairment of Non-Cash Generating Asset  IPSAS 4: Changes in Forex Rate  IPSAS 5: Borrowing Cost  IPSAS 6: Consolidated and separate FS  IPSAS 7: Investments in Associates  IPSAS 8: Interest in Joint Venture  IPSAS 24: Presentation of Budget information in FS  IPSAS 9: Revenue from Exchange Transactions  IPSAS 25: Employee Benefits IPSAS 10: Financial Reporting in Hyperinflationary Economies  IPSAS 26: Impairment of Cash Generating Asset  IPSAS 27: Agriculture    IPSAS 22: Disclosure of Financial Information About the General Government Sector IPSAS 23: Revenue from Non-Exchange Transactions(Tax & Transfer)  IPSAS 11: Construction Contract  IPSAS 28: Financial Instrument Presentation  IPSAS 12: Inventories  IPSAS 29: FI: Recognition & Measurement  IPSAS 13: Leases  IPSAS 30: Financial Instrument Disclosure  IPSAS 14: Events after the Reporting Date  IPSAS 31: Intangible Asset  IPSAS 16: Investment Property  IPSAS 32: Service Concession Arrangements: Grantor  IPSAS 17: Property, plant & Equipment

ACCRUAL IPSAS Detail

IPSAS 1: Presentation of Financial Statements 15   Fundamental principles underlying preparation of financial statements, going Concern assumption, consistency in presentation and classification, accrual basis of accounting, aggregation & materiality Complete set of financial statement include        Statement of financial position Statement of financial performance Statement of changes in net assets/ equities- changes in all assets/ equity Statement of cash flow Budget publicly available & comparison of budget and actual/ accrual Note comprising significant accounting policies & other explanatory notes Entity whose accounting wholly comply with IPSAS, shall give unreserved note in this regard IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 1(Presentation of financial) contd. 16  Complete set of financial statement include Assets & liabilities, revenue & expenses shall not be offset, unless permitted in another IPSAS  Comparative prior-period information shall be presented; In case of change in classification, comparative prior period reclassification shall be done, reasons of reclassification disclosed  Annual year end date change, if any be disclosed, comparative prior period figures given  Current (within 12 months from reporting date)/ non-current (beyond 12 months) distinction for assets to be recovered and liabilities to be settled is normally required  IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 1(Presentation of Financial) contd. 17    IPSAS 1 specifies minimum line items to be presented, includes guidance for identifying additional line items, headings, and subtotals Analysis of expenses by nature or function, if function-classification of expenses by nature shall be provided additionally specifies minimum disclosure requirements for the notes      Accounting policies followed Mgt decision on accounting policies that has significant impact on amounts recognition Key assumptions and estimation uncertainty that carry significant risk to cause material adjustment of carrying value of assets/ liabilities in next financial year Domicile, legal form of the entity, reference to relevant legislation, hierarchy of controlling entities Description of the nature of the entity’s operations IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 2: Cash Flow Statement 18  Objective:   Items on which cash was expended during the reporting period, future cash requirements  Cash balance as at the reporting date  Provides information that enables users to evaluate the changes in net assets/equity of an entity, its financial structure (including its liquidity and solvency), and its ability to affect the amounts and timing of cash flows  Sustainability of the entity’s activities, ability to fund changes in the scope and nature of its activities  Decision-making, accountability, compliance with legislation and regulations (including authorized budgets where appropriate)  Comparability of the reporting of operating performance by different entities  Historical cash flow information is often used as an indicator of the amount, timing, and certainty of future cash flows   Sources of cash inflow, ability to generate cash flows in the future Making decisions about whether to provide resources to, or enter into transactions with, an entity Cash equivalents are short term investments (<3 months from acquisition), readily convertible to known amount of cash and having least risk of change in value, but exclude equity investments  Bank overdrafts that are repayable on demand is part of an entity’s cash management  Cash flows exclude movements between items that constitute cash or cash equivalents

IPSAS 2: Contd 19  Operating: (receipt/ payment of taxes/royalties/ other revenue, supply/ sale/ receipt/purchase of goods and services by the entity, grants or transfers and other appropriations paid/receipt through budget approval of central government/ other public sector entities, payment to employee, receipts and payments from contracts held for trading purposes, receipts or payments from discontinuing operations, receipts or payments in relation to litigation settlements, from Property, Plant, and Equipment, rents and subsequent sales of such assets, but gain or loss from sale of plant is investing)    Indicate ability to maintain its operating capability, repay obligations, pay a dividend, and make new investments, without recourse to external sources of financing If cash flow is not classified into current activities, capital works, and contributed capital, it is accounted as cash flows from operations, disclosed in the notes to the financial statements Investing: Asset in the statement of financial position, that would result in future service delivery   Acquire/dispose equity or debt instruments of other entities and interests in joint ventures  Payment/ receipt of cash advances and loans (not made by a public financial institution)  Payment/ receipt for futures contracts, forward contracts, option contracts, and swap contracts   Acquire/ construct/ dispose property, plant, and equipment, intangibles, and other long-term assets, capitalized development costs Not cash equivalents or held for trading Financing: debentures, loans, notes, bonds, mortgages, and other short or long-term borrowings   Lease payment affecting liability position single transaction of cash flow may be a combination of operating and financing, cash repayment of a loan includes both interest and capital VOLUME I, HANDBOOK OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING PRONOUNCEMENTS 2013 EDITION, BY IPSASB

IPSAS 2: Contd 20  Reporting Cash Flows from Operating Activities    Direct method: major classes of gross cash receipts and payments are disclosed Indirect method, whereby deferrals or accruals (operating), surplus or deficit (non cash), revenue or expense (from investing or financing cash flows) are adjusted Direct Method: taking cash receipts from sales, adding interest and dividends, and deducting cash payments for purchases, operating expenses, interest and income taxes   Cash payment for purchases=cost of goods sold + increase (or - decrease) in inventory + decrease (or - increase) in accounts payable  Cash payments for operating expenses = operating expenses + increase (or - decrease) in prepaid expenses + decrease (or - increase) in accrued liabilities  Cash Interest Payment = interest expense + decrease (or - increase) in interest payable + increase in amortization of bond premium (or - discount)   Cash Receipt from Sale + Decrease (or – Increase) in Accounts Receivable Cash payments for income taxes = income taxes + decrease (or - increase) in income taxes payable Indirect Method: Net income from income statement is adjusted by  Start with net income.  Add back non-cash expenses (Such as depreciation and amortization)  Adjust for gains and losses on sales on assets (Add back losses/Subtract out gains)  Account for changes in all non-cash current assets  Account for changes in all current assets and liabilities except notes payable and dividends payable VOLUME I, HANDBOOK OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING PRONOUNCEMENTS 2013 EDITION, BY IPSASB

IPSAS 2: Contd 18 Direct Method    Cash Collection  Sales=500000  Decrease in Accounts Receivable=5000 Total Cash Received=505000 Cash Outflow  Purchase              Cost of Goods Sold=(400000) Increase in Accounts Payable=2000 Increase in inventory=(5000)    SG&A=(30000) Decrease in prepaid expenses=500 Interest=(5000) Increase in Accrued Interest Receivable= (500) Total Interest Expenses=(5500) Total Expenses=(438000) Net Cash Flow from Operating=67000 Net Income= 50000 Adjustments   Expenses on Operations=(29500) Interest Expense    Total Purchase Cost=(403000) Operations   Indirect Method  Depreciation/Amortization=6000 Increase in deferred taxes=500 Decrease in Account Receivable=500 Increase in Accounts Payable=500 Increase in Inventories=(5000) Increase in Accrued Interest Receivable= (500) Decrease in Accrued Interest Payable = (500) Gain on Sale of Property= (500)  Total Adjustment= 1000  Net Cash Flow from Operating=51000

IPSAS 2: Contd 22  Cash Flow from Investing     Cash Flow from Financing       Sale of Bond=5000 Stock Repurchase=(10000) Dividend issue=(5000) Issue of preferred shares=20000 Net Cash Flow from Financing=10000 Tax on net Surplus   Sale of Land= 50000 Purchase of Plant & Equipment=(60000) Net Cash Flow from Investing=(10000) Govt. entities not liable to tax; in case taxed, will be shown under operating, unless specific tax element can be linked to a transaction under investing or financing Cash receipts and payments are presented separately major class wise on gross basis

IPSAS 2: Contd 20  Cash Flow on Net Basis   Cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short  Trading Investment/ short term borrowings  Receipts and payments for the acceptance and repayment of deposits with a fixed maturity date;  Placement of deposits with, and withdrawal of deposits from, other financial institutions; and   Cash collected on behalf of customers, taxpayers, or beneficiaries and payments made to another  Funds held for customers by an investment or trust entity Cash advances and loans made to customers and the repayment of those advances and loans Foreign Currency Cash Flows  Transactions in a foreign currency or of a foreign controlled entity shall be recorded in functional currency applying exchange rate of the date of cash flow VOLUME I, HANDBOOK OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING PRONOUNCEMENTS 2013 EDITION, BY IPSASB

IPSAS 2: Contd 21  Investments in Controlled Entities, Associates and Joint Ventures    Investment in an associate or a controlled entity accounted for by use of the equity or cost method, an investor restricts its reporting in the cash flow statement to the cash flows between itself and the investee Interest in a jointly controlled entity includes in its consolidated cash flow statement its proportionate share Acquisitions and Disposals of Controlled Entities and Other Operating Units  Aggregate cash flows related to acquisitions and disposals of controlled entities and other operating units shall be presented separately and classified as investing, cash flow effects of disposals are not deducted from those acquisitions  Total purchase or disposal consideration  Portion of the purchase or disposal consideration discharged by means of cash and cash equivalents  Amount of cash and cash equivalents in the controlled entity or operating unit acquired or disposed of  Amount of the assets and liabilities, other than cash or cash equivalents, if recognized by the controlled entity or operating unit acquired or disposed of, summarized by each major category VOLUME I, HANDBOOK OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING PRONOUNCEMENTS 2013 EDITION, BY IPSASB

IPSAS 2: Contd 25  Noncash Transactions  Investing and financing activity, affect the capital and asset structure of an entity, that do not require cash shall be separately disclosed    Components of Cash and Cash Equivalents     Conversion of debt to equity Acquisition of assets through the exchange of assets, the assumption of directly related liabilities, or by means of a finance lease Reconciliation of the amounts in its cash flow statement with the equivalent items reported in the statement of financial position Entity discloses the policy that it adopts in determining the composition of cash and cash equivalents Effect of any change in the policy for determining components of cash and cash equivalents Other Disclosures    Significant cash and cash equivalent balances not available for use by the economic entity, with comments of management Undrawn borrowing facilities, indicating any restrictions on the use of these facilities Restricted Cash Balances VOLUME I, HANDBOOK OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING PRONOUNCEMENTS 2013 EDITION, BY IPSASB

IPSAS 3: Accounting Policies, Change in Accounting Estimates & Errors 26   Criteria for selecting & changing accounting policies, accounting treatment & disclosures of change in accounting policies, change in accounting estimates & correction of errors Hierarchy of Accounting Policies       IPSAS IPSAS not directly applicable- guidance in IPSAS for similar issues If above two not met, management shall choose latest pronouncement of any standard setting body Apply consistently to similar transactions Change accounting policy, only if required by IPSAS or if more reliable & relevant Follow the transition requirements- apply retrospectively by restating accounts as per changed standards-If restatement is impractical, cumulative figures should be given as per new standards IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 3 (Accounting policies) contd. 27  In the absence of an IPSAS for non transaction events, developing and applying accounting policy is a management decision, information to be disclosed  Relevant to the decision making need of user & reliable        Represent financial position, performance & cash flow Reflect economic substance, not merely legal compliance Neutral, prudent and complete in all respect Change in accounting estimates (future life of an asset)- accounting applied from current year onwards- no restatement required Change is accounting policy or estimate if not clear, treated as estimate All material prior period errors shall be corrected in the first set of accounts prepared after discovery of error If error occurred prior to the earliest period presented- restate the opening statement IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 4: Changes in Forex Rate 28  Translate all currency transactions to functional (primary economic environment) currency  On the date of transaction using spot exchange rate for initial recognition & measurement  At subsequent reporting date  Closing rate for monetary items  Transaction date exchange rate for non-monetary items carried at historical cost  Valuation date exchange rate for non-monetary items carried at fair value IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 5: Borrowing Cost 29     Borrowing cost are interest, amortization of discounts, premiums or ancillary costs relating to borrowing Capitalize burrowing cost (yield future economic benefit) attributable to Qualifying Assets Remaining burrowing cost –expense If part of the burrowed fund is used for qualifying assets, then weighted average of burrowing cost to be capitalized IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 6: Controlled Entities 30    Parent Entity and controlled entities FS shall be separate and consolidated Temporary acquisition with intention of disposal/ sale within 12 months and other entities for which parent entity is actively seeking disposal / sale shall not be treated controlled entity- be accounted as held for trading as per standards Entities having dissimilar activities or under long term fund transfer restrictions shall be treated as controlled entities IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 6: Consolidate and Separate 31       Balances, transactions, revenue and expenses between entities within the economic entity are eliminated in full Uniform accounting standards for similar transactions Reporting gap of controlled entities cannot be more than three months Minority interest of controlled entity in net assets/equity is reported separately from parent entity in the consolidated statement of financial position-Hence the same is not deducted from revenue and expenses of economic (controlled) entity. However, the surplus or deficit of economic entity is distributed between major and minor interest Parent Entities investments (either using the equity method, at cost or as financial instrument) in controlling entities, associates and joint ventures shall be shown in separate accounts. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 7: Investments in Associates 32        Equity method to be followed for all investments (except venture capital, mutual fund or unit trust or investment linked insurance those are measured and recognized at fair value as per accounting standards for financial instruments), where parent holds ≥ 20% of voting power Investment in temporary acquisition shall be dealt separately as discussed in IPSAS 6 Initially recorded at costs and subsequently adjusted by the investor’s share of the investee’s post acquisition change in net assets/equity Investors’ statement of financial performance reflects its share in the investee’s post-acquisition surplus or deficit. Uniform accounting standards for similar transactions Reporting gap of associates cannot be more than three months Equity accounting to be done, even if consolidated accounts not required, if accounting standards show that investment may be impaired-IPSAS 21 IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 8: Interests in Joint Venture 33    Applies to all investments having joint control (exception of IPSAS 7) Investment in temporary acquisition shall be dealt separately as discussed in IPSAS 6 Jointly controlled operations- Venturer accounts   Jointly controlled assets, Venturer accounts   Assets under its control and its liability & expenses and share of revenue, separate and consolidated Its share of jointly controlled assets, share of liabilities & expenses incurred separately or jointly & share revenue, separate and consolidated Jointly controlled entities- Two accounting Policies are permitted- Venturer accounts in   Proportionate Consolidation its share of assets, liabilities, expenses and revenue in jointly controlled entity Equity Method as in IPSAS 7 IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 9: Revenue from Exchange Transactions 34  Revenue from the Exchange Transactions shall be measured at the fair value of the consideration received or receivable & shall be recognized in case of    Sale of goods, when control, risk and rewards transferred significantly, cost and revenue determined reliably and economic benefit/ service potential will flow to the seller likely Rendering of Services, the output from the stage of completion of transaction if can be measured reliably, or the cost incurred (to the extent recoverable) for the stage of completion if output cant be measured Use by others of entity assets yielding interest, royalties or dividends, when revenue determined reliably and economic benefit/ service potential will flow to the seller likely Interest on time proportionate basis, when royalties earned as per agreement, or when sharehoder’s/ entity’s right to receive dividend is established IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 10: Financial Reporting In Hyperinflationary Economies 35  The FS of an entity reporting in the currency of a hyperinflationary (100% cumulative inflation in 3 years)economy shall be stated in the rate of the currency at the reporting date.  Comparative figures & information of past shall also be presented in the rate at the reporting date of latest FS  The surplus/deficit on the net monetary position shall be separately disclosed in the statement of financial performance.  The budgetary information (past & present) of public sector entities shall also be restated into the same current measuring unit. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 11: Construction Contract 36       Contract revenue is the agreed amount in the contract and likely & measurable revenue from variation in contract work, claims and incentive payments. Measured at Fair Value Cost directly attributable to the customer as per contract shall be accounted Percent Completion Method Accounting: Outcome of construction contract (Revenue and Cost) shall be estimated by reference to the stage of completion of contract activity at the reporting date Cost incurred (to the extent recoverable) for the stage of completion will be recognized as Revenue, if output cant be measured. The contract cost shall be shown as expense If the revenue as per contract is fixed, can not be increased, it is likely that cost may increase revenue- Expected deficit to be recognized as soon as anticipated IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 12: Inventories 37          Objective: Cost determination, formula as cost determination guide, expense recognition, write down to net realizable value Cost-purchase value, conversion cost (material, labor & overhead) & other cost to bring inventory to present location and shape Not foreign exchange differences and selling costs Carrying cost of inventory is shown as expense in the period corresponding revenue is recognised. If no related revenue, carrying cost is shown as expense, when goods distributed or services rendered Same formulae for similar items and use irrespective of geography Inventories which are acquired through non exchange transaction shall be measured at the fair value (specific costs are attributed to specific item) as at the date of acquisition. Lower of cost and current replacement cost if they are kept for distribution / consumed in production of goods for distribution at no charges or nominal charges. Cost of interchangeable items is determined on either FIFO or weighted average basis. Write-downs to net realizable value are recognized as an expense whereas increase in net realizable value are recognized as a reduction of the inventory expense IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 13: Leases 38       Finance lease: Transfers all of the asset life and PV of lease payment = asset’s fair value, Transfers all risk and rewards incidental to ownership of asset. The title may or may not be eventually transferred Lessee recognizes asset and liability at the lower of the present value of minimum lease payments and the fair value of the asset, determined at the inception, depreciates lease payment as in case of own assets, lease payment apportioned between interest and reduction of liability Lessor recognizes as receivable at an amount equal to the net investment in the lease, revenue at a periodic return on net investment Operating lease: All other leases Lessee places lease payments as expense on a straight-line over lease term Lessor places assets held for leases in FS, adds initial expenses to assets, accounts revenue on straight-line over lease term IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 14: Events After the Reporting Date 39  Events that occur between the reporting date and date for issue of FS:   Adjustment, if retrospective effect, e.g. Court Order Nonadjustment, e.g. a decline in the fair value of property after year end reporting      Shall disclose the nature of event, financial effect, statement if financial effect can not be quantified Dividends declared after the reporting date-no change on reporting date Going Concern assumption has changes after reporting date, FS shall be prepared on the changed basis Disclose the date and authorization of the same on FS, amending authority of FS If entity obtains/gets information about the condition at reporting date, between reporting ate and FS date, it will update disclosures IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 16: Investment Property 40   Defn : Land & Building that earns rent/ capital appreciation, not used in production/ supply, other business operation or a trading commodity in firm’s business Recognitions of IP     If cost/fair value of the IP can be measured reliably & future economic benefits and service potential will flow to the entity Not property occupied by owner/developed as future IP Initially at acquisition cost that includes transaction cost, non-exchange transactions at fair value of acquisition Subsequent Accounting Models  After recognition, entity can choose fair value or cost model      fair value: changes in FV are recognized in surplus or deficit in each period Cost: depreciated costs less any accumulated impairment losses, FV of the investment property shall also be disclosed . Entity using FV model, will use cost model till the end when fair value can’t be determined on a continuing basis to a newly acquired IP, residuary value treated zero Entity can change from one model to another, if results in more appropriate representation Property interest held as operating lease, can qualify as IP, if fair value is used- lesee to account this as finance lease IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 17: Property, Plant and Equipment 41    Land (no depreciation) and buildings are accounted separately Includes special military equipment, infrastructure assets (road, networks, sewer system and communication network) Recognition: Same as IPSAS 16,     Subsequent Accounting Models:     If payment is deferred, interest shall be recognized Derecognized on disposal or loss of future economic benefit or service potential Heritage Assets: may/ may not recognize; standards prescribed for Heritage Assets Cost Model: The asset is carried at cost, less accumulated depreciation and impairment losses Revaluation Model: The asset is carried at revalued amount, which is fair value at revaluation date, less subsequent depreciation and impairment losses. Increase or decrease shall be offset within a class of property Each part ( having significant cost) of separately and systematically. an item of property are depreciated IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 17 (Property) contd. 42      The annual residual value should match the receiving amount at the end of asset’s life. Items requiring regular inspection will be assessed and difference shall be accounted for in change in accounting estimate under IPSAS 3, cost incurred for the inspection is placed in carrying amount of the asset. Exchange to be measured at fair value, not in non-commercial exchange, not when fair value of both items of exchange not determinable Gain or loss from disposal shall be set off within the class of property IPSAS 17 contains transitional provisions allowing not to recognize PPE for reporting periods beginning on a date within five years following the date of first adoption of accrual accounting in accordance with IPSAS. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 18: Segment Reporting 43   Objective: segment analysis of present vs past and resource planning for future Service & Geographic Segment based on organization & internal reporting structure        Service (within one department from lower office to higher), Geography (all dept offices in one region/ district reporting to apex government entity of the region Segments - Entity providing major goods and services, operating programs, or undertaking activities Applicable for accrual basis of accounting In case of controlled and controlling entity, segment information presented on consolidated basis, follows policies of consolidated FS Assets must be allotted to the segment (when jointly used by two or more segments) if, related revenues and expenses are also allocated to segments when a new segment is identified, prior segment data shall be restated No quantitative threshold, primary & secondary (limited disclosure) segment IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 19: Provisions 44  Objective: disclosed in notes to enable user to understand nature, timing and quantum and ensure that only genuine obligations are dealt in FS   Recognitions:        Examples of provisions include onerous contracts, restructuring provisions, warranties, refunds and site restoration Past event with present legal or constructive obligation. Outflow of resources, with economic benefits/service potential, required to settle the obligation is probable. The amount of the obligation can be estimated reliably. Recognized provision is the best estimate of settlement amount of the expenditure required to settle the obligation at reporting date. Requires review of provisions at each reporting date to adjust for changes to reflect the current best estimate, if no longer required, provision shall be reversed Provisions shall be utilized for the purpose it is reserved If there is an onerous contract, present obligation (net of recoveries) be recognised as provision IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 19: Contingent Liabilities and Contingent Assets 45  Contingent liability disclosure when: possible obligation to be confirmed by a future event that is outside the control of the entity  A present obligation may, but probably will not, require an outflow of resources embodying economic benefit or service potential  No reliable estimate of present obligation   Contingent Assets disclosure when: Inflow of economic benefit/ service potential is possible, but not certain  If certain, it is no more contingent asset, it will be recognised as asset  IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 20: Related Party Disclosure 46  Disclose relationship and transaction Relationships involving control, even if no transactions  Related party transactions & clarify significance thereof  Management compensation & analysis thereof   Related parties of reporting entity are controlling entities, owners and their families, major investors, and key management personnel or controlled or influenced by the reporting entity, joint ventures, associates, and post employment beneficiaries or entities subject to common control IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 20: Related Party Disclosure Contd. 47  Examples Purchase or transfers /sales of goods (finished and unfinished)  Purchases or transfers/sales of property and other assets  Rendering or receiving of services  Agency arrangements  Leases  Transfers of research and development  Transfers under license agreement  Provision of guarantees and collateral  IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 21: Impairment of Non-Cash Generating Assets 48      Applies to non-cash-generating (NCG) assets, except such assets from construction contracts(IPSAS 11), inventories (IPSAS 12), investment property at fair value (IPSAS 16), PPE measured at revalued amounts (IPSAS 17), financial assets (IPSAS 29) and assets included in another IPSAS. (Note: IPSAS 26 covers cash-generating assets) Impairment loss, difference of carrying & recoverable service amount- recognised Depreciation (amortisation) charge for the asset shall be adjusted in future, on a systematic basis when impairment loss is recognized. Recoverable service amount is the higher of a non-cash-generating asset’s fair value, less costs to sell and its value in use (present value of the asset’s remaining service potential) Estimation of value in use depends on availability of data & nature of impairment     Depreciated replacement cost approach Restoration cost Service unit Assets to be reviewed at each reporting date for impairment, reversal be recognized IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 22: Disclosure Of Financial Information About The General Government Sector 49   Ralationship between market and nonmarket activities of the government and FS and statistical bases of financial reporting. Conformity with policy for consolidated financial statement, with exception    disclosures of the general government sector includes       not apply “consolidated and separate FS”(IPSAS 6) in respect of entities in the public financial and non-financial corporations. Entity’s investment in public financial and non financial corporation will be recognized as an asset and accounted it at the carrying value Assets & Liabilities, Revenue & Expenses by major class; investment in other sectors separately Net assets/equity, revaluation increments and decrements and other items of revenue and expense recognized directly in net assets/equity Surplus or deficit Cash flows from operating by major class, investing and financing activities. Explanation for removal of significant controlled entities from GGS wrt past reports Disclosure shall be reconciled to the consolidated FS of the government showing separately the amount of the adjustment to each equivalent item in those FS IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 23: Revenue from non-Exchange Transactions (Tax & Transfer) 50      Except non-Exchange transactions (NET) giving rise to entity combination In non-exchange transaction, one entity either receives or gives value without directly giving or receiving approximately equal value in exchange from another entity. Transfers (not tax) are inflows of future economic benefits or service potential from non-exchange transactions. Hence, transferor imposes binding terms upon the entities Future economic benefits or service potential may be consumed by entity, used for specific target group or returned to transferor as per T&C, don’t specify return to transferor if not deployed as per T&C Inflow of resources from NET shall be recognized as an asset when     May recognize service in kind as revenue and assets Present obligation arising from NET shall be recognised as liability       It’s future economic benefits/service potentials are expected to be flown to the entity Fair value of assets can be measured reliably. Outflow of resources embodying future economic benefits/service potentials are expected fair value of liability can be measured reliably. Inflow of resources from NET assets shall be recognized as revenue, and the same recognized as liabilities If entity satisfies present obligation recognized as a liability, in respect of an inflow of resources from NET assets, the liability will be reduced and the same amount will be recognised as revenue, similarly increase in net assets shall be recognised as revenue by same amount Conditions on a transferred asset give rise to a present obligation on initial recognition that will be recognized when the recognition criteria of a liability are met liability recognized is equal to present obligation at the reporting date IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 23 (Revenue) contd. 51  Recognize as asset, when the taxable event occurs and the asset recognition criteria are met    Entity shall disclose on GPFS or in its note, recognised     Gross amount (not reduced by expenses of the tax administration machinery) Not be grossed up, if certain taxpayers get concession provisions, while others don’t Revenue & Receivables by major class, tax and transfers separate Assets & liabilities with T&C Liabilities forgiven and Advance Received Entity shall disclose on note of GPFS  Accounting policy for recognition of NET, major classes of Revenue from NET, Tax Revenue, gifts, goods in kind received IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 24: Presentation of Budget Information in FS 52       Objective: Transparency and Accountability in FS & compliance with the approved budget Applies to PSEs, other than Government business Enterprises(GBEs), whose budget are available publicly Original budget: initial approved expenditure, appropriation bills, govt ordinance, anticipated revenue or receipt for the budget period Final budget: original budget + adjustment for all reserves, carry over amounts, transfers, allocations, supplemental appropriations, and other authorized legislative, or similar authority, changes Comparison of the budget amount is either presented as a separate additional FS or as additional budget columns in the FS. The comparison is presented at different aggregation level for different level of legislative/executive oversight Original, final budget and actual (performance), if FS & Budget are prepared on comparable basis IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 24 (Presentation of Budget) Contd. 53  Note disclosure, unless it is included in other public documents issued with the FS & a cross reference to those documents is made in the notes to FS, explain     If FS and Budget are not on comparable basis, actual amounts presented on a comparable basis to the budget shall be reconciled to the following actual amounts presented in the FS, identifying difference on basis, timing, and entity:    material differences between the budget & actual amounts If changes between original and final budget are due to re-appropriations, or other factors budgetary basis and classification basis, the period, and the entities included If the accrual basis is adopted for the budget, total revenues, total expenses and net cash flows from operating activities, investing activities, and financing activities If a basis other than the accrual basis is adopted for the budget, net cash flows from operating activities, investing activities, and financing activities The reconciliation shall be disclosed on the face of the statement of comparison of budget and actual amounts or in the notes to the FS. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 25: Employee Benefits 54   Prescribes the accounting and disclosure for employee benefits(EB), shortterm (payable within 12 month and treated as expense) and long term benefits (except for share based transactions and employee retirement benefit plan) Recognition of Employee Benefit (EB), when economic Benefit (EB) is earned to the Entity by service of Employee     A liability when an employee to be paid in a future FY An expense when an employee is given employee benefits in a FY Defined Benefit Plans (DBP), a liability if to be paid in future FY Defined Contribution plan(DCP), (e.g. contributory Pension Scheme, Medical Insurance, post employment life insurance) expense on payment - liability for the third party   If legal obligation to the employer to pay if the insurer does not pay, it is a DBP Re-measure the obligation (gains/losses) using current actuarial assumptions IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 25 (Employee Benefits) contd. 55    Bonus payments and profit-sharing payments are recognized when the entity has a legal or constructive obligation to pay, which can be reliably estimated Asset of long term Employee Benefit Fund & Qualifying Insurance policiesplan assets Employer shall recognize the net cost in Group Plan in separate FS, unless contract allocates costs otherwise    Expected cost of unused entitlement & past service cost of employee at reporting date – liability Termination benefits are recognized as a liability and an expense On adopting IPSAS 25, an entity determines its initial liability for DBP    present value of the obligations including cumulative actuarial liability minus the fair value of plan assets out of which the obligations are to be settled directly minus any past service cost that shall be recognized in later periods IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 26: Impairment of Cash Generating Asset 56         Accounting for the impairment of all cash-generating assets except assets class for which accounting requirements for impairment are given in any other IPSAS. Impairment loss/gain (difference of carrying & recoverable amount) recognized in deficit/surplus; (recoverable Amount-higher of fair value less cost of sale and value in use (present value of future cash flow from use + disposal of the asset at the end)) When impairment loss exceeds the carrying amount, is recognized as a liability, if required by another IPSAS Assess impairment at each reporting date. If any indication, estimate recoverable amount Impairment test of intangible assets (long life/not yet available) annually at a fixed time Depreciation (amortisation) charge will be increased prospectively by the difference of asset’s revised carrying amount less its residual value, on a systematic basis over its remaining useful life If Impairment can not be estimated for an individual asset, estimate for the asset’s cash generating unit If the cash inflows generated by an asset or cash-generating unit are affected by internal transfer pricing, an entity shall use management’s best estimate of future prices that could be achieved in arm’s length transactions in estimating:   The future cash inflows used to determine the asset’s or cash-generating unit’s value in use The future cash outflows used to determine the value in use of any other assets or cash-generating units that are affected by the internal transfer pricing IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 26: Impairment of Cash Generating Asset 57         Accounting for the impairment of all cash-generating assets except assets class for which accounting requirements for impairment are given in any other IPSAS. Impairment loss/gain (difference of carrying & recoverable amount) recognized in deficit/surplus; (recoverable Amount-higher of fair value less cost of sale and value in use (present value of future cash flow from use + disposal of the asset at the end)) When impairment loss exceeds the carrying amount, is recognized as a liability, if required by another IPSAS Assess impairment at each reporting date. If any indication, estimate recoverable amount Impairment test of intangible assets (long life/not yet available) annually at a fixed time Depreciation (amortisation) charge will be increased prospectively by the difference of asset’s revised carrying amount less its residual value, on a systematic basis over its remaining useful life If Impairment can not be estimated for an individual asset, estimate for the asset’s cash generating unit If the cash inflows generated by an asset or cash-generating unit are affected by internal transfer pricing, an entity shall use management’s best estimate of future prices that could be achieved in arm’s length transactions in estimating:   The future cash inflows used to determine the asset’s or cash-generating unit’s value in use The future cash outflows used to determine the value in use of any other assets or cash-generating units that are affected by the internal transfer pricing IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 27: Agriculture 58      Prescribes accounting treatment and disclosures for agricultural activity/ harvest of biological assets animals/ plants for sale, or for distribution at no charge/ a nominal charge (Non Exchange Transaction), or for conversion into agricultural produce, or into additional biological assets Measured at fair value less costs to sell, unless fair value cannot be measured reliably Any change in the fair value of biological assets is reported in surplus or deficit The cost model (depreciated cost less any accumulated impairment losses) is used for the biological asset, for which there is no active market at the time of recognition Fair value measurement stops at harvest. IPSAS for inventory applies after that. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 28: Financial Instrument: Presentation 59      Classify & present liability, net asset/equity; offset financial assets & liabilities Guides whether financial guarantee is a contract or not; Entity recognizes and measures under IPSAS 29 financial guarantee contracts (both exchange and nonexchange) & insurance contracts if the financial risk is transferred Non contractual assets & liabilities are not considered as financial instruments. Determines whether the assets and liabilities arising from contractual non exchange transactions are financial instruments or not (IPSAS 23 guides whether a nonexchange transaction gives rise to a liability or an equity instrument classification of an instrument either as a liability or an equity instrument      Based on substance, not form of the instrument Classification at the time of issue and not subsequently altered financial liability if the issuer may be obligated to deliver cash or another financial asset No contractual obligation to pay is an equity instrument Interest, dividends or similar distributions, losses and gains relating to a financial instrument are revenue or expense IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 28 (FI Presentation) contd. 60       Puttable instruments, where issuer obligated to pay cash, but subordinate to all other classes of instruments, are classified as equity instruments Compound instrument, debt & equity classified at the time issue A financial asset and a liability are offset & the net amount reported when, an entity has legal right to set off the amounts, and intends either to settle on a net basis or simultaneously Cost of treasury shares is deducted from net assets/equity, and resale of treasury shares are net assets/equity transactions. Costs of issuing equity instruments are accounted as a deduction from net assets/equity, net of any related income tax benefit. Members’ shares in co-operative entities are liabilities unless the coop has the legal right not to redeem on demand. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 29: FI: Recognition & Measurements 61      It establishes principles for recognizing & measuring financial assets & liabilities. All financial assets , liabilities and derivatives are recognised in the FS When a financial asset or a liability is recognised initially, it is measured at its fair value plus transaction costs directly attributable to the acquisition or issue of the financial asset or financial liability Normal purchases & sales of market securities are recognised either at trade date or settlement date; it requires recognition of certain value changes between trade and settlement dates Difference between the fair value & concessionary value of loan is treated as:     receiver considers whether the difference shall be accounted for in accordance with IPSAS 23 Giver treats the difference as an expense at initial recognition Financial guarantee contracts provided at lower than fair value are initially recognised at fair value, by observation of a price in an active market, not active market price Financial Assets other than measured at fair value shall be subject to impairment IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 29 FI: Recognition & Measurements contd. 62  Subsequent to initial recognition, financial asset are classified into:      Financial assets, including derivatives shall be measured at their fair values(FV), without any deduction for transaction costs except where it can not be reliably measured and:    Financial assets measured at fair value through surplus or deficit Held-to-maturity (HTM) investments, Loans & receivables Available for sale(AFS) financial assets. Held-to-maturity investments & Loans and receivables, measured at amortised cost using the effective interest method Most financial liabilities are measured at original recorded amount less principal repayments and amortisation; derivative & held for trading (short sales) liabilities measured at FV with value changes recognised in surplus or deficit De-recognition of financial asset/liability (when transferred to another party) is not permitted, if entity has retained  substantially all risks and rewards or control of an asset or part of an asset IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 29 (FI: Hedge) contd. 63  Hedge item(asset) measured under hedge accounting (offsetting the effect of hedge instrument and hedge items in same period’s surplus or deficit) are classified as       FV hedge Cash flow (CF) hedge Hedge of a net investment in a foreign entity ( similar to CF Hedge). Hedge of foreign currency risk is accounted as FV or CF hedge permits an entity to reclassify non derivative financial assets out of the FV through surplus or deficit and AFS categories in limited circumstances. prohibits reclassification out of fair value through surplus or deficit if an entity is unable to separately measure the embedded derivative on reclassification. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 30 Financial instrument: Disclosures 64   Significance of a FI for Entity’s Financial position and performance, nature and extend of risks associated with FI and the way to manage those risks. Financial Instrument:      Disclosures relates to the entity’s financial position — information about financial assets and financial liabilities by category, special disclosures when the fair value option is used, reclassifications, derecognitions, pledges of assets, embedded derivatives, and breaches of terms of agreements. Disclosures relates to the entity’s performance in the period — information about recognised revenue, expenses, gains, and losses; interest revenue and expense; fee revenue; and impairment losses. Special disclosures for concessionary loans. Other disclosures — information about accounting policies, hedge accounting, and the FV of financial asset and liability. Nature and extent of risks from financial instruments   Qualitative disclosures about exposures to each class of risk and how those risks are managed Quantitative disclosures about exposures to each class of risk, separately for credit risk, liquidity risk( maturity analysis for both derivative & non-derivative liabilities i.e. issued financial guarantee contract), and market risk (sensitivity analysis). IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 31: Intangible Assets 65  Recognition of intangible asset (purchased/self-created)    Not recognised      Intangible Asset acquired in entity combination by non-exchange transactions, or by legislative authorisation to tax or internally generated good, Internally generated brands, mastheads, publishing titles, lists of customers, or users of services Additional criteria for internally generated intangible assets All research cost charge to expense when incurred. Development cost are capitalized only after technical & commercial feasibility of product and service is established. If intangible items does not meet IA criteria, cost is expensed,   the future economic benefits/ service potential attributable to the asset will flow to the entity. The cost / fair value of the asset can be measured reliably. if the cost is incurred as part of an entity combination, part of the amount is recognised as purchase premium/goodwill Expenditure on IA post acquisition is expensed IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 31: Intangible Assets contd. 66     IA may be accounted for using a cost model(assets are carried at cost less any accumulated amortisation and impairment loss) /revaluation model(rarely used; FV at reevaluation date less any subsequent depreciation and impairment losses) Under revaluation model, revaluation for a class of asset is done together & yearly Accounting for impairment under cash or non-cash generating standards applies Accounting classification of IA after acquisition:    Indefinite Life: expected to produce net cash inflow over unlimited period Finite Life: A limited period of benefit to the entity. IA with indefinite life not amortized, but tested for impairment yearly at a fixed time  If impairment loss recognised, entity reconsiders IA’s indefinite tenure IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

IPSAS 32 Service Concession Arrangements: Grantor 67   Applies to Grantor (entity) that prepares and presents FS on actual basis A grantor recognizes a service concession asset (SCA) if:    The grantor recognizes a liability, based on the way it compensates the operator.    It controls/regulates what services operator must provide with the asset, at what price and to whom It controls (through ownership, beneficial entitlement or otherwise) significant residual interest in the asset at the end of term Financial Liability model: The grantor compensates the operator for the construction, development, acquisition, or upgrade of a service concession asset by issuing FIs/ a series of payments Grant of a right to operator model: The grantor compensates the operator by granting the operator the right to earn revenue from third-party users of the SCA or another revenuegenerating asset. Grantor accounts this liability as unearned portion of revenue arising from exchange of assets between grantor (SCA) and operator (intangible assets) Treatment of Revenue & Expenses:   Financial Liability Model (allocate payment according to their substance as a reduction in liability, a finance charge and charges for service provided by the operator) Grant of a right to the operator model (recognizes revenue and reduces the liability according to the economic substance of the service concession arrangements. IPSAS IN YOUR POCKET, 2013 EDITION, BY DELOITTE

Chidananda Jena Email: chidananda.jena@gmail.com; Skype/ YM: chidanandajena Phone: +88 01789 409432; +91

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