IPSASB works on aligning financial instruments standard for public sector with IFRS
The International Public Sector Accounting Standards Board is circulating some proposed revisions to its financial instruments standard for government entities to harmonize it with the International Accounting Standards Board’s financial instruments standard for businesses.
The IPSASB published an exposure draft, ED 62, Financial Instruments, on Thursday and is asking for public comments on the proposed changes by the end of the year. The IPSASB’s changes aim to align its standard with the IASB’s International Financial Reporting Standard 9, Financial Instruments. In the U.S., the Financial Accounting Standards Board has released its own financial instruments standards under U.S. GAAP, which differ in some ways from the IFRS standards, despite years of work on converging them. The U.S. GAAP standards are broken up into separate accounting standards updates for recognition and measurement of financial instruments, credit losses and hedge accounting.
The IPSASB, which operates under the auspices of the International Federation of Accountants, has proposed a new standard to replace IPSAS 29, Financial Instruments: Recognition and Measurement, for the public sector. Like the IFRS 9 standard on financial instruments, the board’s changes aim to improve the standard’s requirements by introducing simplified classification and measurement requirements for financial assets, along with a forward-looking impairment model, and a flexible hedge accounting model.
“Accounting for financial instruments is an important but complex area for most governments,” said IPSASB chair Ian Carruthers in a statement. “Although our existing standard IPSAS 29 includes guidance on a number of topics specific to the public sector, it is converged with the previous IFRS. Through incorporating the improvements in IFRS 9 financial reporting will be improved by ED 62.”
The board applied a process it already has in place for reviewing and modifying IASB documents, to align ED 62 with IFRS 9, with modifications appropriate to the public sector and the kinds of issues faced by government entities. The exposure draft includes public sector specific guidance on financial guarantees that are issued through non-exchange transactions, along with concessionary loans and examples to show how to apply the principles to transactions that are unique to the public sector.
To see the exposure draft, along with a summary document, and submit a comment, visit www.ipsasb.org. The IPSASB is asking for comments by Dec. 31, 2017, and is requesting IFAC members, associates and regional accounting organizations to promote the availability of the document to their members and employees.