Standard-setter reconsiders accounting for non-exchange expenses

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The International Public Sector Accounting Standards Board is mulling new guidance on how the public sector should account for revenue and non-exchange expense transactions, such as the provision of education, health care and defense, in light of the revenue recognition standard.

The IPSASB, which operates under the auspices of the International Federation of Accountants, has released a consultation paper asking for comments on the accounting for revenue and non-exchange expenses by Jan. 15, 2018. The revenue recognition standard from the International Accounting Standards Board, in coordination with the U.S.’s Financial Accounting Standards Board, gave the IPSASB the motivation to reconsider how it should treat both commercial transactions and public sector specific transactions.

“This consultation paper is an important first step in addressing some key IPSAS implementation issues while seeking to maintain IFRS convergence,” said IPSASB chair Ian Carruthers in a statement. “It also provides an opportunity to address gaps in literature that have been identified in accounting for non-exchange expenses and the measurement of non-contractual receivables and non-contractual payables—such as taxes, fines and licenses.”

The paper proposes updating an existing standard, IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers), to address such issues, as well as to replace another current standard dealing with revenue from exchange transactions and construction contracts.

For non-exchange transactions with performance obligations the paper discusses two potential revenue recognition approaches, along with two possible approaches to the recognition of non-exchange expenses. It also discusses implementation issues related to the recognition of revenue from capital grants and services in-kind; initial and subsequent measurement of non-contractual receivables; and subsequent measurement of non-contractual payables.

To see the consultation paper and a summary At-a-Glance document, or to submit a comment, visit the IPSASB website, The IPSASB is asking for comments by Jan. 15, 2018. It is encouraging IFAC members, associates, and regional accounting organizations to promote the availability of the paper to their members and employees.

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