The International Public Sector Accounting Standards Board has released for comment a consultation paper on the Recognition and Measurement of Social Benefits.

The IPSASB, which operates under the auspices of the International Federation of Accountants, noted that the delivery of social benefits to the public is the primary objective of most governments and social benefits often account for a large proportion of a government’s budget. This paper asks for views on the various approaches.

“Users need information that allows them to evaluate the financial impact of the social benefits that governments provide,” said IPSASB chair Andreas Bergmann in a statement. “The IPSASB considers there is a major need for guidance in this area. This consultation paper is the first step in achieving appropriate reporting of social benefits. We look forward to receiving constituents’ views on the options we have identified.”

The paper builds on previous work by the IPSAS on accounting for social benefits while also developing new ideas. It defines social benefits as “benefits provided to individuals and households, in cash or in kind, to mitigate the effect of social risks.”

The definitions of social benefits and social risks are intended to be consistent with those used in statistical reporting. The scope of them includes social assistance and social security, but excludes programs that form part of an employer-employee relationship, other transfers in kind, and collective goods and services such as the provision of universal health care and education services. Thus, the project has a significantly narrower scope than the IPSASB’s earlier work in this area.

The paper identifies three broad options to account for social benefits:

• Option 1: The obligating event approach. This approach considers social benefits by reference to the definition of a liability in the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. Obligations to pay social benefits are seen as no different from other obligations. The key issue is when a present obligation arises.

• Option 2: The social contract approach. This option is based on the view that there is an imputed social contract between the state and the citizens. Under this social contract, citizens agree to pay taxes to enable the state to provide social benefits. This is analogous to an executory contract for commercial transactions. Obligations are recognized when they become enforceable (or when claims for social benefits are approved).

• Option 3: The insurance approach. This approach considers that some social benefits are similar in practice to insurance contracts. It uses an insurance accounting model to measure schemes at the net present value of their cash inflows and outflows.

To access the consultation paper and an at-a-glance summary of the consultation paper, or to submit a comment, visit the IPSASB’s Web site at

Comments on the consultation paper are due Jan. 31, 2016. The IPSASB is encouraging IFAC members, associates and regional accountancy bodies to promote the availability of the consultation paper to their members and employees.