Agenda Item 6: First-time Adoption of Accrual Basis IPSASs Amanda Botha IPSASB Meeting June 24 – 27, 2014 Toronto, Canada Page 1 | Confidential and Proprietary Information
First Time Adoption of Accrual Basis IPSASs • Objective of agenda item to: – Discuss an analysis of the responses to ED 53 on First-Time Adoption of Accrual Basis IPSASs – Obtain direction from IPSASB for development of final pronouncement – Identify issues for further discussion at September 2014 meeting Page 2 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Matters for consideration Page 3 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs General observations • Support for development of an IPSAS – General support for development of IPSAS (16 out of 25) – 2 respondents proposed development of RPG to include exemptions that affect fair presentation and compliance 2 respondents comment on format → difficult to understand – • Members view on: Consider staff proposal to – Continue to develop IPSAS rather than RPG (issue 1) – Retain format and not use IFRS 1 as alternative format (issue 11) Page 4 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Specific matter for comment 1 • SMC 1(a) – 13 respondents supported exemptions and provisions – 8 respondents proposed additional exemptions and provisions • SMC 1(b) – 18 respondents agreed that IPSASB achieved its goal – 1 respondent thought IPSASB can do more but no details provided • Members should – Note support for development of IPSAS and IPSASB achieving its goal (issues 2 and 3) Page 5 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Specific matter for comment 2(a) • 19 supported differentiation • Proposal for different categorization (Appendix A) – Split between voluntarily and mandatory exemptions and provisions • Comment on applying judgement to assess impact on fair presentation and compliance • Members view on: – Consider different categorization proposed in Appendix A (issue 4) – Consider wording in par 25A and 25B to clarify judgement application (issue 5) Page 6 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Specific matter for comment 2(b) • 18 agreed with individual categorization • 1 respondent questioned categorization of IPSAS 18 – Staff proposes to amend explanation in Basis for Conclusions • Members view on: – Note support of categorization (issue 6) – Consider amendments to BC84 and BC85 to clarify why not presenting segment report will not affect fair presentation and compliance (issue 6) Page 7 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Specific matter for comment 3 • Summary on different relief periods in paragraph 37 – 11 respondents supported 3 years 8 respondents proposed different periods →1yr/ 3 – 5yrs/ 5 –15yrs) – – 4 respondents proposed relief to be determined by country – 1 respondent proposed that no relief should be allowed • Members view on: – Consider staff proposal to retain 3yr relief period (issues 8 and 9) – Consider clarification in BC37 that entities need to plan in advance of transition (issue 7) Page 8 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Relief for inventory and asset classes • Relief period for inventory – Allow some time to appropriately identify and classify inventory • Relief for recognition and/or measurement per asset class – Does relief apply to all assets or asset categories and can categories be recognized at different points – Proposal to clarify assets similar to exemption for IPSAS 23 • Members view on: – Proposal to provide 3yr relief period for inventory (land) (issue 16) – Proposal on exemption for assets on class-by-class (issue 17) Page 9 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other comment: Interests in other entities • Identification of interest in another entity No relief to identify interests in other entities → Fin Instruments – • Exemption to not prepare consolidated f/s – When exemption is adopted to eliminate certain items • Additional disclosures about items not eliminated • Members view on proposals to: – Provide 3yr relief to identify interest in other entities (issue 19) – Provide exemption from preparing consolidated f/s (issue 20) – Include additional disclosures of items not eliminated (issue 28) Page 10 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Related party disclosures • Related party disclosure – Proposal to limit relief to disclosure of related party relationships and related party transactions – Information about key management should be available First-Time Adoption of Accrual Basis IPSASs • Members view on: – Proposed amendment to amend transitional exemption to require that information about key management personal should be provided (issue 22) Page 11 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Leases • Classification of existing finance and operating lease – Proposal to consider circumstances where provisions of lease was amended prior to adoption • Members view on: – Proposed wording in paragraph 94A to clarify changes in lease between date of inception and date of adoption (issue 26) Page 12 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Intangible Assets • Recognition on internally generated intangible assets – Proposal to deleted requirement to recognize and/or measure internally generated I/A that were expensed under previous basis • Members view on: – Proposal to delete requirement in paragraph 123 (issue 27) Page 13 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Additional implementation guidance • Additional implementation guidance – Example of first transitional IPSAS financial statements – Wording for basis of preparation for first transitional IPSAS f/s – Clarify that entities should not derecognize existing assets when relief period is adopted • Members view on: – Proposal to include additional implementation guidance on • First transitional IPSAS financial statements (issue 30) • Basis of preparation (issue 30) • No derecognition of existing assets (issue 10) Page 14 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Cash flow statement • Exemption to not present cash flow statement during period of transition – Proposal to not present cash flow statement during period of transition • Members view on: – Staff proposal to not provide relief for preparation of cash flow statement as users still need information about (a) sources of cash flow (b) items on which cash was spend (c) cash balances (issue 29) Page 15 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters: Comparative information • Clarify paragraph 3 to explain that ED53 does not apply to non- IPSAS comparative information • Present comparative information in accordance with IPSAS 1 • Clarify paragraph 76 on presentation of statements with comparative information for preceding period • Members view on: – Proposal to clarify that ED53 does not apply to non-IPSAS comparative information (issue 23) – Proposal to clarify comparative info aligned with IPSAS 1 (issue 24) – Proposal to clarify wording in par 76 on statements (issue 25) Page 16 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters • Proposals to clarify definitions – Date of adoption – Declaration of compliance with accrual basis IPSAS (paragraph 11) – Clarify first transitional IPSAS financial statements (paragraph 12) • Members view on: – Proposed amendment to date of adoption definition (issue 13) – Proposed clarification on when compliance can be claimed (issue 14) – Proposed deletion of paragraph 12(b)(ii) (issue 15) Page 17 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Other matters • Retrospective application of borrowing costs (issue 18) • Transitional provisions for new pronouncements (issue 12) • Deemed cost for interests in other entities (issue 21) • Impact of ED on Study 14 (issue 31) • Members view on: – Proposals relating to borrowing costs and new pronouncements – Proposal to not include measurement alternative for interests in other entities – Proposal to review Study 14 → update with recent pronouncements Page 18 | Confidential and Proprietary Information
First-Time Adoption of Accrual Basis IPSASs Way forward • Incorporated proposals as agreed • Consider revised IPSAS pronouncement at September 2014 meeting for approval as final IPSAS pronouncement Page 19 | Confidential and Proprietary Information
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