31 July 2015

IFAC: IPSASB publishes ED 56, The Applicability of IPSASs

ED 56 proposes to:

• Revise the Preface to International Public Sector Accounting Standards to provide the characteristics of public sector entities for which IPSASs are intended;
• Delete the definition of Government Business Enterprises (GBEs) in IPSAS 1, Presentation of Financial Statements; and
• Amend the scope section of each IPSAS™ and Recommended Practice Guideline (RPG) by removing the paragraph that states that these pronouncements do not apply to GBEs.

ED 56’s proposed changes address constituents’ concerns about the application of IPSASs to public sector entities. Currently, each IPSAS includes a statement that it does not apply to GBEs, which are expected to be commercially-oriented public sector entities. The term “Government Business Enterprise” is defined in IPSAS 1, Presentation of Financial Statements.

The IPSASB received feedback that a wide range of entities are described as GBEs, but some of these entities clearly do not meet the IPSASB definition of a GBE. In other cases, there are different interpretations of the GBE definition.

“The proposals in this Exposure Draftprovide a more transparent way to communicate the types of public sector entities that the IPSASB considers when developing IPSASs and RPGs,” said IPSASB Chair Andreas Bergmann. “They use a high-level, principles-based approach that draws on The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities.”

“These proposals acknowledge the role of regulators in determining the accounting standards to be applied by different entities in their jurisdictions, and address constituents’ concerns about differing interpretations of the GBE definition,” Prof. Bergmann added. “We look forward to hearing whether constituents support the changes to IPSASs and RPGs proposed in this Exposure Draft or present alternative views.”

Publication of ED 56 follows the IPSASB’s consideration of responses to a Consultation Paper (CP), The Applicability of IPSASs to Government Business Enterprises and Other Public Sector Entities. The CP proposed two main approaches to communicate the IPSASB’s view of the entities for which it develops IPSASs. The first approach involved describing the characteristics of public sector entities for which IPSASs are intended. The second approach would have retained the definition of a GBE in modified form, potentially narrowing it to profit-seeking public sector entities.

A large majority of respondents to the CP supported the first approach of providing the characteristics of public sector entities for which IPSASs are intended using IPSASB’s current literature, rather than retaining and improving the definition of a GBE. The proposals in ED 56 give effect to that approach.

Comments on the Exposure Draft are requested by November 30, 2015.

Press release

Exposure Draft 56, The Applicability of IPSASs

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