04 February 2016

IFAC: IPSASB publishes ED 61 Proposing Revisions to the Cash Basis IPSAS

The Cash Basis IPSAS has two parts. Part 1 identifies requirements that a reporting entity needs to adopt to claim that its financial statements comply with the IPSAS. It presently includes requirements for preparation of consolidated financial statements and for disclosure of information about external assistance and payments made by third parties. ED 61 proposes that these requirements be revised, recast as encouragements, and moved into Part 2 of the IPSAS. Part 2 identifies encouraged disclosures that an entity may choose to provide, but which are not required to claim compliance with the IPSAS.

The ED also proposes amendments to ensure that the existing requirements and encouragements of the Cash Basis IPSAS are better aligned with the equivalent accrual IPSAS, unless there is a reason to deviate as a result of adopting the cash basis of accounting. This will better support entities’ expected use of the Cash Basis IPSAS as a platform from which to transition to accrual IPSAS.

“The amendments proposed in ED 61 aim to remove practical obstacles to implementation of the Cash Basis IPSAS,” said IPSASB Chair Ian Carruthers. “These proposals respond to views expressed by our constituents that wider adoption of the Cash Basis IPSAS will enhance financial reporting by governments in developing economies that adopt a cash basis of accounting. They should also strengthen the Cash Basis IPSAS in its role as an important transition path to adoption of accrual IPSAS. We look forward to receiving constituents’ views on these proposals.”

First issued in 2003, the Cash Basis IPSAS is the only IPSASB pronouncement that deals with the cash basis of accounting. Respondents to the IPSASB’s 2014 strategy consultation supported retaining the Cash Basis IPSAS.

“The primary role that the Cash Basis IPSAS plays in the IPSASB’s overall standard-setting strategy is as a stepping stone to adoption of accrual IPSAS,” explained Mr. Carruthers. “While robust reporting on the cash basis contributes significantly to broader improvements in public sector financial management in many jurisdictions, it provides only part of the information that the users of financial statements need for accountability and decision-making purposes. Such information is best provided by adoption of accrual IPSAS.”

Comments on the ED are requested by July 31, 2016.

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