IPSAS: Issues, Challenges and Implementation

By

Ahmad Bello (PhD)*

Being a paper presented at MCPD organised by Institute

of Certified Public Accountants of Nigeria (ICPAN).

December, 2013

*Dr. Ahmad Bello is Faculty member Department of Accounting Ahmadu Bello University, Zaria

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“There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all who profit by the old order, and only lukewarm defenders in all those who would profit by the new order. This lukewarmness arises partly from fear of their adversaries, who have the law in their favor, and partly from the incredulity of mankind, who do not truly believe in anything new until they have to have actual experience of it.” (Machivelle, n.d.)

1. Introduction:

The global wind of economic integration has now reached the doorstep of

accounting profession with intense pressure on nations state to apply

unified accounting Standards in government undertakings. This effort could

be seen as a centaury reform to the profession. The reform agenda was

perceived as way forward towards harmonizing public sector with private

sector liked system and principle of financial reporting, which for long

experts had been advocating on the believed that both sectors should

operate at the same level of efficiency. The need for high quality standards

to enhance sound and consistent financial reporting and the fact that the

inefficiency and ineffectiveness of public sector extended to a belief that

public and private sectors did not have to be managed in fundamentally

different ways, fostered a wide-ranging discussion about the harmonization

of public sector accounting systems and their convergence towards the

private sector financial reporting standards (Gorana, et al, 2013).

There is no doubt that applying universal high quality standards can

promote efficiency, transparency which in long run may promote public

accountability. However, The process of adopting a uniform set of

accounting standards, as a part of the international convergence of financial

reporting systems, is perceived as a very complex, time consuming and

difficult task. The trend of international convergence and harmonisation

policy of private sector accounting and financial reporting standards has

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also made the influence on the process of entire public sector reform that

has been progressing worldwide.

Joining the league of adopting nations, the federal executive council in

2010 announced Nigeria’s commitment to adopt IPSAS and the committee

on the road map set deadlines for the adoption of cash base and accrual

base IPSAS by 2014 and 2016 respectively. However, the pertinent

question remains of the viability of the deadlines. The paper explores the

issues surrounding IPSAS adoption, extent of challenges as well as

implementation issues. The rest of the paper proceeds as thus:

conceptualization, government reform agenda, issues on the reform,

challenges, implementation and summary and concluding remarks each

occupying a segment.

2. Conceptualization:

A distinction may be made between lower-case ipsas — international

public sector accounting standards –— and upper-case IPSAS, i.e.

International Public Sector Accounting Standards. The “ipsas” refers to the

norms for reporting government finance required or recommended by (1)

international treaties, agreements, and contracts; and (2) international

organizations of an official nature. The first category includes, for example,

the definitions of “deficit” and “debt” used in calculating the financial

ratios under the Maastricht Treaty, and in meeting the conditionality

requirements of the International Monetary Fund (IMF). The second

category includes the government financial reporting requirements in the

United Nations (UN) and European System of National Accounts (SNA),

the IMF’s Government Finance Statistics (GFS) and Fiscal Transparency

(FT), the Organization for Economic Cooperation and Development

(OECD) Budget Transparency projects. Due to the close relationships

between these ipsas and IPSAS, the organizations concerned have worked

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on their harmonization.

3. Objectives of IPSAS:

The initial goals of IPSAS were to promote greater government

accountability in all countries, improved quality and reliability in

accounting and financial reporting, better financial and economic

performance, better financial management and discipline, and international

harmonization of reporting requirements (IFAC, 1996, p. 2). Have these

laudable objectives led to the development of IPSAS that are relevant to

developing countries? The approach of coming with IPSAS is two:

Adoption from IFRS and Formulation of new standards based on public

sector peculiarities.

4. Government Reform agenda:

Government accounting refers to a government’s financial information

results from the interaction between the supply of and demand for

government financial accountability and transparency. Since it is costly

everywhere to produce and disseminate information, governments in all

types of political systems lack the economic incentives to do so. Moreover,

with existing democratic system of governance and yearning for public

accountability in Nigeria coupled with the bill of right to information,

IPSAS adoption becomes imperative if not necessary.

Although it will take a long way to full realization of IPSAS, moving

towards full implementation will lead to revolution in the public

accountability. A public institution is more interesting and become more

attractive if it knows how to base the budget, to substantiate the request for

funds; if it dared to request and obtain financing programs; if it offers legal

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and scientific support for dimensioning and collecting its revenue from

taxes, related activities, collateral resources; if it knows how to manage

costs, properly balancing between needs and resources - and all in a context

in which efficiency and perspective are not omitted (Dragan, 2008).

5. Major issues on the reform

Starting from the considerations that cost, efficiency, economy and effectiveness have entered the reforming agenda of public sector organisations, and accounting still represents a potentially biased and active technology for social and political changes, it is of interest to understand the intended and unintended consequences of accounting (Hopwood, 1985).The Nigerian Accounting Standard Board (NASB) Committee on road map

on internationalization of financial reporting in Nigeria provides a timeline

for adopting international standards in Nigeria with deadline for adopting

International Financial Reporting Standard (IFRS) by the year 2012. For

public sector entities a time line of 2014 and 2016 was set for full

implementation of cash basis international public sector Accounting

Standards (IPSAS) and accrual IPSAS respectively. With this development

the role of NASB will shift from standard setter to regulatory enforcers

under the new name and structure called Financial Reporting Council

(FRC). This major shift could be seen as revolutionary act in the financial

reporting circle, which may affect the role of several institutions:

professional bodies and even the parliament.

The reform agenda seek to address the following issues:

(1) The implementation of accruals in national public sector

accounting systems and the compliance of national accounting

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solutions with IPSASs;

(2) The need and effort put into the process of information systems’

convergence–the convergence of accounting and statistics systems

(3) The practice of implementing resource accounting and budgeting

in order to establish the connections between the inputs, goals and

purpose of activities undertaken by the government, and the results

(outputs) achieved;

(4) The consistency of accounting basis adopted for the budget

(budget and actual amounts comparison);

(5) The consistency of accounting basis for financial reporting with

the accounting basis for the budget.

(6) Shift in regulatory framework of public sector accounting from

parliamentary to institutional.

(7) Designing of uniform chart of accounts to be used across

governmental institutions and organization irrespective of tier.

5.1. Benefits of Adopting IPSAS:

According to the committee on road map on adoption of IPSAS in Nigeria

the followings are identifiable benefits:

(a) The alignment of local accounting with best accounting practices

through the application of credible, independent accounting standards on a

full accruals basis;

(b) Improved internal control and transparency with respect to assets and

liabilities;

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(c) More comprehensive information about costs that will better support

results-based management;

(d) More comprehensive information produced and disclosed under IPSAS

facilitates improved management and stewardship of resources, the

effectiveness of operational delivery and the achievement of results; and

(e) Improved consistency and comparability of financial statements as a

result of the detailed requirements and guidance provided in each standard.

f.) Enhances the implementation of freedom of information act

g.) Promotion of cross border investment thereby enhancing the flow of

foreign Direct Investment.

h.) Promote the policy of Public Private Partnership, which depends largely

on the extent of accountability and transparency of public sector.

i.) Facilitate the flow of aid and assistance from foreign bodies

6. Challenges:

The current transformation of government accounting is likened to a global

revolution staged by accountants. Many revolutions were started with high

ideals and an incomplete conceptual design. Most failed because the

revolutionaries ignored local conditions, or did not have the patience to

prepare a blueprint on how to govern a country afterwards. It remains to be

seen whether this global revolution in government accounting is premature.

The challenges for adopting IPSAS in Nigeria are like other developing

countries. This challenges can be broadly divided into two; general

challenges and specific challenges. However a notable challenge is that of

General challenges: this is inherent to the IPSAS themselves; as viewed by

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chan, 2010:

-  No clear road map for „reverse engineering” from financial

statements to accounting systems;

-  Capacity to decide the future (budgeting) is a higher priority than

to look back at the past (financial accounting);

-  Capacity to manage parts of a government throughout the year

(special purpose reports) is more urgent than to monitor the whole

government at year-end (annual consolidated financial statements).

Specific challenges: this are peculiar to Nigeria as a polity and ranges from

institutional, organizational, political, principle, conceptual and

professionals challenges as discussed below:

1) Institutional Challenges: IPSAS is a venturesome enterprise in

several aspects. At first, it intends to transcend national jurisdictions,

ignoring or overlooking the national diversity in political, cultural,

traditional, legal and economic sectors. Furthermore, it elevates

professional despotism above governmental authority while it expects

the Anglo-American model of government accounting to have global

appeal. There are important issues awaiting resolution. Even in the

absence of the conceptual challenges, some legitimate institutional

issues about the standard-setting structure and its oversight still remain.

2) Organizational Challenges: IPSAS adoption is a complex and

comprehensive change management process. While it offers numerous

benefits over the medium and long term, it also entails short-term costs

and challenges that need to be seriously addressed by the executive heads

of all the organizations concerned. In fact IPSAS adoption is a complete

change that may face vigorous resistance. Therefore without total

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organizational transformation and leaders commitment, realization will

end up as a myth.

3) Political Challenges: The full potential of using accrual-based

information can be realized only if political office holders are convinced

of the value of accrual-based data and are able to act on it so as to improve

reporting processes. However those that are benefitting from old system

will sabotage the successful implementation of IPSAS. Unless there is

political commitment and honesty from the elected officials who virtually

power lies in their hands, the exercise will end in paper.

4) Principle Challenges: IPSAS still lack of guidance from a sound

conceptual framework. A conceptual framework is expected to specify the

objectives, scope, recognition criteria, definitions and qualitative

characteristics of financial information, providing the basement and

justification for standards. Up to this time, IPSAS are characterized by

numerous detailed rules and only few general principles regarding

financial statements.

5) Professional Challenges: presentation of financial statements according

to IPSAS claims professional expertise as accountants and auditors, it

requires the availability of professional accounting skills framework.

Although the number of professional accountants in Nigeria has increased

tremendously in two decades with coming of ANAN, IPSAS is a new

concept, which is not understood by many. The Government as the leading

user of these standards will therefore require undertaking massive capacity

building to enlighten its accountants on IPSAS. This is going to be a

challenge both in terms of capacity building costs and the required change

management issues from the traditional cash accounting to a more

business like accounting under accrual basis IPSAS.

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Furthermore apart from training at grass root education serve as a good

source for manpower. Introducing and modifying accounting courses in

tertiary institution becomes imperative.

6) Conceptual Challenges: IPSAS lacks basic and clear conceptual

framework rather an assumed IFRS framework is to be used. These

pause a lot of impediments in comprehending and certain treatment

of items. Furthermore the conceptual issues aggravate the

followings:

a) Neglect of system capability and internal accountability

b) Setting standards before agreement on a conceptual framework

c) Starting IPSAS with modified international business accounting standards

d) Ambiguous stance on the basis of accounting

e) High aggregation level in financial reporting

7) Specific Challenges (REF to Appendix A)

7. Implementation:

The success of IPSAS adoption in Nigeria depends largely on the ability to

identify and measure the government’s assets and liabilities. Corruption

tends to result in the understatement of government’s assets or the

overstatement of government’s liabilities. Unless financial integrity is

assured, the credibility of government’s financial information suffers. Thus

both financial integrity assurance and accurate accrual accounting are

accountants’ professional contribution to developing countries.

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7.1. Indices for implementation:

The implementation of IPSAS is a process that entails different stages form

mild to full/strong accrual. While there are different approaches and

choices the final journey is full accrual IPSAS adoption. The technical

committee on road map envisage to first go to cash basis IPSAS before

accrual IPSAS. Table 7.1. Shows the adoption degree.

Table 7.1. Degrees of Accrual

Degree Assets

Recognized

Liabilities Recognized

Mild accrual Current financial

resources

Current liabilities

Moderate

accrual

Long-term

financial

resources in

addition to

current financial

resources

Long-term liabilities in addition to current

liabilities

Strong accrual Capital

resources in

addition to

current and

long-term

financial

Contingent liabilities in addition to current

and long-term liabilities

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resource

7.2. Key drivers to successful Implementation

While introduction of IPSAS can provide immense benefit in achieving fair

and transparent financial reporting which will provide public accountability

and probity, the successful application would defend on the following key

drivers. These are discussed below:

1) ICT Infrastructure: for a successful implementation of IPSAS huge

infrastructural resources are needed. Even with this investment

power is also needed to support this ICT. Developing world would

find this as key challenging area.

2) Human Capabilities and commitment: IPSAS are a complete

transformation/revolution in government accounting; full

implementation may require capable manpower at top and

operational. Currently this is lacking in public sector. Professional

accountants are not keen to work in the sector because of poor pay

and bureaucrative bottlenecks.

3) Finance: Migrating from cash to full IPSAS accrual requires

substantial financial investment in material and human resources.

Such huge expenditure may be a burden to developing world that is

fighting poverty, corruption and unemployment.

4) System Capability and Internal Accountability: System capability

refers to the infrastructure for collecting, recording, and summarizing

financial data. Financial statements on the accrual basis can be

produced only by an accounting system with sophisticated features.

These features include:

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a) The accounting equation, assets = liabilities + net assets, as its

conceptual foundation.

b) A detailed chart of accounts for the elements of the accounting

equation, as well as revenues, expenses and changes in net

assets.

c) A double-entry recording system.

d) The ability to translate standards (such as IPSAS) into specific

policies and procedures applicable to the organization

concerned.

These above mentioned features have to be incorporated in the hardware

and software of the accounting system, along with human resources and

financial resources made possible by political support and managerial

leadership.

8. Summary & Conclusion:

Developing IPSAS is similar to formulating a universal building code. One

may raise questions about the feasibility and desirability of having such a

code. Taking cognizance of the cost involved, capacity building, ICT

infrastructure and famous among all political commitment of elected

officials. While there is no gain saying that effective government

accounting makes it possible to manage the government’s finances

smoothly and provides audit trails to prevent and detect financial

misconduct, implementing IPSAS given cognizance to duo time dead lines

will not be as easy as initially thought.

Two of the most substantial challenges, for most public sector entities,

seeking to adopt accrual-based IPSAS are those of keeping the

implementation process within a reasonable timeline and, relatedly,

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adopting the standards in a cost-effective manner. It is crucial that the

change process entails senior management support, risk management,

quality assurance, communication, internal and external stakeholder

involvement and support.

In conclusion it takes a certain amount of foresight and insight to make

investments in government accounting reform; the foresight to anticipate

the consequences of bad or no accounting and the insight to link accounting

to government performance and eventually the achievement of societal

goals. Adopting IPSAS will make accounting and its allied functions -

including information system design, internal control, pre- and post-audit,

revenue administration, and public expenditure management – more

transparent and efficient thus ensuring public resources are used for their

intended purposes.

Material Used & References:

Adam B., Mussari R. and Jones R. (2011), The diversity of accrual policies in local government financial reporting: an examination of infrastructure, art and heritage assets in Germany, Italy and the UK, Financial Accountability & Management, 27, 107–133.

Benito B., Brusca I., Montesinos V. (2007), The harmonization of government financial information systems: The role of the IPSASs, International Review of Administrative Sciences, 73(2), 293–317.

Brusca I. and Condor V. (2002), Towards the harmonisation of local accounting systems in the international context, Financial Accountability & Management, 18(2), 129–162.

Budaus D. and Buchholtz K. (1996), Controlling local government cost and performance: an international comparison, in: J.L. Chan, R.H. Jones and K.G. Lοder (eds), Research in Governmental and Nonprofit Accounting, Greenwich, CT: JAI Press, , vol. 9, pp. 33–57.

Carlin T.M. (2005), Debating the impact of accrual accounting and reporting in the

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public sector, Financial Accountability & Management, 21(3), 309–336.

Christiaens J., Reyniers B., Rollé C. (2010), Impact of IPSAS on reforming governmental financial information systems: a comparative study, International Review of Administrative Sciences, 76, 537- 554.

Chan, J. L. (2010). Government Adoption of Accounting Standards,

especially IPSAS. www.jameslchan.com, Retrieved from

http://jameslchan.com/papers/ChanPhDSem6.pdf

Dragan, C. M. (2008). Accounting practice of public institutions,

www.conta.cafe.ro. Retrieved from http://www.contacafe.ro/

topic11240.html

Groot T. and Budding T. (2008), New public management’s current issues and future prospects, Financial Accountability & Management, 24(1), 1–13.

Grossi G. and Soverchia M. (2011), European commission adoption of IPSAS to reform financial reporting, Abacus, 47, 525–552.

Heald D. (2003), The global revolution in government accounting, Symposium in Public Money & Management, Vol. 23, No. 1.

Ilie E. and Miose N.-M. (2012), IPSAS and the application of these standards in the Romania, Procedia - Social and Behavioral Sciences, 62, 35–39.

International Public Sector Accounting Standards (IPSAS) Board, Handbook of International Public Sector Accounting Pronouncements (New York: IFAC, 2008).

Luder K. (1992), A contingency model of governmental accounting innovations in the political administrative environment, in: J. Chan and J.M. Patton (eds), Research in Governmental and Nonprofit Accounting, Greenwich, CT: JAI Press, Vol. 7, pp. 99–127.

Luder K. (1998), Governmental accounting in west European countries: with special reference to the federal republic of Germany, in: J.L. Chan and R.H. Jones (eds), Governmental Accounting and Auditing: International Comparisons, New York: Routledge, pp. 82–104.

IPSAS Board (2008). Handbook of International Public Sector Accounting

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Pronouncements.

Kanellos, T. , Evangelos P., & Dimitrios B. (2013). Concept, Regulations and Institutional Issues of IPSAS: A Critical Review. European Journal of Business and Social Sciences, Vol. 2, No. 1, pp 43‐54; URL: http://www.ejbss.com/recent.aspxISSN: 2235 ‐767X

Machiavelli, Niccolo, The Prince and the Discourses (Random House, 1950).

APPEDICES:

Appendix “A” IPSAS Challenge:IPSAS ISSUES ADDRESSED CHALLENGESIPSAS 1. Presentation of Financial Statements.

Sets out the overall considerations for the presentation of financial statements, guidance for the structure of those statements and minimum requirements for their content under the accrual basis of accounting

Currently PSA are on cash basis it would take long time to train qualified personnel to handle accrual accounting in PS

IPSAS 2. Cash Flow Statements

Requires the provision of information about the changes in cash and cash equivalents during the period from operating, investing and financing activities.

The operation of PS is not well defined likewise its financing structure. It’s going to be difficult to provide structure in place in near time to come

IPSAS 3 Net Surplus or Deficit for the Period, Fundamental Errors and Changes inAccounting Policies

Specifies the accounting treatment for changes in accounting estimates, changes in accounting policies and the correction of fundamental errors defines extra ordinary items and requires the separate disclosure of certain items in the financial statements.

PS in Nigeria

operates

inefficiently and

reporters will

face a lot of

obstacles in

identifying what

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constitute errors.

errors

IPSAS 4 The Effects of Changes in Foreign Exchange Rates

Deals with accounting for foreign currency transactions and foreign operations. IPSAS 4 sets out the requirements for determiningWhich exchange rate to use for the recognition of certain transactions and balances and how to recognize in the financial statements the financial effect of changes in exchange rates.

The exchange

rate regime in

Nigeria is highly

volatile and

adopting this

standard may

creates a lot of

flexibility in

governance of

govt. funds.

IPSAS 5 Borrowing Costs

Prescribes the accounting treatment for borrowing costs and requires either the immediate expensing of borrowing costs or, as an allowed alternative treatment, the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

Vast resources

accruing to PS in

Nigeria come

from statutory

allocation; any

standard that will

aloe borrowings

to be expensed

may jeopardize

the reports.

IPSAS 6 Consolidated Financial Statements and Accounting for Controlled Entities

Requires all controlling entities to prepare consolidated financial statements, which consolidate all controlled entities on a line by line basis. The Standard also contains a detailed discussion of the concept

It’s going to

be difficult

looking at

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of control as it applies in the public sector and guidance on determining whether controlexists for financial reporting purposes.

existing

political

structure for

FGN to

consolidate

SGA and

LGA’s.

IPSAS 7 Accounting for Investments in Associates

Requires all investments in associates to beaccounted for in the consolidated financial statements using the equity method of accounting, except when the investment is acquired and held exclusively with a view to its disposal in the near future in which case the cost method is required.

Consolidation

is a difficult

task even in

private

settings.

IPSAS 8 Financial Reporting of Interests in Joint Ventures

Requires proportionate consolidation to be adopted as the benchmark treatment for accounting for such joint ventures entered into by public sector entities. However, IPSAS 8 also permits – as an allowed alternative – joint ventures to be accounted for using the equity method of accounting.

Accounting for joint venture using equity method will result in given undue advantage to government.

IPSAS 9 Revenue from Exchange Transactions

Establishes the conditions for the recognition of revenue arising from exchange transactions, requires such revenue to be measured at the fair value of the consideration received or receivable and includes disclosure requirements.

Fair value consideration may results in directing financial reports to preparers’ interest (income smoothing). In governments this allows for the tendency of

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corruption.IPSAS 10 Financial Reporting in Hyperinflationary Economies

Describes the characteristics of a hyperinflationary economy and requires financial statements of entities which operate in such economies to be restated.

Financial restatement may be cumbersome and difficult. A lot of assumption and value judgment may cause subjectivity.

IPSAS 11 Construction Contracts

Defines construction contracts, establishes requirements for the recognition of revenues and expenses arising from such contracts and identifies certain disclosure requirements.

Due to inflationary forces full application may be difficult. Likewise, abandoned projects and lack of enforcement rules could be a factor to successful application.

IPSAS 12 Inventories

Defines inventories, establishes measurement requirements for inventories(Including those inventories which are held for distribution at no or nominal charge) under the historical cost system and includes disclosure requirements.

Currently government inventories are not fully accounted for, data on them is also scarce. It will take long time before such can be achieved.

IPSAS 13 Leases Establishes requirements for the accounting treatment of operating and finance leasing transactions by lessees and lessors.

Improper documentations of agreements may hamper application of this provision

IPSAS 14 Events After the Reporting Date

Establishes requirements for the treatment of certain events that occur after the reporting date, and distinguishes between adjusting and non-adjusting events.

Budget delays and variations are major challenges.

IPSAS 15 Financial Instruments: Disclosure and Presentation

Establishes requirements for the presentation of on-balance-sheet financial instruments and identifies the information that should be disclosed about both on-balance-

Stocks in Nigeria are highly volatile and some are stagnant.

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sheet (recognized) and off-balance-sheet (unrecognized) financial instruments.

Volatility factor could be a potential problem in fair value treatment of financial instruments.

IPSAS 16 Investment Property

Establishes the accounting treatment, and related disclosures, for investment property. It provides for application of either a fair value or historical cost model.

Lack of adequate statistical data of government owned properties and estate is a big challenge.

IPSAS 17 Property, Plant and Equipment

Establishes the accounting treatment for property, plant and equipment, including the basis and timing of their initial recognition, and the determination of their ongoing carrying amounts and related depreciation. It does not require or prohibit the recognition of heritage assets.

Inadequate statistical data on government assets and difficulty in classification.

IPSAS 18 Segment Reporting

Establishes requirements for the disclosure of financial statement information about distinguishable activities of reporting entities.

This requirement is full of ambiguities, which is difficult even in private sector.

IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets

Establishes requirements for the recognition of provisions, and the disclosure of contingent liabilities and contingent assets.

Its difficult to ascertain and value contingent liabilities talk less of assets.

IPSAS 20 Related Party Disclosures

Establishes requirements for the disclosure of transactions with parties that are related to the reporting entity including Ministers, senior management, and their close family members.

Corruptions and graft related offenses are major impediments to the realization of this standard.

IPSAS21 Impairment of Non-Cash-Generating Assets

Ensure that non-cash-generating assets are carried at no more than their recoverable service amount, and to prescribe how recoverable service amount is calculated.

This standard is redundant as par as public entities are concerned.

IPSAS 22Disclosure of Financial Information About

Sets the disclosure requirements for governments that elect to present information about the general government sector (GGS)

A lot of statistical data are needed to realize the

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the General Government Sector

in their consolidated financial statements.The disclosure of appropriate information about the GGS of a government can provide a better understanding of the relationship between the market and non-market activities of the government and between financial statements and statistical bases of financial reporting

provisional requirements of the standard.

IPSAS 23.Revenue from Non-Exchange Transactions (Taxes and Transfers)

Prescribes requirements for the financial reporting of revenue arising from non-exchange transactions, other than non-exchange transactions that give rise to an entity combination.In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange

Less challenge in application. Government grants aid form a substantial part of revenue at state and LGA’s so its not a new thing.

IPSAS 24 Presentation of Budget Information in Financial Statements

Ensures that public sector entities discharge their accountability obligations and enhance the transparency of their financial statements by demonstrating compliance with the approved budget for which they are held publicly accountable and, where the budget and the financial statements are prepared on the same basis, their financial performance in achieving the budgeted results.

Large history of variation may hamper honest presentation. Also poor budget performance history.

IPSAS 25Employee Benefit

Prescribes the accounting and disclosure for employee benefits.This includes: short-term benefits (wages, annual leave, sick leave, bonuses, profit-sharing and non-monetary benefits); pensions; post-employment life insurance and medical benefits; termination benefits and other longterm employee benefits (long-service leave, disability, deferred

The standard requires a lot of actuarial information, which is currently not available.

22

compensation, and bonuses and longterm profit-sharing), except for share based transactions and employee retirement benefit plans.

IPSAS 26 Impairment of Cash-Generating Assets

Prescribes the procedures that an entity applies to determine whether a cash-generating asset is impaired and to ensure that impairment losses are recognized.This standard also specifies when an entity shall reverse an impairment loss and prescribes disclosures.

The provision of impairments may lead to room for smoothing.

IPSAS27Agriculture

Sets the accounting treatment and disclosures for agricultural activity.Agricultural activity is the management by an entity of the biological transformation of living animals or plants (biological assets) for sale, or for distribution at no charge or for a nominal charge or for conversion into agricultural produce or into additional biological assets.

Lack of adequate data on government farms asset, implements and produce. Valuation of plantation farms could also be a big challenge.

IPSAS 28 Financial Instruments: Presentation

This standard sets the principles for classifying and presenting financial instruments as liabilities or net assets/ equity, and for offsetting financial assets and liabilities.

Fair value valuation

IPSAS 29Financial Instruments: Recognition and Measurement

Establishes principles for recognizing, derecognizing and measuring financial assets and financial liabilities.All financial assets and financial liabilities, including all derivatives and certain embedded derivatives, are recognized in the statement of financial position.

Fair value Measurement

IPSAS 30 Financial Instruments: Disclosures

Prescribes disclosures that enable financial statement users to evaluate the significance of financial instruments to an entity, the nature and extent of their risks, and how the entity manages those risks.

What constitute risk in Govt. is not adequately defined and hard to comprehend

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IPSAS 31Intangible Assets

Sets the accounting treatment for intangible assets that are not dealt with specifically in another IPSAS.IPSAS 31 does not apply to intangible assets acquired in an entity combination from a non-exchange transaction, and to powers and rights conferred by legislation, a constitution or by equivalent means, such as the power to tax.

Intangibles are yet to be fully conceptualized in government.

IPSAS 32Service Concession Arrangement: Grantor

Prescribes the accounting for service concession arrangement by the grantor, a public sector entity.

Conceptual challenges.

Cash Basis IPSAS Prescribed the manner into which GPFS should be presented using cash basis of accounting

Lack of qualified manpower especially at LGA’s level is identified as a major obstacle to migration to full cash IPSAS

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