IPSASB proposes new disclosures for government expenses

IPSASB proposes new disclosures for government expenses

No guidance on government expenses

Governments exist primarily to provide services to its citizens and others. These services take many forms and include providing services for all to access, as well as direct support to individuals in the form of goods, services and financial support.

The International Public Sector Accounting Standards Board (IPSASB) sets requirements for governments around the world to use when preparing their financial statements. Up until 2019, there was a lack of guidance internationally on how to account for expenditure incurred by governments to provide such services to citizens and others. This means that governments – and their entities – could have applied widespread accounting practices in deciding when, and at what value, to recognise these expenses and any corresponding liability, as well as what information to present and disclose in the financial statements.

The IPSASB issued ED 72 on Transfer Expenses for comment. ED 72 is one component of a larger reform dealing with accounting for expenses. As the ASB primarily uses IPSAS in developing Standards of GRAP, it is exploring and discussing the proposed principles in ED 72 and how feasible they are to apply locally. Issues identified locally on ED 72 will be shared with the IPSASB.

New proposals for disclosing information on government expenses

In articles published in June 2020, we explored issues related to the recognition and measurement of transfer expenses. Apart from establishing principles for the recognition and measurement of transfer expenses, the IPSASB has proposed a number of new disclosures for transfer expenses. The proposed disclosures are different for transfer expenses:

(a) With performance obligations, i.e. binding arrangements where a transfer provider agrees to provide resources to a transfer recipient, and in return the transfer recipient promises to provide distinct goods or services to a 3^rd party beneficiary.

(b) Without performance obligations, i.e.:

(i) binding arrangements where a transfer provider agrees to provide resources to a transfer recipient, and in return the transfer recipient promises to undertake an activity or similar; or

(ii) arrangements where there is no binding arrangement, and where a transfer provider agrees to provide resources to a transfer recipient with no benefit being provided in return.

The Secretariat of the ASB has prepared a summary of the disclosures, which maps differences between the disclosures required for either type of transaction. The summary can be accessed by following this link: [https://www.asb.co.za/wp-content/uploads/2020/07/ED-72-183-Summary-of-presentation-and-disclosure-requirements-for-Transfer-Expenses.pdf].

The relevance, appropriateness, and completeness of the disclosures will need to be assessed when discussing ED 72 locally.

Where can the EDs be accessed and how can you provide comment?

ED 72 can be accessed on the ASB’s website by following this link: https://www.asb.co.za/comment-on-proposals/.

Comment can be submitted to the Secretariat of the ASB at through the website or info@asb.co.za by 1 October 2020.

[The views expressed in this article are those of Secretariat and not the ASB Board.]