IPSASB provides more guidance on what a “resource” means in the public sector

Understanding what a resource means, particularly in the context of an asset in the public sector, has been the topic of debate since the advent of government accounting. The IPSASB has proposed new guidance in its Conceptual Framework to explain what a resource is and how it should be interpreted in the context of an asset.

The proposed guidance deals with three issues:

• Rights
• Service potential and economic benefits
• Present control because of past events

The most prominent guidance proposed by the IPSASB relates to the understanding of “rights” in the public sector. There are several additions or points of clarification that will be helpful to readers of IPSAS. Rights can take a variety of forms, including:

1. Rights can exist to either service potential or the capability to generate economic resources or both. The change to the capability to generate economic resources is helpful as it means that there is potential to generate, rather than currently being able to generate economic benefits.
2. Rights that correspond to an obligation of another party, e.g. rights to:

• Receive cash (bank account).
• Receive goods or services (prepayment of services like insurance).
• Exchange resources with another party under favourable conditions (forward contract to purchase an asset).
• Benefit from an obligation of another party to transfer resources if a specified uncertain future event occurs (insurance provided against theft, disasters, etc.).

3. Rights that do not correspond to the liability of another party, e.g. rights:

• Over physical objects (leases of assets).
• To use intellectual property.

4. Rights must have service potential or economic benefits beyond those available to all other parties, e.g. public goods may be available to everyone, and individual users/beneficiaries would therefore not have exclusive rights over these goods.
5. An individual asset, particularly physical assets, could have several rights. To reflect the faithful representation of the asset, the related rights of the asset are treated as a single unit of account.
6. Rights to service potential or economic benefits may sometimes exist only momentarily, e.g.,services received by employees and the use of assets are consumed immediately.

Given the importance of assets in the public financial management environment, it is  essential to read the guidance and understand its implications.

Have your say?

It is important that you have your say on the proposed changes. Comment to the IPSASB is due on 31 May 2022. As the ASB ‘s Conceptual Framework is based on the IPSASB’s, any changes would need to be considered by the Board. The ASB will have a series of roundtable discussions to discuss the proposed changes in ED 81 so that comments can be submitted to the IPSASB. ED 81 of the IPSASB has been published concurrently by the ASB as ED 197. Information about the project can be accessed using this link. If you are interested in joining the discussions, please contact  E van der Westhuizen at eliznav@asb.co.za.