IPSASB researches scope of project to consider presentation of financial statements

The IPSASB’s consultation on their mid-period work programme identified the need for a project that enhances the presentation of information in financial statements. It is important for public sector entities to clearly communicate their financial information to users for accountability and decision-making purposes. Internationally and locally this has been identified as an area requiring improvement.

To respond to this need the IPSASB added a project to its work programme to consider the overall requirements for the presentation of financial statements, their structure and minimum requirements for their content (including disclosure).

Current status

At the December 2022 meeting, the IPSASB considered initial research into the scope of the project, including feedback received from other standard-setters at the International Public Sector Standards Setters Forum. The IPSASB noted that the potential impact of the following should be considered on the project:

• The users of public sector financial statements as identified in the Conceptual Framework.
• The need for entities to apply judgement to determine what information is important to users, and to present the financial statements accordingly.
• The applicability of changes to International Accounting Standards from the International Accounting Standards Board’s Primary Financial Statements project (which is part of the IASB’s work on Better Communication in Financial Reporting).
• Presentation guidelines that apply to other areas of reporting in the public sector, such as statistical reporting.
• The impact of recently approved changes to the IPSASB’s Conceptual Framework, and the interaction of the project with existing IPSAS, e.g. IPSAS 18 Segment Reporting, IPSAS 22 Disclosure of Financial Information About the General Government Sector and IPSAS 24 on Presentation of Budget Information in Financial Statements.
• The way in which users consume information (e.g. digitally).
• The application of materiality as an underlying principle when entities decide what and how information should be presented.
• Users’ ability to understand items that impact surplus/deficit within a year, including items that may be recognised directly in net assets/equity.
• An ordinary citizen’s ability to understand the information presented in financial statements, and how this is impacted by whether information is presented by function versus nature.
• The need for guidance on performance measures presented in financial statements that are not required by IPSAS.

Next steps

The IPSASB will continue its research and scoping activities as part of the process to develop and approve a detailed project brief in 2023.

Local guidance

The Accounting Standards Board (Board) recently finalised the work programme for 2024 to 2026 – access the work programme here. The Board does not intend to undertake a large-scale project to look at presentation of financial statements during this period, but may do a literature review of practices on reporting compensation of employees in financial statements, should resources be available.

Past work of the Board considered the presentation of information in the Statement of Financial Performance. Access the Research Paper that was published as a result here: ASB’s Research Paper on Presentation of Information in the Statement of Financial Performance.