The IPSASB continues its deliberation on the applicability of current operational value across IPSAS

The International Public Sector Accounting Standards Board (IPSASB) continues its discussion on the Measurement Application phase. This is the second phase of the measurement project, where the IPSASB assesses the applicability of current operational value (COV) across IPSAS in issue. COV is a measurement basis for assets under the current value model in IPSAS 46 on Measurement. COV is defined as the amount that an entity would pay for the remaining service potential of an asset at measurement date.

At their meeting in December 2023, the IPSASB decided that IPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors should be amended to reflect that a change in measurement model (rather than a change in measurement basis) is a change in accounting policy. The measurement models applicable in IPSAS 46 are the historical cost model and the current value model. The IPSASB also assessed the applicability of COV in IPSAS 12 Inventories, IPSAS 43 Leases and IPSAS 21 Impairment of Non-Cash-Generating Assets. The following was highlighted:

Inventories

COV is relevant for the initial measurement of inventories acquired in non-exchange transactions. It was also agreed that COV is an applicable subsequent measurement basis for inventories held for their operational capacity.

Leases

COV is relevant for right of use assets subsequently measured in accordance with IPSAS 45 on Property, Plant and Equipment. The IPSASB will next consider to clarify how the principle of ‘least costly manner’ should be applied in the context of concessionary arrangements.

Impairment of Non-Cash-Generating Assets

IPSAS 21 currently states that the recoverable service amount of a non-cash-generating asset is the higher of its value in use and its fair value less costs to sell. The IPSASB concluded that it is appropriate to replace value in use with COV. The restoration cost and service units approaches should be removed from the updated IPSAS 21. Examples in the public sector were debated to better understand the application of COV in impairment testing.

The approval date of the Measurement Application Exposure Draft is planned for June 2024.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.