The IPSASB is testing the applicability of current operational value

The International Public Sector Accounting Standards Board (IPSASB) is currently progressing the second phase to the measurement project – the Measurement Application phase. In this phase the applicability of current operational value (COV) across IPSAS literature is assessed. 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. The following was highlighted at the IPSASB meeting in September 2023:

IPSAS 12 on Inventories

The IPSASB indicated that further analysis is required on the applicability of COV to inventories. The analysis relates to practical challenges with applying COV instead of fair value to initially measure inventories held for distribution. The IPSASB will also consider if other IPSASs appropriately link to IPSAS 12 with the introduction of COV, where an entity applies another IPSAS before the asset is initially recognised in IPSAS 12. The drafting and any practical issues will be presented at the December 2023 Board meeting.

IPSAS 32, Service Concession Arrangements

The IPSASB discussed whether COV applies to assets within the scope of IPSAS 32. A public sector entity recognises a service concession asset when it enters into a binding agreement with a private sector entity who operates the asset. The public sector entity (grantor) controls and regulates the service the private entity (operator) provides, and has a significant residual interest in the asset at the end of the term of the arrangement. IPSAS 32 refers to other applicable IPSASs for the subsequent measurement of the asset, so no change was required to IPSAS 32 as COV is already in IPSAS 45 on Property, Plant and Equipment and IPSAS 31 on Intangible Assets. The IPSASB thus agreed that COV can be applied to service concession assets.

IPSAS 43 on Leases

The IPSASB indicated that further analysis is required on the applicability of COV to the measurement of the right-of-use assets in leases. The paper the IPSASB discussed referred to leases in general, but IPSAS 43 now has three types of leases i.e. leases on market terms, concessionary leases and in-kind leases. The applicability of COV to the different types of leases will be deliberated further in December 2023. The IPSASB will also discuss the link with IPSAS 47 on Revenue and IPSAS 48 on Transfer Expenses and consider whether any guidance is needed in IPSAS 46 to hang on in other Standards.

IPSAS 21, Impairment of Non-Cash-Generating Assets

The IPSASB considered proposals to revise the definition and the guidance on recoverable service amount. It was noted that further work is required to understand the effect of COV when the different measurement models are applied. This will be discussed again at the December 2023 meeting. The IPSASB will also consider illustrative examples at the December meeting.

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.