The ASB recently submitted a comment letter to the IPSASB on its Consultation Paper, Presentation of Financial Statements. The project proposes a comprehensive review of IPSAS 1 and explores how financial statements can better communicate information to users while considering developments such as IFRS 18.
Stakeholders welcomed the objective of modernising financial reporting but emphasised that alignment with international developments matters, but it should not overshadow the objective of public sector financial reporting.
Alignment of definitions requires careful consideration
One of the strongest messages conveyed to the IPSASB related to a proposal to align definitions in the future presentation standard with those in the IPSASB Conceptual Framework. While stakeholders supported consistency across the IPSAS literature, they expressed concern about elevating Conceptual Framework definitions into authoritative Standards-level requirements without fully considering the implications. They cautioned that changes to definitions could unintentionally affect how transactions are recognised and presented and might create uncertainty about how standards are applied.
The comment letter encouraged the IPSASB to clearly explain the relationship between the Conceptual Framework, transaction-specific IPSAS Accounting Standards and the presentation requirements in the new Standard. They noted that guidance should explain how differences in definitions and any resulting implications should be addressed in practice.
Financial performance should reflect the public sector environment
Another key area of discussion was the IPSASB’s proposal to classify revenue and expenses into categories such as Operating, Investing and Financing, broadly aligned with IFRS 18. The IPSASB views categorisation as a way to improve comparability and communication.
Stakeholders acknowledged these objectives but questioned whether these categories would provide the most meaningful information in a public sector environment. Public sector entities exist primarily to deliver services and achieve policy objectives rather than generate profits. As a result, revenue and expenses may ultimately be reported in the Operating category, limiting the usefulness of the proposed categorisation for understanding how public resources are managed and deployed. They indicated that categorisation should reflect how public resources are raised, allocated and used in delivering services.
As a result, stakeholders noted that many public sector revenues and expenses may ultimately be reported in the Operating category, limiting the usefulness of the proposed categorisation for understanding how public resources are managed. They suggested that any proposed categorisation approach should instead reflect how public resources are raised, allocated and used in delivering services. The comments letter recommends that the IPSASB retain the existing presentation requirements or consider public sector-specific categories.
Preserving what already works
Stakeholders noted that modernisation does not necessarily require replacing existing practices that already serve users well. Proposals that retain established public sector approaches, particularly where those approaches support accountability and are well understood by users, were generally supported.
Next steps for IPSASB
After considering stakeholder comments from all jurisdictions, the IPSASB will redeliberate its proposals and develop an Exposure Draft setting out proposed requirements for the new IPSAS 1. The Exposure Draft will be issued for further public consultation before the IPSASB considers a final Standard.
You can access the full comment letter on the ASB website here.