What to expect in new IPSAS proposals: measurement-related disclosures

The IPSASB’s ED 77 on IPSAS Measurement includes amendments to the measurement requirements and disclosures to other IPSASs.

Use of fair value throughout IPSAS

Based on feedback from respondents, the IPSASB decided that fair value is appropriate in the public sector and has aligned with IFRS 13 on Fair Value Measurement. As a result, it was necessary for the IPSASB to evaluate whether the existing uses of fair value in IPSAS will be appropriate when ED 77 is adopted. The IPSASB reviewed its suite of IPSAS and agreed where an asset or liability is held for its financial capacity, the term “fair value” should be retained. Consequently, ED 77 proposes an update to the definition and guidance in other IPSAS to be aligned with the IFRS 13. In some cases such as leases, service arrangements and impairment of non-cash-generating assets, the IPSASB decided that the existing definition of fair value should be retained. The changes will be considered in separate projects.

New disclosures for current value measurements

The IPSASB agreed that no additional disclosures are needed under the historical cost model as no remeasurement occurs. Changes related to depreciation (or amortisation) and impairments are already addressed in the relevant IPSAS.

Additional disclosures are proposed where assets and liabilities are measured using the current value model. Since these measurements are updated regularly, new and useful information is available at each reporting date. The IPSASB decided that the IASB’s disclosures in IFRS 13 are appropriate, and used them as a basis. It developed its additional disclosures so that they apply across all current value model measurements – current operational value, fair value and cost of fulfillment.

The premise behind the disclosures is that, irrespective of the current value measurement basis selected, the users of the financial statements require the same information to understand the measurement – the valuation techniques, inputs and assumptions applied to develop those measurements. In addition, as the inputs to the assumptions become less observable, the users require more information to understand the measurement. This means that more disclosures will be required when entities use less observable inputs.

ED 77 further distinguishes the disclosures between recurring and non-recurring current value measurements. Recurring disclosures are required at each reporting period as the current value measurement occurs frequently, while non-recurring disclosures are required in specific circumstances. The proposed disclosures have been included in the relevant IPSAS in Appendix E of ED 77.

Have your say…

The Board will need to consider whether these changes are needed to the Standards of GRAP. As a result, stakeholder feedback is critical in (a) commenting to the IPSASB on local experiences, and (b) informing the Board’s future work in this area.

What are your views on these proposals?

Comment can be submitted to the Secretariat of the ASB at info@asb.co.za, by 1 October 2021.

ED 77 was issued as part of package of documents dealing with inter-related issues. This package includes:

• ED 76 on Conceptual Framework Update: Chapter 7, Measurement of Assets and Liabilities in Financial Statements (published locally as ED 188);
• ED 78 on Revisions to IPSAS 17 on Property, Plant and Equipment (published locally as ED 190); and
• ED 79 on Non-current Assets Held for Sale and Discontinued Operations (published locally as ED 191).

ED 76 to ED 79 (locally published as ED 188 to ED 191) are available on the ASB’s website and can be accessed here: https://www.asb.co.za/comment-on-proposals/.

Disclaimer

This content 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.