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IPSAS 23 - REVENUE FROM NON-EXCHANGE TRANSACTIONS (TAXES AND TRANSFERS)

When & How to Governments recognise Revenue?

Government Revenues are 2 Types

Exchange Revenue

Non-Exchange Revenue - Taxes - Transfers

Taxes are economic benefits or services potentially compulsorily paid or payable to public sector entities, in accordance with laws and/or regulations, established to provide revenue to the government.

Taxes - when to recognise

1. An asset will be recognized for taxes when the event happens and recognition criteria are met.

2. Taxes can be recognized as an asset if it is likely that resources will come in and their value can be measured.

3. The likelihood is determined based on available evidence, including disclosure by the taxpayer.

4. Taxes are not considered contributions from owners and don't give taxpayers rights to future benefits, excess assets, or ownership in the

government.

The Taxable Event

The taxable event is the event that the government, legislature, or other authority has determined will be subject to taxation. The entity reviews local tax laws to determine taxable events for different taxes. The taxable event for various taxes are:

a) Income tax is earning assessable income during the taxation period.

b) Value-added tax is undertaking taxable activity during the taxation period. c) Goods and services tax is on buying or selling taxable goods and services.

d) Customs duty is moving dutiable goods or services across customs boundaries.

e) Death duty is when a person owning taxable property passes away.

f) Property tax is when the tax is levied or the period for which tax is levied.

Advance Receipts of Taxes

Advance tax receipts are treated similarly to other advance receipts and the liability is only recognized once the taxable event takes place, at the discharge of liability, revenue is recognized.

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IPSAS 23 - REVENUE FROM NON-EXCHANGE TRANSACTIONS (TAXES AND TRANSFERS)

When & How to Governments recognise Revenue?

Government Revenues are 2 Types

Exchange Revenue

Non-Exchange Revenue - Taxes - Transfers

Taxes are economic benefits or services potentially compulsorily paid or payable to public sector entities, in accordance with laws and/or regulations, established to provide revenue to the government.

Taxes - when to recognise

1. An asset will be recognized for taxes when the event happens and recognition criteria are met.

2. Taxes can be recognized as an asset if it is likely that resources will come in and their value can be measured.

3. The likelihood is determined based on available evidence, including disclosure by the taxpayer.

4. Taxes are not considered contributions from owners and don't give taxpayers rights to future benefits, excess assets, or ownership in the

government.

The Taxable Event

The taxable event is the event that the government, legislature, or other authority has determined will be subject to taxation. The entity reviews local tax laws to determine taxable events for different taxes. The taxable event for various taxes are:

a) Income tax is earning assessable income during the taxation period.

b) Value-added tax is undertaking taxable activity during the taxation period. c) Goods and services tax is on buying or selling taxable goods and services.

d) Customs duty is moving dutiable goods or services across customs boundaries.

e) Death duty is when a person owning taxable property passes away.

f) Property tax is when the tax is levied or the period for which tax is levied.

Advance Receipts of Taxes

Advance tax receipts are treated similarly to other advance receipts and the liability is only recognized once the taxable event takes place, at the discharge of liability, revenue is recognized.

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IPSAS 23 - REVENUE FROM NON-EXCHANGE TRANSACTIONS (TAXES AND TRANSFERS)

When & How to Governments recognise Revenue?

Government Revenues are 2 Types

Exchange Revenue

Revenue: Revenue comprises gross inflows of economic benefits or service potential received and receivable by the reporting entity, which represents an increase in net assets/equi- ty, other than increases relating to contri- butions from owners.

Analysis of the Initial Inflow of Resources from Non-Exchange Transactions.

An entity recognizes an asset from a non-exchange transaction when it gains control of resources satisfying recognition criteria.

Contributions from owners are not revenue and are accounted for separately.

Entities analyze non-exchange transactions to determine recognized elements in financial state ments

The below flowchart determines if revenue arises from the inflow of resources.

Non Exchange Revenue

Taxes

Transfers

Recognition & Measurement of Assets: As per IPSAS 1, Assets are resources an entity controls from past events with expected future benefits. Non-exchange inflows meeting asset definition are recognized if benefits will flow and fair value can be measured reliably on the acquisition date.

Measurement of Revenue from Non-Exchange Transations: Revenue from non-exchange transactions is based on the net asset increase. If an asset is recog- nized, revnue is also recognized unless a liabil- ity must be reconized. Any subsequent reduc- tions in liability are recognized as revnue.

Measurement of Liabilities on Initial Recognition: The amount recognized as a liability shall be the best estimate of the amount required to settle the present obligation. at the reporting date.

Exchange and Non-Exchange Components of a Transaction: When acquiring an asset through a transaction with both exchange and non-exchange components, the entity follows IPSASS for the exchange component and this standard for non-exchange. If not possible to separate, treat it as non-exchange

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PROFESSIONALS AND CONSULTANTS' ROLES AND RESPONSIBILITIES IN TRANSITION TO PUBLIC SECTOR ACCOUNTING

As an IPSAS/Accrual Accounting adviser, your roles and responsibilities that will undertake:

Assess IPSAS accrual standards and map them with the financial management system to identify obstacles and prepare a blueprint for changes.

Renovate the current statements and reporting structure to align with the IPSAS framework.

Formulate data migration plans and tools to ensure high data quality.

Provide technical guidance on IPSAS reporting requirements at every phase of ex*****on.

Act as a mediator between the organization and auditors, deep diving into financial statements as needed.

Conduct training programs for stakeholders involved in financial reporting.

IPSAS is flexible and can be pursued by professionals from various fields and become an accounting professionals.

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IPSAS 22 - DISCLOSURE OF FINANCIAL INFORMATION ABOUT THE GENERAL GOVERNMENT SECTOR

This Standard mandates governments to disclose information about their general government sector in consolidated financial statements to increase transpar- ency and understanding of the government's market and non-market activities, and financial statements and statistics reporting.

Statistical Reporting vs IPSAS

➤ IPSASs and statistical financial reporting have simi larities and differences.

➤ IPSASs inform decision-making and show account ability, while statistical reporting analyzes GGS and performance.

► Statistical reporting uses accrual basis treatment but differs from financial accounting.

➤ Statistical reporting can include non-controlled enti ties, leading to unconsolidated units in GGS.

➤ Differences include how dividends are treated and the focus on specific measures.

➤ GGS disclosures do not require reconciliation but can be disclosed in notes.

The General Government Sector includes all govern- ment organizations in financial reporting. It is part of the public sector along with PFC and PNFC. GGS includes resident central, state, and local government units, social security funds, and non-profit institutions controlled by government units.

Disclosures

GGS disclosure must include assets, liabilities, netassets, revaluation adjustments, revenue, expenses,surplus/deficit, and cash flows from operating, invesing, and financing activities. The governments may disclose GGS by way of notes, separate columns in the financial statements, or as appropriate in their jurisdiction.

Disclose reconciled to the consolidated financial state- ments of the government, showing separately the amount of the adjustment to each equivalent item in those consolidations.

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SUSTAINABLE PUBLIC INVESTMENT MANAGEMENT

Sustainable Public Investment Management (SPIM): Public investment management (SPIM) is the process by which governments allocate, manage, and monitor public resources to achieve certain economic or social goals. With well organized policies and laws governments can make fight against environmental challenges. Green Investing leads to an improved world moving forward.

Sustainable Public Investment Management (SPIM):

1. Helps governments improve the efficiency of spending on climate-related projects.

2. Aids in project selection, design, monitoring, and evaluation of climate-related projects

3. Supports governments to achieve the economic and social objectives of the state.

4. Links budgeting and investment with the selection of achievable development objectives.

5. Improves government spending efficiency, effectiveness and accountability in resource allocation..

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IPSAS 21 - IMPAIRMENT OF NON-CASH-GENERATING ASSETS|

How to record impact of impairment in books?

1. Identify impairing assets using external and internal indicators at each reporting date.

2. Compare Recoverable Service amount with carrying value of an asset.

Impairment Loss Carrying value- Recoverable Service amount

3. Recoverable service amount is the higher of an asset's fair value, less costs to sell, and its value in use.

4. To measure value in use or the asset's remaining service potential, choose the appropriate approach based on data availability and the nature of the asset

1. Depreciated Replacement Cost Approach

2. Restoration Cost Approach

3. Service Units Approach

5. Recognition: If RSA Carrying Value, then the impairment loss is recog- nized immediately in surplus or deficit and the depreciation charge should be adjusted for future periods to allocate the asset's revised carrying amount systematically

6. Impairment a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future eco- nomic benefits or service potential through depreciation or amortization.

7. Reversal of Impairment Loss: If any. indication, a prior impairment loss on an asset can be reversed by increasing its carrying amount to the recoverable service amount. The increased amount cannot exceed what the carrying amount would have been without the impairment loss. The reversal is recognized immediately, except for revalued assets. Future depreciation or amortization charges will be on the revised carrying amount.

internal indicators at each reporting date.

8. Cash-generating assets are assets held with the primary objective of generating a commercial return. Non-cash-generating assets are assets other than cash-generating assets.

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PUBLIC SECTOR SUSTAINABILITY REPORTING

Sustainable development can be defined as 'development that meets the needs of the present without compromising the ability of future generations to meet their needs'.

It covers a wide range of topics, spanning environmental, social and governance (ESG)parameters

Governments are responsible for global challenges and the public sector should provide transparent economic oversight to create a positive and sustainable future.

There's a push for sustainability initiatives globally, IFAC is campaigning for a new International Sustainability Standards Board (ISSB) under the IFRS Foundation to support the UN 2030 Agenda for Sustainable Development and achieve Sustainable Development Goals (SDG).

Public Sector financial information related to sustainability contains

1. The government's sustainability strategy addresses the risks and opportunities associated with it.

2. Decisions made by the government that might lead to future cash inflows and outflows.

3. How governments are affected by their actions concerning people, the planet and the economy.

4. Development of knowledge-based assets related to sustainability

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IPSAS 20 – RELATED PARTY DISCLOSURES

Are we government-related parties?

Related party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged.

Related party means parties are considered to be related if one party has the ability to (a) control the other party, or (b) exercise significant influence over the other party in making financial and

operating decisions, or if the related party entity and another entity are subject to common control.

The public sector has related party relationships due to executive and parliamentary direction,

controlled entities, and influential government officials.

Related parties include control/affiliated parties, influential individuals & families, key personnel & family, and entities with significant ownership by influencers.

Disclosures:

Control Disclosure: Disclose related party relationships with control, including names of controlled entities and controllers.

Related Party Transactions: Disclose relationships, types, and necessary elements for clarity, including situations leading to related party transactions: service rendering, buying/selling goods or assets, agency/leasing/license agreements, R&D

transfer, finance, and guarantees.

Key Management Personnel: Disclose aggregate remuneration, other compensation, and loan details if not widely available.

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THE BENEFITS OF APPLYING

COST-BENEFIT ANALYSI IN THE PUBLIC SECTOR

Financial reporting imposes costs. Assessing whether the benefits of providing information justify the related costs is difficult to measure. Cost-benefit analysis (CBA) is a powerful tool the public sector can utilize to objectively evaluate the potential costs and benefits of implementing IPSAS. CBA promotes transparency in decision-making, offers an evaluation of reforms post-ex*****on, and helps governments make informed decisions with confidence. The following are components of Cost Benefit Analysis.

1. Benefits

The benefits are the outcomes of developing new or improved systems, Subdivided into Tangible Benefits and Intangible Benefits.

2. Cost

Financial reporting imposes costs. Reform costs are Implementation, Operating and Intangible costs.

3. Return on Investment

For analysis of ROI on the new system, accountants require to do cost and benefit analysis by subtracting costs from benefits.

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IPSAS 19 – PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

When to record in books?

I. Provisions

A provision is a liability of uncertain timing or amount.

Provision recognition and measurement require:

(1) a present obligation due to a past event,

(2) probability of outflow of resources, and

(3) reliable estimate of obligation amount.

If not met, no provision is recognized.

The provision amount is the best estimate for settlement at the reporting date.

Review provisions regularly to update estimates and use them only for their intended expenses.

Do not recognize provisions for future operating deficits.

II. Contingent Liabilities

A contingent liability is a possible or present obligation that is uncertain and not fully within the control of the entity. It may not be recognized if it is not probable that resources will be needed to settle or if the amount cannot be reliably measured. An entity shall not recognize a contingent liability.

An onerous contract has costs that exceed expected benefits. If an entity has, it must recognize and measure the obligation as a provision.

Restructuring is a management-led program that significantly changes an entity's activities or manner of operation. Examples include termination or disposal of a service, closure or relocation of an office, changes in management structure, and reorganizations that materially impact the entity's operations. A provision for restructuring costs is recognized when the criteria for provisions are met..

III. Contingent Assets

Contingent assets may arise from past events and are only confirmed by uncertain future events outside an entity's control. They are not reognized but disclosed in notes if there is a probable inflow of benefits or services.

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CHART OF ACCOUNTS: HOW TO ORGANIZE YOUR PUBLIC SECTOR ACCOUNTING

1. Tool for recording data and financial reporting.

2. Own unique COA with list of account titles, with entity specific needs.

3. Hub of Integrated Financial management Information System(IFMIS).

4. Key to record data of revenues, expenses, assets, liabilities and equity.

5. Monitoring a COA during design and implementation is essential for success.

6. Application of COA:

1) Control

2) Accountability

3) Budget Management

4) Financial planning & management

5) Management information

6) General purpose financial reports
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REDUCING GENDER DISPARITIES THROUGH GENDER-BASED BUDGETING(GBB) IN THE PUBLIC SECTOR

United Nations Sustainability Development Goals 5 (UN SDG 5) aims to achieve gender equality and empower all women and girls by 2030.

GBB is a tool that assesses:

1. Needs of both men and women

2. Budget requirement

3. Measurement of performance

4. Long term alignment

Reducing gender disparities can:

1. Promote participation

2. Raise productivity

3. Economic diversification

4. Improve political stability

GBB can help:

1. Improve efficiency

2. Accountability

3. Growth in the public sector

4.Create gender-sensitive culture

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Comparative Analysis Across Governments

A segment is a unique activity or group of activities of an entity that requires separate financial reporting for assessing performance and resource allocation decisions. Promotes financial transparency and accountability. Users can analyze major activity performance and resource allocation through segment reporting. Segment Reporting applies to a complete set of financial statements. If presenting consolidated and separate statements together, segment reporting should apply only to consolidated statements.

Reporting of Segments: Service and Geographical Segments are decided for financial statements based on below factors:

1.Criteria for deciding Goods & Service:

Segment are:

a) entity operating objectives,

b) budget allocation,

c) nature of goods/services,

d) production process,

e) customer type, management, and

f) regulatory environment.

2.Criteria for deciding Geography Segment are:

a) Similarity of economic, social, & political conditions

b) Relationship to entity objectives

e) Differences in service delivery operating conditions

d) Management and reporting practices

e) Special needs, skills, or risks in specific areas.

Disclose:

1. Revenue and expense for each segment, including budget allocation, extenal sources, and inter segment transactions.

2. The totall carrying amount of each segment's assets.

3. The totall carrying amount of each segment's liabilities.

4. The total cost incurred during the period so acquire segment assets for each segment.

5. Encourage to disclose significant segment revenues and expenses to explain segment perfomance. Segment asset depreciation and non-cash expenses/revenues for each segment.

6. Disclose each segment's overall net surplus (deficit) share from equity method accounted investments within the same segment.

7. Disclose reconcile segment information with consolidated financials

8. Disclose reconciliations comparing segment revenue, expense, assets, and liabilities to those of the overall entity, including any external revenue not included in any segment's revenue

9. Other Disclosures

1. The basis of pricing inter-segment transfers and any change therein.

2. Changes in accounting policies adopted for segment reporting have a material effect.

3. Segment nature and activities if not using service/geographical basis.

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PERFORMANCE-BASED BUDGETS(PBB): TO IMPROVE THE EFFICIENCY AND EFFECTIVENESS OF PUBLIC EXPENDITURE

1.PBB links spending to results

2.Public spending should be focused on activities that have the greatest impact on citizens' lives.

3.Easy to assess if a program is achieving its goals and, make adjustments.

PBB improves accountability and transparency.

4.The World Bank strongly supports PBB and offers assistance to countries interested in introducing it.

How Can Performance-based Budgeting Be Implemented?

1. Set a clear & measurable goals for all public expenditures.

2. Create a system for tracking expenditures.

3. Develop a mechanism for monitoring and evaluating performance.

4. Use evaluations to adjust and achieve desired results.

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IPSAS 17, PROPERTY, PLANT & EQUIPMENT

How Government Assets are Recorded?

Property, plant, and equipment are tangible items that:

(a) Are held for use in the production or supply of goods or services,

for rental to others, or for administrative purposes and

(b) Are expected to be used during more than one reporting period.

Recognition & Measurement

Initially

Acquired through Exchange transaction

(The cost comprises: purchase price, directly attributable costs & dismantle & restoration cost)

Acquired through Non - Exchange transaction

value as at the date of acquisition

At Reporting Date

Cost Model

Carrying Value:

Historical Cost # # #

Accumulated Depreciation XX

Accumulated Impairment Loss XX

# #

Revaluation Model

Carrying Value:

Fair Value # # #

Subsequent Accumulated Depreciation XX

Subsequent Accumulated Impairment Loss XX

Depreciation allocates an asset's depreciable amount over its useful life. Its charges to surplus or deficit.

Fair value < Carrying Value

CASE 1: Decreased amount to be charged to Profit & loss account

CASE 2: Increased amount to be added to Revaluation Surplus subject to previous charges to Profit & loss account

Derecognize

PPE are derecognized when disposed of or no future economic benefits or service potential is expected from its use or disposal. The gain or loss from de-registering an asset is added to the surplus/deficit and is calculated as the difference between net disposal proceeds and the asset's carrying amount.

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HOW ACCRUAL ACCOUNTING IS DIFFERENT

FROM BUDGETING

BUDGET IN PUBLIC SECTOR

Fiscal policy is the government's use of spending and taxation to influence the economy, i.e., the budget.

The budget cycle is a key part of the PFM process. A strong legal and fiscal framework is necessary to outline the rules and regulations for budget preparation, ex*****on, accounting and audit of the budget cycle.

ACCRUAL ACCOUNTING IS DIFFERENT FROM BUDGETING

Fiscal policy is the government's use of spending and taxation to influence the economy, i.e., the budget.

The budget cycle is a key part of the PFM process. A strong legal and fiscal framework is necessary to outline the rules and regulations for budget preparation, ex*****on, accounting and audit of the budget cycle.

Budget Cycle

Legal Framework

1. fiscal Framework

2. Budget Preparation

3. Budget Ex*****on

4. Accounting and Reporting

5. Control and Audit

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IPSAS 16 INVESTMENT PROPERTY

Investment property is property (land or a building – or both) held to earn rentals or for capital appreciation, or both, rather than for:

(a) Use in the production or supply of goods or services, or for administrative purposes or

(b) Sale in the ordinary course of operations.

Measurement at Recognition

1. An owned investment property shall be measured initially at its cost.

2. Where an owned investment property is acquired through a non-exchange transaction, measured at its fair value as at the date of acquisition.

Measurement at Recognition

1. An entity shall choose as its accounting policy either the fair value model or the cost model

1. Fair Value Model

After initial recognition, an entity that chooses the fair value model.

A gain or loss arising from a change in the fair value shall be recognized in surplus or deficit.

2. Cost Model

After initial recognition, chooses the cost model shall measure investment property: The entity shall apply IPSAS 17 or IPSAS 43 until the disposal.

Transfer

1. Investment Property > Owner Occupied Property: the property’s cost for subsequent accounting in accordance with IPSAS 17, IPSAS 43 or IPSAS 12, shall be its fair value at the date of change in use.

2. Owner Occupied Property > Investment Property: it will be carried at fair value. Any difference at that date between the carrying amount of the property and its fair value shall be adjust as per revaluation model of IPSAS 17.

Disposals

1. An investment property shall be derecognized on disposal or when permanently withdrawn from use and no future economic benefits or service potential are expected from its disposal.

2. Gains or losses arising from the retirement or disposal of investment property shall be recognized in surplus or deficit.

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