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Project History: Public Sector Conceptual Framework
Status: Consultation Paper - Phase 1 Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: The Objectives of Financial Reporting, The Scope of Financial Reporting, The Qualitative Characteristics of Information Included in General Purpose Financial Reports, The Reporting Entity published with a comment date of March 31, 2009. Preparation of a Consultation Paper on definition and recognition of elements and measurement is in progress.
Staff: Stephenie Fox (stepheniefox@ifac.org)
Paul Sutcliffe (psutcliffe@ifac.org)
Task Force: The IPSASB is leading a collaborative project, with participation from a group of national standards setters and other organizations (NSS) which develop authoritative requirements for financial reporting in the public sector.
Objective(s) of project: The objective of the project is to develop a Public Sector Conceptual Framework which is applicable to the preparation and presentation of general purpose financial reports of public sector entities. General purpose financial reports include, but are not necessarily limited to, financial statements and notes thereto.
Scope: The Public Sector Conceptual Framework will be developed primarily for all public sector entities other than Government Business Enterprises (GBEs).

GBEs are required to apply International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB).
Background: Currently the concepts related to public sector financial statements are embedded in the existing IPSASs.

Many of the IPSASs currently on issue are based on International Accounting Standards (IASs/IFRSs) to the extent that the requirements of the IASs/IFRSs are relevant to the public sector. Therefore, the current IPSASs draw on concepts and definitions in the IASB Framework with modifications where necessary to address public sector circumstances.

The IASB is currently updating its Framework in a joint project with the Financial Accounting Standards Board of the USA. The IPSASB is monitoring progress on that project.
Issues: The Framework will deal with financial reporting under the accrual basis and encompass such matters as:
  • Objectives of financial reporting;
  • Scope of financial reporting;
  • Qualitative characteristics of financial information;
  • Characteristics of the reporting entity;
  • Definition and recognition of the elements of financial statements;
  • Measurement; and
  • Presentation and disclosure.
The project will also consider the need for a framework for financial reporting under the cash basis of accounting, and implications of matters dealt with in the accrual framework for the cash basis.
Task Force progress / Board discussions to date: December 2009: The IPSASB continued its review of responses to the Phase 1 Consultation Paper. This review will continue at the IPSASBs next meeting in April 2010.

September 2009: The IPSASB continued its consideration of issues relating to Phase 3: Measurement. The IPSASB agreed that the next stage of development is to take a draft CP 3 to the Conceptual Framework Sub-Committee.

May 2009: The IPSASB commenced its review of the 55 responses to the Consultation Paper on Phase 1 of its Conceptual Framework project. The IPSASB will continue its review of the responses at meetings during 2009.

The IPSASB also considered a draft Consultation Paper on the definition and recognition of elements (phase 2) and a first paper on measurement (phase 3). The IPSASB will consider further papers on phases 2 and 3 at its September meeting.

March 2009: Comments on the Consultation Paper (see below) are due by March 31. The IPSASB will commence its review of comments at its next meeting in May 2009.

September 2008: The IPSASB approved and published for comment the Consultation Paper Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: The Objectives of Financial Reporting, The Scope of Financial Reporting, The Qualitative Characteristics of Information Included in General Purpose Financial Reports, The Reporting Entity, with a comment date of March 31, 2009.

June 2008: The IPSASB reviewed an updated draft Consultation Paper dealing with 'objectives of general purpose financial reporting', 'scope of general purpose financial reporting', 'qualitative characteristics of financial information included in general purpose financial reports' and 'the reporting entity'. The IPSASB confirmed its preliminary views on the objectives and scope of financial reporting and agreed preliminary views that, in broad terms:

  1. The qualitative characteristics of information included in general purpose financial reports (GPFRs) should be identified as relevance, faithful representation, timeliness, understandability, comparability and verifiability. Constraints on information included in GPFRs are materiality, cost and the appropriate balance between the characteristics;
  2. The key characteristic of a reporting entity is the existence of users dependent on GPFRs for accountability purposes and for making resource allocation, political and social decisions. A reporting entity may have a separate identity at law or be an organization, activity or administrative arrangement; and
  3. The boundary of a group reporting entity should include the government (or other reporting entity) and other entities over which the government (or other reporting entity) has the power to direct the strategic financing and operating policies and, as a consequence, has access to, and can increase, maintain or protect, benefits from those entities or is exposed to a financial burden or loss by the other entities.

The IPSASB also tentatively agreed the text of the draft Consultation Paper subject to a final review of amendments and agreement on the executive summary and other introductory material out of session. The Consultation Paper is planned for publication in September.

The IPSASB also reviewed developments with the group 2 Consultation Paper which deals with the definition and recognition of elements.

The Board discussed some of the key aspects of the IASB/FASB conceptual framework project and in that context considered the need to change the existing IPSASB asset and liability definitions. As such, the IPSASB directed staff to explore the 'rights and obligations' approach being mindful of the type of rights a government possesses (non-exchange) and the types of liabilities of a government (non-exchange). The Board expressed concern with taking a strictly 'legal' approach as well as focusing solely on enforceability noting that some environmental liabilities may be questionable using this approach.

While open to considering developments from the IASB/FASB project, the IPSASB also believed it was important to firstly review its existing definitions and consider general improvements that could be made. The Board also emphasized the importance of keeping any definitions at a high level and identifying public sector specific examples to illustrate the effects of any changes proposed.

A draft of the group 2 Consultation Paper is planned to be provided to the IPSASB for consideration before the next Board meeting in October 2008.

March 2008: The IPSASB performed a review of a first draft Consultation Paper which consolidates four previously separate chapters dealing with 'objectives of general purpose financial reporting', 'scope of general purpose financial reporting', 'qualitative characteristics of financial information included in general purpose financial reports' and 'the reporting entity'. Each chapter was discussed in detail with the IPSASB agreeing that the draft paper be restructured and refocused to identify a number of IPSASB preliminary views for further consideration in June 2008 - these included:

  1. The objectives of financial reporting be identified as the disclosure of information for accountability and decision making purposes;
  2. The scope of financial reporting should encompass the disclosure of financial information about past transactions and events such as presented in "conventional" financial statements, as well as non-financial information about the performance of the entity including its service delivery achievements, and prospective financial information consistent with the achievement of the objective of financial reporting - but would not encompass matters of policy formulation; and
  3. A public sector reporting entity should be described as an entity that is required or elects to prepare a general purpose financial report (GPFR) in accordance with IPSASs.
The IPSASB agreed the need to further explore whether the boundary of the reporting entity in the public sector should be determined on a control or an accountability basis, and issues that might arise in the application of those bases.

For qualitative characteristics, the IPSASB had significant discussion as to whether timeliness and understandability need special consideration in a public sector context. Related to this was 'if' and 'what' any 'order of application' should be applied to public sector qualitative characteristics.

The IPSASB directed that the draft Consultation Paper be revised for scheduled approval at their next meeting in June 2008.

November 2007: The IPSASB reviewed papers on 'objectives', 'scope of general purpose financial reporting', 'qualitative characteristics of financial information' and 'the reporting entity' prepared by national standards setters and IPSASB staff. They directed that a first draft of a Consultation Paper which consolidates all four papers be prepared for review at their next meeting in March 2008.

July 2007: The IPSASB reviewed draft consultation papers on "Objectives of financial reporting" and the "Scope of financial reporting" and provided directions for their further development. Final drafts of these papers are to be reviewed by the IPSASB at its November 2007 meeting, together with papers on the "Characteristics of the reporting entity" and "Qualitative characteristics of financial information".

The IPSASB agreed that other components of the project should be actioned as soon as possible with a view to accelerating the development process.

The subcommittee met and considered a revised paper dealing with the reporting entity. The paper is to be further developed for review, as discussed above, by the IPSASB in November 2007.

March 2007: The IPSASB noted progress and the current status of the project, including that initial issues papers on Objectives, Scope, Reporting Entity and Qualitative Characteristics had been prepared for review by the subcommittee.

The Board discussed the scope of the conceptual framework, differences between general purpose financial statements and general purpose financial reporting and the notion of a reporting entity. Members noted that the need to demonstrate accountability implied reporting beyond general purpose financial statements, and a range of factors would need to be considered in determining the reporting entity.

The subcommittee held its first meeting to confirm operating procedures and timing of project development and to review initial issues papers dealing with:
  • Objectives of financial reporting: prepared by UK - ASB;
  • Scope of financial reporting: prepared by South Africa-ASB;
  • Qualitative Characteristics: prepared by Norway - Institute; and
  • Reporting entity: prepared by Australia - AASB.
November 2006: The IPSASB formally approved the project brief, noting that:
  • The project would be actioned with the expectation that CPs on the components of the Framework and then an exposure draft of the full Framework would be issued;
  • The IPSASB Framework would deal with general purpose financial reports, and would not be limited to only general purpose financial statements;
  • When the draft of the paper on objectives of financial reporting was developed, it would be used as the basis for "focus group discussions" and/or similar public hearings, to facilitate additional input on users and user needs; and
  • The Framework under the accrual basis would initially be developed, and the implications for the cash basis of financial reporting considered towards the end of the project.
July 2006: The IPSASB met with representatives of national standards setters (NSS) from Argentina, Australia, Canada, France, Israel, Malaysia, Italy, the Netherlands, New Zealand, Spain, South Africa, Switzerland, the United Kingdom and the United States of America. Also participating were the Public Sector Committee of the Federation des Experts Comptables Europeens (FEE), the IASB, the Task Force on the Harmonization of the Public Sector Accounting (TFHPSA) and Eurostat. There was agreement the IPSASB would lead a collaborative project. A draft project brief and tentative development program was also agreed for formal approval in November 2006.
Last updated Dec. 21, 2009

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