Financial Instruments

  • Financial Instruments

    Project Status

    Project priority elevated. EDs approved in February 2009. Standards approved in December 2009. IPSASs 28-30 issued in January 2010.


    John Stanford

    Task Force

    A staff project. Jeanine Poggiolini, of the South African Accounting Standards Board, has played a key leading role in this project.

    Objective(s) of project

    To develop IPSASs that converge with IAS 32, Financial Instruments: Presentation, IAS 39, Financial Instruments: Recognition and Measurement and IFRS 7, Financial Instruments: Disclosure.


    The project applies to financial instruments for all public sector entities, other than Government Business Enterprises (GBEs) that prepare and present financial statements under the accrual basis of accounting.

    GBEs are required to apply International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB).


    IPSAS 15, Financial Instruments: Presentation and Disclosure no longer converges with IAS 32, Financial Instruments: Presentation or IFRS 7, Financial Instruments: Disclosure.

    Further, the IPSASB has had no IPSAS addressing the recognition and measurement of financial instruments. Public sector entities are encouraged indirectly to apply IAS 39, Financial Instruments: Recognition and Measurement through the hierarchy in IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors.

    Developing comprehensive financial instrument IPSASs will assist users of IPSASs in preparing and presenting financial statements under the accruals basis of accounting.


    Following on from a discussion on the global credit crisis, the IPSASB decided to prioritize the development of IPSASs based on IFRS 7, IAS 32 and IAS 39 in October 2008. The IFRSs do not address public sector specific financial instruments or reporting issues. A later stage of the project will consider public sector specific issues, including items that do not meet the definition of a financial instrument, such as special drawing rights in the IMF, reserve position in the IMF, monetary gold and the issuing of currency.

    Task Force progress / Board discussions to date

    April 2010: The IPSASB considers the approach to the IASBs IAS 39 replacement project (IFRS 9), other IASB projects on financial instruments and other IASB pronouncements relating to financial instruments issued after December 31, 2008. The IPSASB decides to defer work on these issues until the IASB has completed its IFRS 9 project.

    January 2010: The IPSASB issues IPSAS 28, Financial Instruments: Presentation, IPSAS 29, Financial Instruments: Recognition and Measurement, and IPSAS 30, Financial Instruments: Disclosures. These standards apply for annual financial statements covering periods beginning on or after January 1, 2013. Earlier application is encouraged. IPSAS 15 remains applicable until these standards are applied or become effective, whichever is earlier.

    December 2009: The IPSASB approves IPSAS 28, Financial Instruments: Presentation, IPSAS 29, Financial Instruments: Recognition and Measurement, and IPSAS 30, Financial Instruments: Disclosure for issuance. The Standards have an effective date of January 1, 2013. Early adoption is permitted, subject to the condition that all three Standards must be adopted at the same time. IPSAS 15, Financial Instruments: Disclosure and Presentation remains applicable until January 1, 2013 or date at which IPSASs 28 to 30 are applied in the case of early adoption.

    September 2009: IPSASB reviews 30 responses to the EDs (not all of which address all EDs and all specific matters for comment). The IPSASB notes the IASBs intention and ongoing work to amend IAS 39 in the areas of classification and measurement, impairment and hedge accounting. The IPSASB affirms its intention to develop IPSASs based on EDs 37-39. The IPSASB considers issues raised by respondents and makes a number of key decisions, including:

    • Retention of the approach to concessionary loans whereby the difference between the fair value of a loan granted and its transaction price is expensed;
    • Retention of the approach to financial guarantees including the hierarchy for determining initial measurement, but deletion of the references to Levels One-Three on the grounds that it might be confused with the IASBs hierarchy for determining fair value; and
    • Retention of the disclosures proposed in ED 39, including the additional disclosure additional to those in IFRS 7 requiring a reconciliation of opening and closing balances for concessionary loans granted.

    April 2009: The IPSASB published ED 37 Financial Instruments: Presentation, ED 38 Financial Instruments: Recognition and Measurement and ED 39 Financial Instruments: Disclosures. Comments are requested by July 31, 2009.

    February 2009: The IPSASB considered draft EDs and made decisions in a number of areas, including:
    • Treatment of financial guarantee contracts that are regarded as insurance contracts;
    • Approach to measurement at initial recognition, and subsequently, of financial guarantee contracts at nil or nominal consideration;
    • Treatment of, and disclosures relating to, concessional loans; and
    • How to deal with SIC 12, Consolidation-Special Purpose Entities in light of likelihood that this interpretation will be withdrawn by IASB.

    IPSAB approved issuance of ED37, Financial Instruments: Presentation, ED 38, Financial Instruments: Recognition and Measurement and ED 39, Financial Instruments: Disclosures.

    October 2008: Following a discussion of the global credit crisis, the IPSASB decided that it should elevate the priority of developing IPSASs based on IFRS 7, IAS 32 and IAS 39. The IPSASB will only modify the core text of IAS 32 and IAS 39 to ensure connectivity with current IPSASs. For IFRS 7 the IPSASB decided to consider proposals to omit disclosures or insert new disclosures for public sector specific reasons. The IPSASB decided that it would provide additional guidance to address contractual items such as guarantees provided for nil or nominal consideration, concessionary loans and sovereign receivables and payables.

    June 2008: The IPSASB further considered its strategy and development of financial instruments IPSASs. The IPSASB remains committed to developing IPSASs that converge with IAS 32: Financial Instruments: Presentation, IAS 39: Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments: Disclosures, but also wants to ensure that public sector specific financial instruments are addressed as part of this project. The IPSASB is of the view that further research needs to be undertaken to determine the implications of modifying any of the definitions established by the IASB and whether public sector issues are best addressed by modifying the substantive provisions of the IFRSs or by some other means.

    The IPSASB has tentatively agreed that it will retain the classification and reclassification requirements in IAS 39, and adopt the requirements in IAS 39 and IFRS 7 for financial guarantees, regular way purchases and sales, hedge accounting, and disclosures. Further, the IPSASB agreed that concessional loans should be initially recognized at fair value and that the difference between fair value and the amount of the loan should be recognized as an imputed subsidy. That imputed subsidy will be recognized in accordance with IPSAS 23: Revenue from Non-Exchange Transactions (Taxes and Transfers). The IPSASB is also considering additional disclosures in relation to public sector specific issues.

    A further issues paper is planned to be considered by the IPSASB at its October 2008 meeting.

    March 2008: The IPSASB reconsidered the direction of its financial instruments project agreeing that it was appropriate to develop financial instrument IPSASs that converge with the existing standards of the IASB - IAS 32: Financial Instruments: Presentation, IAS 39: Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments: Disclosures. However the IPSASB agreed that it should not incorporate public sector specific financial instruments and issues into the converged IPSASs but should instead develop an additional public sector specific standard on financial instruments. While there may be concerns about the appropriateness of the financial instrument IFRSs in a public sector context, the IPSASB concluded that those standards represent best current international practice that are already being applied by many public sector entities.

    November 2007: The IPSASB reviewed two draft exposure drafts (EDs) and requested they be revised in light of the newly approved Guidelines for Modifying IASB Documents. Staff will also be developing an in-depth analysis of public sector issues related to financial instruments. The IPSASB will consider the revised draft EDs and issues paper at its meeting in March 2008.

    July 2007: The IPSASB reviewed a draft IPSAS based on revised IAS 32 concluding that further consideration should be given to including in the ED, a proposed IPSAS that converges with IFRS 7 Financial Instruments: Disclosure. As such, at its November meeting, the IPSASB will consider a revised draft ED of a revised IPSAS 15 which not only converges with IAS 32 but also proposes the above. The IPSASB will also consider a paper analyzing the impact of excluding financial instruments arising from non-exchange transactions from any financial instrument IPSASs.

    March 2007: The IPSASB approved a project brief agreeing IPSAS 15 should be amended quickly to ensure convergence with updated IAS 32. Given the nature of the changes, a draft ED is to be prepared for the July 2007 meeting.

    The IPSASB discussed developing recognition and measurement requirements noting the international debate about the requirements of IAS 39, Financial Instruments: Recognition and Measurement, in particular noting the ongoing harmonization work of the IASB and US Financial Accounting Standards Board.

    The IPSASB concluded that this could result in substantial change to IAS 39 in the near term and that the IPSASB should not proceed to develop an IPSAS until that project is at least concluded. The IPSASB noted the IASB's desire to have all financial instruments measured at fair value, and concluded that developing an IPSAS on that basis was not appropriate at this time. A project on recognition and measurement will be commenced at a later date, tentatively scheduled for 2009.


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