Government Business Enterprises
The Task-Based Group consists of Ron Salole, Ken Warren, Kenji Izawa, Rachid El Bejjet, John Verrinder
Objective(s) of project
The project will explore issues with the current definition of Government Business Enterprises (GBEs) and will consider whether the current accounting requirements are adequate. The initial output will be either a Consultation Paper or an Exposure Draft. The ultimate output may be revisions to existing IPSASs.
The project will assess the existing definition and accounting treatment of GBEs and determine whether any changes to the current definition are needed. In addition there is a need to consider whether guidelines for the disclosure of non-financial information by GBEs are needed in light of the enhanced accountability focus in the public sector. The project will also explore differences between the definition of GBEs for accounting purposes and public corporations in statistical reporting guidelines.
The definition of a GBE was first developed around 1987 when the rationale for doing so was to set boundaries for public sector within a government that were business like and might apply, in their own financial statements, different accounting principles and presentation based on local company law and business GAAP. The requirement for such entities to consolidate controlled entities using IPSASs was introduced by IPSAS 6 Consolidated and Separate Financial Statements, issued in May 2000.Since then a variety of different forms of entity have been formed so it is appropriate to assess the adequacy of the current definition.
Issues the project needs to take into consideration include (but are not necessarily limited to):
- Is there a need for a definition of GBEs at all;
- If so, is there a need to separate profit oriented entities from full cost recovery entities;
- Should GBEs continue to apply IFRSs;
- Consider whether guidelines for disclosure of non-financial information by GBEs are needed; and
- Analyze the differences between the definition of GBEs for accounting purposes and public corporations in statistical reporting guidelines.
Task Force progress / Board discussions to date
June 2013: The IPSASB discussed a number of issues raised in relation to the current definition. The IPSASB noted that within the current definition the term “full cost recovery” may be understood to mean different things. The IPSASB commented that in the context of the term “not being reliant on continued government funding to be a going concern” governments have many ways of supporting entities and therefore this could have different meanings. The IPSASB noted that the current definition does not take into account the entity’s legal form and that difficulties in interpreting the definition may also arise from local debates on whether an entity is a public sector entity.
Given the wide spectrum of entities currently described as GBEs by jurisdictions, the IPSASB considered there would be difficulty in achieving a definition which would be accepted internationally and proposed that instead of a definition the IPSASB might consider providing indicators of the characteristics of entities which each jurisdiction would consider in specifying the reporting framework of each GBE. The IPSASB considered going forward that it is important to separate and define clearly businesses and services since the objectives are different. The IPSASB also pointed out the need to consider whether markets operate in a regulated or non-regulated environment and suggested distinguishing entities where the government is the only customer.
The IPSASB affirmed that the decision on whether to apply IPSAS, IFRS or local country private sector GAAP to any public sector entity would be taken by the relevant regulator in an individual jurisdiction.
The IPSASB directed that, as a next step, staff develop a consultation paper proposing the characteristics of entities which jurisdictions should consider when deciding whether to apply IPSASs to a public sector entity.
March 2013: The IPSASB had a brief discussion on the GBEs project, noting that it is in the initial research stages. The project will consider whether the current definition of GBEs is appropriate and the IPSASB’s preliminary discussions indicated a need to start with a more detailed review of the current definition. The project will also address as a subsequent issue whether GBEs should continue to apply IFRSs. In terms of how GBEs should be accounted for within a government’s financial statements, the IPSASB agreed that this issue would be addressed in the project to amend IPSAS 6, Consolidated and Separate Financial Statements.
December 2012: Staff allocated and project activated. Information survey issued to board members on current practice.
March 2012: The IPSASB confirmed the project brief on GBEs and agreed to commence work once staff resources became available.