The IPSASB CAG held its second meeting on December 5. The CAG discussed needs and perspectives in the current public financial management (PFM) environment. This included the IPSASB´s role and responsibility in the global PFM landscape and initial input to the IPSASB’s next strategy and work plan. The CAG was updated on the IPSASB’s current work plan and discussed the projects on Public Sector Combinations, Financial Instruments, Leases, and Heritage.

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The IPSASB considered a draft final pronouncement that reflected the decisions taken at the September 2016 meeting. After agreeing to a number of drafting changes, the IPSASB approved IPSAS 40, Public Sector Combinations. The standard, which has an effective date of January 1, 2019, is expected to be issued in late January or February 2017.

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The IPSASB approved the first three chapters of the draft Consultation Paper dealing with the drivers for the project, the literature on revenue recognition, and the categorization of public sector transactions in order to explore the extent to which a performance obligation approach might be applied. The IPSASB agreed that, under this approach, there are a range of remedies available to a resource provider in the event of non-fulfillment of a performance obligation by a resource recipient.

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The IPSASB progressed the project scope and key definitions. The IPSASB also considered the obligating events to be identified in a future Exposure Draft. While not reaching any conclusions on these topics, the IPSASB identified further matters for consideration, including current IASB work on Insurance. The IPSASB had initial discussions on disclosures and amendments to other IPSAS.

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The IPSASB discussed a number of issues in development of the Exposure Draft, including accounting for embedded derivatives, hedge accounting, and transitional provisions. The IPSASB agreed to remain consistent with IFRS 9 for authoritative guidance in these areas and to develop public sector-specific illustrative examples and implementation guidance.

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The IPSASB discussed two variants of the right-of-use model for lessor accounting. While most IPSASB members support continuing to recognize the underlying asset in its entirety and to recognize a liability (unearned revenue), the IPSASB directed staff to carry out further analysis on consistency with sale and leaseback requirements and other IPSAS. The IPSASB decided to replace the term “peppercorn leases” with the term “concessionary leases.”

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The IPSASB reviewed a draft Consultation Paper on financial reporting for heritage in the public sector, and approved the first three chapters. The IPSASB will consider the next four chapters, including recognition and measurement of heritage items, in March.

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The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities Webinar is now available in Mandarin. The Framework guides the development of IPSAS and Recommended Practice Guidelines. It also provides guidance on financial reporting issues outside the IPSASB’s literature.

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The Call for Nominations for the Independent Standard-Setting Boards for 2018 sets out upcoming opportunities on the independent standard-setting boards, including the IPSASB. For details on time commitments and how to nominate, see Developing a Nominations Strategy.

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The IPSASB noted that the IFAC Board approved the IPSASB’s revised Terms of Reference at its September 2016 meeting.

IPSASB Consultative Advisory Group (CAG) Chair, Mr. Thomas Müller-Marqués Berger, updated the IPSASB on efforts to add additional members with a parliamentarian perspective and discussed the agenda and approach to papers for the next CAG meeting in December 2016.

In developing the forthcoming Exposure Draft (ED) to update IPSASB’s standards on financial instruments, the IPSASB discussed overarching issues, such as terminology and interaction with other standards, as well as specific issues related to classification, measurement, and impairment. The IPSASB agreed to remain consistent with IFRS 9, Financial Instruments, for authoritative guidance in those areas and to develop public sector-specific illustrative examples as appropriate to alleviate implementation concerns.

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The IPSASB reviewed a draft Consultation Paper (CP) on financial reporting for heritage in the public sector. The IPSASB supported a preliminary view on a definition of heritage items, but concluded that use of a “symbolic value” of one currency unit to measure heritage assets is not consistent with its Conceptual Framework. Chapters on heritage-related information—obligations and presentation—will be revised to consider the implications of heritage items’ special characteristics. In December, the IPSASB will consider a revised CP.

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The IPSASB decided not to adopt the lessor accounting requirements in IFRS 16, Leases. The IPSASB directed staff to analyze further lessor accounting models against the criteria of consistency with the Conceptual Framework, the IPSASB’s current literature, and lessee accounting, taking into account the overall public sector context. The IPSASB also made a tentative decision not to include explicit guidance in an ED on the assessment of a sale within the context of a sale and leaseback transaction based on a performance obligation approach, prior to any decision on, and development of, an IPSAS drawn from IFRS 15, Revenue from Contracts with Customers.

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In addition to progressing the scope of the project, the IPSASB agreed that meeting eligibility criteria related to social risks is a key element of the social benefits definition. The IPSASB agreed that a future ED should include the “threshold eligibility criteria” and “eligibility criteria for the next benefit” obligating events, with further research required on other possible obligating events.

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After reviewing a first draft of a CP, the IPSASB instructed that modifications should be made to the structure and that it should reflect a greater preparer and user perspective. The IPSASB agreed that the public sector performance obligation approach should be limited to transactions that are enforceable, but that enforceability should reflect a variety of public sector mechanisms, rather than purely contractual ones. The IPSASB will consider a revised draft in December.

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In light of responses to Exposure Draft 60, Public Sector Combinations, the IPSASB agreed to make a number of changes to the requirements. The key changes are: additional clarification of the classification approach; permitting the presentation of comparative information in amalgamations; and allowing reserve balances to be carried forward in amalgamations. The IPSASB expects to approve an IPSAS at its December 2016 meeting.

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The IPSASB published an overview of the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities in Portuguese. Narrated by IPSASB staff member João Carlos Fonseca, this presentation provides an overview of the key aspects of the Conceptual Framework, which guides the development of IPSAS and Recommended Practice Guidelines and can also provide guidance on financial reporting issues that are not dealt with by the standards and guidelines.

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The CP, Public Sector Specific Financial Instruments, is open for public comment until December 31,2016. The CP aims to initiate a debate on the scope of requirements and guidance, and possible approaches to recognition and measurement. See also the At-a-Glance document for a summary.

Comment by December 31>>

The September 2016 episode of the IPSASB’s meeting podcast summarizes key points discussed on the following projects: Revenue and Non-Exchange Expenses, Financial Instruments, Heritage, Public Sector Combinations, Leases, Social Benefits, and Emissions Trading Schemes.

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