IPSASB consults on revenue and transfer expenses standards

The International Public Sector Accounting Standards Board (IPSASB) is consulting on three inter-connected exposure drafts which are intended to pioneer new approaches to accounting for some of the most significant transactions of public sector entities

These include accounting for inter-governmental transfers and grants for the delivery of key government services to the community.

The proposals are covered by exposure draft ED 70, Revenue with Performance Obligations, ED 71, Revenue without Performance Obligations, and ED 72, Transfer Expenses.

The standards body says the three are published together to highlight for respondents the linkages between the accounting for revenue and transfer expenses.

The changes are designed to introduce a more straight-forward approach to classifying revenue transactions, as well as a new model for the recognition and measurement of revenue. They also include guidance on transfer expenses, which currently does not exist in IPSAS.

ED 70 is aligned with IFRS 15, Revenue from Contracts with Customers, while extending the income recognition approach in that standard to address common public sector transactions which include performance obligations, including those where the ultimate beneficiary is a third party.

It is intended to supersede IPSAS 9, Revenue from Exchange Transactions, and IPSAS 11, Construction Contracts.

ED 71 is an update of IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers) that addresses some of the issues encountered in its application.

Unlike the current revenue standards, which classify revenue based on an exchange or non-exchange distinction, ED 70 and ED 71 differentiate revenue transactions based on whether or not the transaction has a performance obligation, which is defined as a promise to transfer goods or services to a purchaser or a third-party beneficiary.

ED 71 also provides public sector-specific guidance on capital transfers for the first time.

ED 72 proposes guidance for transfer expenses, where a transfer provider provides resources to another entity without receiving anything directly in return. In providing guidance for the first time on the expense side of transactions that may be accounted under the revenue EDs by other public sector organizations, ED 72 includes proposals for transactions with and without performance obligations.

Ian Carruthers, IPSASB chair, said: ‘Sound accounting for revenue is crucial for all governments and other public sector bodies.

‘We are confident that the proposed use of the performance obligation approach in ED 70, together with the updates to IPSAS 23 in ED 71, will improve financial reporting for both users and preparers of public sector financial statements.

‘ED 72 complements the other two EDs by proposing guidance for the first time on transfer expenses, which are a major area of government expenditure, often recognized as revenue by other public sector bodies.’

The three EDs are open for comment until 15 September.

ED 70, Revenue with Performance Obligations

ED 71, Revenue without Performance Obligations

ED 72m Transfer Expenses

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