The International Public Sector Accounting Standards Board (IPSASB) has issued the first four chapters of its Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework). The chapters are inclusive of the role and authority of the Conceptual Framework; objectives and users of General Purpose Financial Reporting; qualitative characteristics and reporting entity.
The Conceptual Framework underpins the development of International Public Sector Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs).
'The publication of the Conceptual Framework's first four chapters is a major landmark for the IPSASB and the setting of global accounting standards for the public sector,' said IPSASB Chair Andreas Bergmann.
'These concepts will provide the basis for the ongoing development of consistent and useful IPSASs and RPGs, and for the other three phases of the Conceptual Framework. They will also provide guidance to preparers faced with financial reporting issues not dealt with by IPSASs or RPGs.'
The chapters outline the role of the Conceptual Framework in the IPSAS and RPG development process, identify that the primary users of general purpose financial reports (GPFRs) of public sector entities are service recipients and resource providers, and clarify that the objectives of financial reporting by public sector entities are to provide information useful to users for accountability and decision making purposes. They also identify the qualitative characteristics of, and constraints on, information included in GPFRs and the key characteristics of a public sector reporting entity.
Information presented in financial statements is central to financial reporting and will remain the primary focus of IPSASs and RPGs developed by the IPSASB.
However, because the primary objective of governments and other public sector entities is to deliver services to constituents the performance of public sector entities can only be partially evaluated by reference to their financial position, financial performance, and cashflows. These chapters explain that, to respond to users' need for information for accountability and decision-making purposes, the scope of financial reporting by public sector entities is more comprehensive than information included in the financial statements. GPFRs may include, for example, information about an entity's achievement of its service delivery objectives, compliance with its approved budget, and prospective information about its future service delivery activities, objectives, and resource needs.
Other chapters of the Conceptual Framework, which will address the definition, recognition, and measurement of the "elements" (or building blocks) of financial statements, and presentation in GPFRs, are being developed and are set to be added later.
At its recent meeting, the IPSASB confirmed that it will review present IPSASs and non-authoritative guidance and, through application of the due process, address circumstances where there is substantial conflict between an IPSAS and the Conceptual Framework when issued. The mechanism and timing for withdrawal of the qualitative characteristics presently in IPSAS 1, Presentation of Financial Statements, and any other changes to IPSASs resulting from issue of these four chapters will be determined and communicated to constituents in 2013.