| IPSASB proposes changes to their Conceptual Framework – what do we think? |
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| The International Public Sector Accounting Standards Board (IPSASB) published proposed changes to their Conceptual Framework for General Purpose Financial Reports. We explained these proposals in a series of articles in March 2022, which included the following: What is prudence in accounting, and why does it matter? Can “obscuring” information affect materiality? IPSASB provides more guidance on what a “resource” means in the public sector. What is the “Unit of Account”? The proposals mostly align the IPSASB’s Conceptual Framework to the Conceptual Framework of the International Accounting Standards Board. |
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| What do our stakeholders think? |
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The Accounting Standards Board published the Exposure Draft concurrently as ED 197 and the Secretariat is consulting stakeholders on it locally.
Stakeholders mostly support the proposals. Potential issues raised to date for the IPSASB’s consideration include the following: | Proposal | Potential issue and suggestions | | The definition of an asset now reflects that an asset may arise from past events. The IPSASB considered that plural past events, rather than the singular past event, better conveys the point that resources can accumulate over time due to an initial and subsequent past events. | Stakeholders questioned whether there could be instances where this change unintentionally changes the recognition point for some assets, resulting in entities inappropriately recognising an asset earlier. It would be useful to clarify that the change captures existing ways in which assets are acquired and does not intend to change the recognition point. | | The description of a resource, in the context of an asset, now reflects a rights-based approach. | The role governments’ sovereign powers and rights play in identifying resources would need to be clear. No changes are proposed to the BCs where this role was previously explained. It would be useful for the IPSASB to note in the BCs that the change in approach should not change governments’ assessments of their resources resulting from sovereign powers and rights. | | The discussions on assets and liabilities respectively include proposed guidance on recognising assets and liabilities in principal-agent arrangements. An agent would not recognise resources of the principal in its custody, and would also not recognise a related liability. | The guidance may result in agents not recognising assets (and related liabilities) when all the elements of the definitions are met. The appropriateness of the guidance should be reconsidered. | | Guidance on accounting principles for binding arrangements that are equally unperformed is included in the section on Unit of Account; a separate section was deemed unnecessary. | Although stakeholders support including the guidance in the Conceptual Framework, they questioned the placement. Unit of Account is not the only consideration for binding arrangements that are equally unperformed and such arrangements should be discussed in a broader context. |
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| Are differences between the Conceptual Framework and standards-level guidance acceptable? |
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| For various reasons, there may be temporary and permanent differences between the guidance in the Conceptual Framework and individual Standards. There are divergent views internationally and locally about whether this is appropriate. Some stakeholders, including preparers locally, prefer that the principles in the Standards are aligned to the Conceptual Framework. Other stakeholders accept differences given the role of the Conceptual Framework – it is a tool for a standard-setter to develop Standards, and may be used in specific circumstances by preparers to develop accounting policies. Standards deal with specific types of transactions or events and guidance may differ from the Conceptual Framework to provide useful information to users about those specific types of transactions or events. |
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| You can submit comment to the ASB by 17 May 2022 at info@asb.co.za, or submit comment directly to the IPSASB by 31 May 2022 here. |
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