1. INTERNATIONAL PUBLIC SECTOR
ACCOUNTING STANDARDS
Part II –Key Summaries
Differences between IFRS
and IPSAS
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2. KEY IPSAS
• IPSAS 1/ IAS 1 – Presentation of Financial Statements
• IPSAS 2/IAS 7 - Cash Flow Statements
• IPSAS 3/IAS 3 - Accounting Policies, Changes in Accounting Estimates and Errors
• IPSAS 4/IAS 21 – The Effects of Changes in Foreign Exchange Rates
• IPSAS 5/IAS 23 – Borrowing Costs
• IPSAS 6/IAS 27 – Consolidated and Separate Financial Statements
• IPSAS 7/IAS 28 – Investments in Associates
• IPSAS 8/IAS 31 – Interest in Joint Ventures
• IPSAS 9/IAS 18 – Revenue from Exchange Transactions
• IPSAS 10/IAS 29 – Financial Reporting in Hyperinflationary Economies
• IPSAS 11/IAS 11 - Construction Contracts
• IPSAS 12/IAS 2 – Inventories
• IPSAS 13/IAS 17 – Leases
• IPSAS 14/IAS 10 – Events After the Reporting Date
• IPSAS 15/ - Financial Instruments Disclosure and Presentation, superseded by IPSAS
28 IPSAS 30
• IPSAS 16 /IAS 40 – Investment Property
• IPSAS 17 /IAS 16 - Property, Plant and Equipment
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3. KEY IPSAS
• IPSAS 17 /IAS 16 - Property, Plant and Equipment
• IPSAS 18/IAS 14 – Segment Reporting
• IPSAS 19 / IAS 37 – Provisions, Contingent Liabilities and Contingent Assets
• IPSAS 20/ IAS 24 – Related Party Disclosures
• IPSAS 21 / IAS 36 – Impairment of Non – Cash – Generating Assets
• IPSAS 22 / IAS NA - Disclosure of Financial Information about the General
Government Sector
• IPSAS 23/IAS NA - Revenue from Non – Exchange Transactions (Taxes and Transfers)
• IPSAS 24 / IAS NA - Presentation of Budget Information in Financial Statements
• IPSAS 25 / IAS 19 - Employee Benefits
• IPSAS 26/ IAS 36 - Impairment of Cash Generating Assets
• IPSAS 27/IAS 41 – Agriculture
• IPSAS 28/ IAS 32 – Financial Instruments: Presentation
• IPSAS 29/ IAS 39 – Financial Instruments: Recognition and Measurement
• IPSAS 30 / IFRS 7 – Financial Instruments : Disclosures
• IPSAS 31/ IAS 38 -- Intangible Assets
• IPSAS 32 /IFRIC 12 – Service Concession Arrangement: Grantor
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4. IPSAS 1
PRESENTATION OF FINANCIAL STATEMENTS
• Shows the presentation of accrual based FS
• Fundamental principles in preparation of FS
– Going Concern Assumption
– Consistency in presentation and classification
– Accrual basis of accounting
– Aggregation
– Materiality
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5. IPSAS 1
PRESENTATION OF FINANCIAL STATEMENTS
• Complete set of FS in Tanzania comprises of:
a. Three items
b. Four items
c. Six items
d. Seven items
e. None of the above
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6. IPSAS 1
PRESENTATION OF FINANCIAL STATEMENTS
• Complete set of FS comprises of:
a. Three items
b. Four items
c. Six items
d. Seven items
e. None of the above
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7. IPSAS 1
PRESENTATION OF FINANCIAL STATEMENTS
• Complete set of FS comprises
– Statement of financial position
– Statement of financial performance
– Statement of changes in net asset/equity
– Statement of Cash flow
– Directors Report
– A comparison of budget and actual amounts
– Notes (summary of significant policies and other
explanatory notes)
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8. IPSAS 1
PRESENTATION OF FINANCIAL STATEMENTS
• Explicit statement
– An entity should make an explicit and unreserved
statement of compliance to IPSAS in notes
– FS do not comply to IPSAS unless it complies with
all the requirements of IPSAs.
– No offsetting of
• Assets and liabilities
• Revenue and expenses Unless permitted or
required by IPSAS
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9. IPSAS 1
GENERAL ISSUES
• Comparative prior information should be presented for
all amount shown in the FS and notes
– In case presentation or classification is amended, comparative
amounts should reclassified, and the nature, amount of, and
reason for any reclassification shall be disclosed
– FS are generally prepared annually. Contrary a disclosure is
required
– Distinction between CA/NCA to the CL/NCL should be made
clear
• The current and non-current is measured in 12 months period from
reporting date (either settlement or recovery)
– The analysis of expenses in the SFP may be by
• Nature or by function
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10. IPSAS 1
PRESENTATIONOF BUDGET INFO
• It is for users in public sector to monitor
appropriations or budget authorization
• Uses of resources in accordance with adopted
budget
• Use of columnar format with separate
columns for budget amounts and actual
amounts and variance
• Disclosure of budgeted amounts that has been
exceed with details of the reasons thereof.
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11. IPSAS 1
MINIMUM DISCLOSURE REQUIREMENTS IN NOTES
• Accounting policies
• The judgments that management has made in the process
of applying the entity’s accounting policies that have the
most significant effect on the amounts recognized in the FS
• Key assumptions concerning the future, and other key
sources of estimation uncertainty, that have a significant
risk of causing material adjustment to the carrying amounts
of assets and liabilities within the next FY
• The domicile and legal form of the entity
• A description of the nature of entity’s operations
• Reference to relevant legislation
• The name of controlling entity and ultimate controlling
entity of the economic entity
• Sample FS on the Appendix to IPSAS 1
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12. IPSAS 1
Other Issues
• Going concern
• Consistency of presentation
• Materiality and Aggregation
• No offsetting unless permitted by IPSAS
– Revenue from exchange transaction
– Gain or loss from disposal of NCA
• Comparative information
– When the presentation of items is amended, comparative amounts shall be re-classified unless reclassification
is impracticable.
• Structure and content
– Identification of financial statements separate from annual report
– Each component of FS shall be identified clearly and prominently
– Name of entity, economic entity, presentation currency, level of rounding
• Reporting period; changes may be for realignment to budget
• Timelines; FS should be issued within six months of reporting date
• Directors Report is implied under Par. 149-150 of IPSAS 1
• Prohibition of Extraordinary Items
• Classification of expenses by function and by natureSako Mayrick 12

13. How IPSAS differs from IAS 1
• Different terminology
– Statement of financial performance vs statement of CI
– Net asset or equity while IAS 1 uses equity
– Use of the term income is not in IPSAS 1 it uses revenue
– IAS 1 defines IFRS to include IFRSs, IASs and SIC/IFRIC
interpretations but IPSA 1 does not define IPSAS
– IPSAS 1 does not explicitly preclude the presentation of items
of revenue and expense as extraordinary items either on the
fact of the SFP or in the notes. IAS 1 prohibits any items of
income and expense to be presented as extraordinary items
either on fact of the income statement or notes.
– IPSA 1 contains transition provision allowing non disclosure
of items that have been excluded from the FS due to the
application of transition provision in another IPSAS which is
not the case in the IAS 1
– Economic entity Vs Group of entities
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14. Does xxx comply with IPSAS 1?
• See the worked example 1
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15. IPSAS 2
CASH FLOW STATEMENTS
• Major classification in the CFS
– Operating Activities (using direct (recommended) or indirect method)
– Investing Activities
– Financing Activities
• Cash equivalents includes
– Short term investment (less than three months from the date of acquisition) Readily
convertible to known amounts cash
– Exclude equity investments
• The use of direct method requires entities to provide a reconciliation of the surplus/deficit
from ordinary activities with the net cash flows from operating activities
• CF from interest and dividends received and paid shall be disclosed separately and
classified either operating, investing or financing activities
• CF from taxes on net surplus are classified as operating unless they can be specifically
identified within the F or I activities.
• Exchange rate for foreign denominated currency translation shall be the rate in effect at
the date of cash flows
• Cash flows from acquisition and disposal of controlled entities and other operating units
shall be presented separately and classified as investing activities with separate disclosure.
• Illustration of CFS is shown on appendices to IPSAS 2 ( SEE ALSO TRAINING NOTES 2)
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16. IPSAS 2
CASH FLOW STATEMENTS
Does xxxx comply with IPSAS 2?
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17. How does IPSAS 2 differ from IAS 7
• Use of terms revenue, statement of financial
performance and net assets/equity Vs
Income, Income Statement and Equity
• IPSAS 2 allows either the direct and indirect
method to be used. Where a direct method
is used disclosure of reconciliation for
surplus or deficit to operating CF is required
in notes
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18. IPSAS 3
ACCOUNTING POLICIES, CHANGES IN ACCOUNTING
POLICIES AND ERRORS
• IPSAS are authoritative policy statements
• In absence of IPSA, the use of judgment in developing and applying accounting policy for
– Relevant information for decision making needs of users
– Reliable, in that the financial statements
• Represents faithfully the financial position, financial performance and cash flows of an entity
• Reflect economic substance of the transactions, other events and conditions and note merely the legal
form
• Are neutral
• Are prudent and ; complete in all material aspects
– In absence of IPSAS management may consider most recent pronouncements of other standard
setting bodies, and acceptable public and private sector practices.
• Consistency application of accounting policy, change only when it is required by IPSAS
• All material prior period errors shall be corrected retrospectively in the first set of
financial statements authorized for issue after their discovery, by restating comparative
prior period amounts, or if the error occur before the earliest period presented, by
restating the opening SFP.
• A change from one basis of accounting to another basis of accounting is a change in
accounting policy Sako Mayrick 18

19. IPSAS 3
• When an entity changes an accounting policy upon initial application of an IPSAS that
does not include specific transitional provisions applying to that change, or changes an
accounting policy voluntarily, it shall apply the change retrospectively.
• when a change in accounting policy is applied retrospectively in accordance with
paragraph above, the entity shall adjust the opening balance of each affected component
of net assets/equity for the earliest period presented, and the other comparative
amounts disclosed for each prior period presented as if the new accounting policy had
always been applied
• When it is impracticable to determine the period-specific effects of changing an
accounting policy on comparative information for one or more prior periods presented,
the entity shall apply the new accounting policy to the carrying amounts of assets and
liabilities as at the beginning of the earliest period for which retrospective application is
practicable, which may be the current period, and shall make a corresponding
adjustment to the opening balance of each affected component of net assets/equity for
that period.
• When an entity applies a new accounting policy retrospectively, it applies the new
accounting policy to comparative information for prior periods as far back as is
practicable.
• Usually the adjustment is made to accumulated surpluses or deficits
• Any other information about prior periods, such as historical summaries of financial data,
is also Sako Mayrick 19

20. IPSAS 3
• On initial application of IPSAS which has effect on
current period or prior period; entity shall disclose
a. Title of the standard
b. Change in accounting policy and reason for decision
c. Nature of change in accounting policy
d. Description of the transitional provisions
e. Effects of transitional provisions on future periods ( if
applicable)
f. Amount of adjustment required
g. FS of the subsequent periods need not to repeat these
disclosures
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21. IPSAS 3
CHANGES OF ACCOUNTING ESTIMATES
• Is a result of uncertainties during reporting period
• It involves judgment based on available, latest
information e. g. Tax revenue due to government, Bad
debts arising from uncollected taxes, inventory
obsolescence, fair value of financial assets and financial
liabilities
• Revision of an estimate does not relate to prior periods
and is not correction of an error
• This is not change in accounting policy
• The change shall be recognized by adjusting the
carrying amount of the related asset, liability, or net
asset in the period of change
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22. IPSAS 3
ERRORS
• It arises in respect of the recognition,
measurement, presentation or disclosure of
elements of financial statements
• Entity must correct material prior period
errors retrospectively in the first set of FS
authorized for issue by
– Restating the comparative amounts for prior
period
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23. How is IPSAS 3 different from IAS 8?
• Different terminologies; statement of financial
performance, accumulated surplus or deficit
and net assets/equity Vs. Income statement,
retained earnings and equity in IFRS
• Use of term income Vs. Revenue in IPSAS
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24. IPSAS 4
THE EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES
• Covers
– Foreign currency transactions and
– Foreign operations
• The reporting entity’s functional currency should be properly
identified based on primary economic environment
• Translation should be done for foreign currency items into
functional currency
– Initial recognition and measurement record the spot exchange rate
– Subsequent reporting dates
• Monetary items use the closing rate
• Non monetary items use the transaction date exchange rates that are carried at historical
costs
• Non monetary items that are carried at fair value use the valuation date exchange rates
– Exchange differences arising from settlement and translation of monetary items at a
different rate should be included in surplus or deficit,
• Exception: for consolidated financial statement with foreign operation, the differences will
be recognized in the surplus or deficit on disposal of net investment.
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25. IPSAS 4
THE EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES
• The results and financial position of an entity’s
foreign operations for non hyperinflationary
economy are translated into presentation currency
by
– Assets and Liabilities are translated at the closing date of
the SFP
– Revenue and Expenses of each SFP are translated at the
date of transaction
– Resulting exchange difference are recognized as separate
component of net asset or equity
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26. How does IPSAS 4 differ from IAS 21
• IPSAS contains an additional transitional
arrangement allowing an entity, when first
adopting IPSASs, to deem cumulative
translational differences existing at the date of
first adoption of accrual IPSASs to Zero as in IFRS
• Different terminology e.g. revenue, economic
entity, statement of financial performance and
net assets/equity in IPSAS Vs. Income, group,
statement of comprehensive income and equity
in IFRS
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27. IPSAS 5
BORROWING COSTS
• The costs includes
– Interests, amortization of discounts or premiums on borrowing and
amortization of ancillary costs incurred in the arrangement of borrowings
• Accounting treatment
– Expense model – charge all the borrowing costs to expenses in the period
incurred
– Capitalization model – capitalize borrowing costs which are directly
attributable to the acquisition or construction of a qualifying asset
• It should be probable that the costs will result in future economic benefit or service
potential to the entity and costs can be measured reliably
• The model should be applied consistently to all borrowing costs that are directly
attributable to acquisition, construction or production of all qualifying assets of the
entity. Investment income from temporary investment should be deducted from the
actual borrowing costs
• Qualifying asset is an asset which requires a substantial period of time to make it
ready for its intended use or sale. Examples include office buildings, hospitals,
infrastructure assets such as roads, bridges and power generation facilities and some
inventories
• Capitalization rate (Weighted average of borrowing costs ) should be used if funds are
borrowed generally and used for the purpose of obtaining qualifying assets
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28. IPSAS 6
CONSOLIDATED AND SEPARATE FS
• Consolidated FS must include all controlled entities except
– If the control is temporary because the controlled entity is acquired and held exclusively with a
view to its subsequent disposal within 12 from acquisition
– Management is actively seeking a buyer
• Controlled entity is an entity controlled by another entity, known as controlling entity even if the
activities are dissimilar.
• Control is the power to govern the operating and financial policies
• Balances, transactions, revenue and expenses between entities within the economic entity are
eliminated in full
• Consolidated financial statements shall be prepared using uniform accounting policies for like
transactions and other events in similar circumstances
• Same reporting date within three months maximum range
• NCI is reported in net asset/equity in Consolidated SFP, separately from the controlling entity’s net
assets/equity and is not deducted in measuring the economic entity’s revenue or expense
• Surplus or deficit of the economic entity is allocated between minority and majority interest on the
face of the statement of financial performance.
• In the controlling entity’s separate financial statements: account for all its investments in controlling
entities, associates and joint ventures either using the equity method, at cost or as financial
instrument.
– Under the equity method, subsidiaries‟ net assets (A-L) collapse into one line usually called
„investment‟.
– Equity method is often called “one line consolidation”Sako Mayrick 28

29. IPSAS 7
INVESTMENT IN ASSOCIATES
• Caters for all investment where investor has significant influence
– Exception
• Venture capital organizations
• Mutual fund or unit trust or similar entity, such as investment linked
insurance fund that is measured at fair value
• The investment shall be classified as held for sell if its is acquired exclusively with
a view to its disposal within twelve months from acquisition and that
management is actively seeking a buyer and accounted differently
• Equity method is used for all investments in associates over which the entity has
significant influence ( Rebuttable presumption of significant influence if it is more
than 20% of voting power)
– The investment is initially recorded at costs and subsequently adjusted by
the investor’s share of the investee’s post acquisition change in net
assets/equity.
– Investors’ statement of financial performance reflects its share in the
investee’s post-acquisition surplus or deficit
• Investor’s FS shall be prepared using uniform accounting policies for like
transactions and events in similar circumstances
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30. IPSAS 8
INTEREST IN JOINT VENTURES
• JV is a binding arrangement ( IAS 31 uses contractual
arrangement) whereby two or more parties are
committed to undertake an activity that is subject to
joint control
• Applicable to all investments which investor has joint
control
– Exception
• Venture capital organization
• Mutual fund, trust or similar entity, such as an investment-linked
insurance fund that is insured at fair value
– It can be jointly controlled operations, jointly controlled
assets and jointly controlled entities. Each has different
accounting treatments Sako Mayrick 30

31. IPSAS 8
INTEREST IN JOINT VENTURES
• Jointly controlled operations
– Venturer recognize the assets it controls and expenses and liabilities it incurs, and
its share of revenue earned, in both its separate and consolidated FS
• Jointly controlled assets
– Venturer recognize in its FS its share of jointly controlled assets any liabilities that
it has incurred and its share of any liabilities incurred jointly with other venturer,
revenue earned from the sale or use of its share of output of the joint venture, its
share of expenses incurred by joint venture and expenses incurred directly in
respect of its interest in the joint venture.
• Jointly controlled entities
– It permits two accounting policies
• Proportionate consolidated: under this method, the venture's SFP includes its
share of the assets that it controls jointly and its share of liabilities for which
it is jointly responsible. Its SFP includes its share of revenue and expenses of
the jointly controlled entity
• Equity method as described in IPSAS 7
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32. IPSAS 9
REVENUE FROM EXCHANGE TRANSACTIONS
• The exchange transactions includes the
following events
– Rendering of services
– Sale of goods; and
– The use of other entity assets yielding interest,
royalties or dividends
• Revenue shall be measured at fair value of the
consideration received or receivable
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33. IPSAS 9
REVENUE FROM EXCHANGE TRANSACTIONS
• Recognition
– Sale of goods
• When significant risks and rewards have been transferred to purchaser, loss of
effective control by the seller, amount of revenue can be reliably measured; it
is likely that the economic benefits or services potential associated with the
transaction will flow to the entity, and the costs incurred or to be incurred can
be measured reliably
– Rendering of service
• Stage of completion of transaction at the reporting date, provided outcome
can be estimated reliably, if not then recognize only to the extent of expenses
that are recoverable
– Interest (on time proportion based on effective yield on the assets),
royalties (substance of relevant agreement) and dividends ( when
shareholders right to receive payment is established)
• When it is probable that the economic benefits or services potential will flow
to the entity and amount of revenue can be measured reliably
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34. IPSAS 10
FR IN HYPEINFLATIONARY ECONOMIES
• FS of an entity that reports in the currency of a hyper-
inflationary economy shall be stated in terms of the
measuring unit current at the reporting date.
• Comparative figures for prior periods shall be stated in
the same measuring unit currency at reporting date
• Surplus or deficit on the net monetary position shall be
separately disclosed in the SFP
• For Public Sector entities, the budgetary information
shall also be restated into the same current measuring
unit
• The economy is hyperinflationary when there is a 100%
cumulative rate of inflation over 3 years
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35. IPSAS 11
CONSTRUCTION CONTRACTS
• It deals with FS of the contractor
– Contract revenue shall comprise of
• Initial amount agreed in the contract;
• Variations in the contract work;
• Claims;
• Incentive payments; to the extent which the result of
revenue can be measured reliably.
– Contract revenue is measured at fair value of
consideration received or receivable
– Contract cost shall comprise of costs directly related
to specific contract, and are allocated to contract on
systematic and rational basis
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36. IPSAS 12
INVENTORIES
• Covers
– Cost determination, expense recognition, write-down to the
NRV
– Guidance on the cost formula that are used to assign costs to
inventories
• Inventories are measured at
– Lower of COST and NRV ( for exchange transactions)
– If they are acquire through a non-exchange transaction, the cost
shall be measured at their fair value as at the date of
acquisition.
– Lower of cost and current replacement costs if they are held for
• Distribution at no charge or a nominal charge; or
• Consumption in the production process of goods to be distributed at
no charge or for nominal charge
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37. IPSAS 12
INVENTORIES
• The costs includes; purchase costs, conversion cost ( material, labor and
overhead) and other costs to bring the inventory into its present location and
condition, but not foreign exchange differences and selling costs
• An entity shall apply the same cost formula for all inventories having similar
nature and use to the entity
• For interchangeable items, cost is determined either by
– FIFO or Weighted average basis, LIFO is not permitted
• For inventories with different nature and use, different cost formulas may be
justified
• When the inventory is sold, exchanged or distributed, the carrying amount
shall be recognized as an expense in the period in which the related revenue
is recognized. If there is no related revenue, the expense is recognized when
goods are distributed or related services have been rendered
• Write down to NRV are recognized as an expense in the period the loss or the
write down occurs. Reversals arising from the increase in NRV are recognized
as reduction of inventory expense in the period in which they occur.
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38. IPSAS 13
LEASES
• Scope
– Explains appropriate accounting policies and disclosures to
apply in relation to finance and operating leases
• There are two types of leases
– Finance lease – it transfers substantially all risks and
rewards incidental to ownership of an asset. The title may
or may not be eventually transferred
• Eg. It covers substantially all the asset’s life or present value of
lease payment is substantially equal to the assets fair value
– Operating lease
• The land and building element of the lease of land and buildings
are considered separately for purpose of lease classification
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39. IPSAS 13
LEASES
• Finance leases – lessee’s Accounting:
– Assets and liabilities are recognized at lower of
present value of minimum lease payments and
the fair value of the assets, determined at
inception of the lease. Discount rate shall be
interest rate implicit in the lease or the
incremental borrowing rate
– Depreciation policy is as for owned assets
– Finance lease payment – apportioned between
interest and reduction in outstanding liability
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40. IPSAS 13
LEASES
• Finance Leases - Lessor’s Accounting
– An amount equal to the net investment in lease is recognized as a receivable in the SFP
– Finance revenue is recognized based on a pattern reflecting a constant periodic rate of return
on the lessor’s net investment
• Operating leases – lessee’s Accounting
– Lease payments are recognized as an expense in the SFPerformance on the straight line basis
over the lease term
• Operating leases – lessor’s accounting
– Assets held for operating leases shall be presented in the statement of financial position
according to the nature of assets
– Lease revenue shall be recognized on a straight line basis over the lease term
• Lessors of operating leases shall add initial direct costs incurred in negotiating
and arranging an operating lease to the carrying amount of the leased asset and
recognize them as an expense over the lease term on the same basis as the
lease revenue
• Sale and leaseback transaction will depend on whether these are essentially
finance or operating leases. Sako Mayrick 40

41. IPSAS 14
EVENTS AFTER THE REPORTING DATE
• Scope
– Describes as to when an entity shall adjust its FS for events
after the reporting date
– Disclosure to give when the FS were authorized for issue,
and about events after reporting date
• EARD are favorable and unfavorable events that
occur between the reporting date and the date when
the FS are authorized for issue.
• There are two types
– Adjusting events
– Non adjusting events
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42. IPSAS 14
EVENTS AFTER THE REPORTING DATE
• Adjusting events are those that provide evidence of conditions that existed at the reporting date – adjust the FS to
reflect those events that provide evidence of condition that existed at the reporting date e.g. settlement of court
case after reporting date, that confirms that the entity had an obligation at reporting date)
• Non-adjusting events are those that are indicative of the conditions that arose after the reporting date but do not
adjust the FS to reflect the events that arose after the reporting date e.g. decline in fair value of property after year
end, which does not change the valuation of property at the reporting date)
• Dividend proposed or declared after the reporting date shall not be recognized as a liability at the reporting date.
Disclosure is required
• An entity should not prepare its FS on the going concern basis if events after the reporting date indicate that the
going concern assumption is not appropriate ( e.g. if there is an intention to liquidate the entity or cease
operations after reporting date, or that there is no realistic alternative to do so)
• The entity shall disclose the date its FS were authorized for issue and who gave that authorization. If another body
has the power to amend the FS after issuance, the entity shall disclose the fact
• If an entity obtains information after the reporting date, but before the FS are authorized for issue, about
conditions that existed at the reporting date, the entity shall update disclosures that relate to these conditions in
the light of the new information
• An entity shall disclose the following for each material category of non adjusting event after the reporting date
– The nature of the event and
– An estimate of its financial effect, or a statement that such an estimate cannot be made
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43. IPSAS 16
INVESTMENT PROPERTY
• Scope
– Accounting treatment of IP and related disclosures
• IP is a land or buildings held (whether by the owner
or under a finance lease) to earn rentals or for capital
appreciation or both, rather than for
– Use in the production or supply of goods or
services or for administrative purposes
– Sale in the ordinary course of operations
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44. IPSAS 16
INVESTMENT PROPERTY
• Recognition of IP
– Only if the future economic benefit or service potential associated with the investment
property will flow to the entity
– The cost or fair value of the IP can be measured reliably
• Measurement
– Initially at cost including the transaction costs; if it has been acquired through non
exchange transaction than at its fair value at the date of acquisition
– Afterwards use either of two models
• Fair value model; IP is measured at fair value and changes in FV are recognized in
surplus or deficit for the period in which it arises
• Cost model; investment property is measured at depreciated costs less any
accumulated impairment losses. FV of the investment property shall still be
discolsed.
– A chosen measurement model shall be applied to all the entity’s investment property
– If an entity uses the FV model, but when a particular property is acquired, there is clear
evidence that the entity will not be able to determine FV on continuing basis, the cost
model is used for that property – and it shall continue to be used until disposal of that
property. In that case,the residual value of the investment property shall be assumed
zero
– Change from one model to another shall be made only if the change will result in a more
appropriate presentation ( highly unlikely for change from FV to cost model)
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45. IPSAS 17
PROPERTY, PLANT AND EQUIPMENT
• Scope
– Explains principles for initial recognition and subsequent accounting (Carrying Amounts and
depreciation charges and impairment losses)
• Recognition
– PPE shall be recognized as assets if, it is probable that the future economic benefit or
service potential associated with the item will flow to the entity, and the cost or FV of the
item can be measured reliably
– Heritage assets are optional for IPSAS 17
– IPSAS 17 also covers other assets such as Military equipment, infrastructure assets e.g. road
networks, sewer systems and communication networks
– Initial recognition is done at cost which includes costs necessary to get the assets ready for
its intended use. For non exchange assets, its cost is its fair value as at the date of
acquisition. If payment is deferred, interest shall be recognized
– Subsequent to acquisition, there are two accounting model for the entire class of PPE
• Cost model: the asset is carried at cost less depreciation and impairment losses
• Revaluation model: the asset is carried at revalued amount, which is fair value at
revaluation date less subsequent depreciation and impairment losses
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46. IPSAS 17
PROPERTY, PLANT AND EQUIPMENT
• Revaluation Model
– Revaluations shall be carried out regularly. All items of a given class
shall be revalued. Revaluation increases shall be credited directly to
revaluation surplus.
– Increases shall be recognized as revenue in surplus or deficit to the
extent that it reverses a revaluation decreases of the same class of
asset previously recognized as an expense in the surplus or deficit.
– Decreases are debited first against the revaluation surplus related
to the same class of assets, and any excess against surplus or
deficit.
– When the asset is disposed off, the revaluation surplus is
transferred directly to accumulated surpluses or deficits and is not
recycled through surplus or deficit.
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47. IPSAS 17
PROPERTY, PLANT AND EQUIPMENT
• Each part of PPE that is significant in relation to the total cost of an
item shall be depreciated separately
• Depreciation is charged systematically over the asset’s useful life. It
must reflect the pattern in which the asset’s future economic benefits
or service potential is expected to be consumed by the entity.
• The residual value must be reviewed must be reviewed at least
annually and shall equal the amount the entity would receive
currently if the assets were already of the age and condition expected
a the end of its useful life.
• If operation of an item of PPE (e.g. aircraft) requires regular major
inspections, when each major inspections is performed, its cost is
recognized in the carrying amount of the asset as a replacement, if
the recognition criteria are satisfied.
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48. IPSAS 17
PROPERTY, PLANT AND EQUIPMENT
• Land and buildings are separable assets and are accounted separately, even when they are
acquired together. Land has normally unlimited useful life, and therefore is not depreciated
• To determine whether an item of PPE is impaired, the entity applies IPSAS 21 or IPSAS 26 as
appropriate
• All exchange of PPE shall be measured at FV, including exchanges of similar items, unless
the exchange transaction lack commercial substance or the fair value of neither the asset
received nor the asset given up is reliably measurable
• The carrying amount of item of PPE must be derecognized
– On disposal, or
– When no future economic benefit or service potential is expected from its use or disposal
• The gains of disposal shall be included in surplus or deficit and shall not be classified as
revenue.
• IPSAS 17 contains transitional provisions allowing entities not to recognize PPE for reporting
periods beginning on the date within five years following the date of first adoption of
accrual accounting in accordance with IPSAS
• The transitional provisions allows entities to recognize the PPE at cost or fair value on first
adopting of the standard
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49. DETAILED EXAMPLE
• PPE (send request from
www.elsamconsult.com)
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50. Review of xxxx Financials
• Request for appendix 1 at
www.elsamconsult.com
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