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Can the International Public Sector Accounting Standard IPSAS 41 Financial Instruments help us in Australia?
Can it help us for public sector issues in the absence of additional guidance in AASB 9 Financial Instruments?
Public sector entities are finalising their preparations for the implementation of AASB 9, the Australian equivalent to the International Accounting Standards Board’s IFRS 9.
AASB 9 started for financial years commencing on or after 1 January 2018, however doesn’t include public sector specific guidance. Some entities are grappling with public sector issues that are not quickly resolved by using the private sector guidance.
The International Public Sector Accounting Standards Board (IPSASB) recently issued IPSAS 41, which is based on IFRS 9. I have contributed to the development of IPSAS 41 by responding to draft proposals, to try and have it address the public sector issues that I have come across.
So how can IPSAS 41 help us in Australia?
IPSAS 41 includes some public sector guidance that will be useful in Australia. In the absence of specific guidance in AASB 9, the guidance in IPSAS 41 is a useful starting point for Australian public sector and not-for-profit entities that want to determine an appropriate accounting policy for those issues.
These changes are incorporated in IPSAS 41 through additional material in the:
However, the guidance must be considered with care, as IPSASs have different requirements to our IFRS-based standards for the public sector. For example, IPSASs use a different revenue and income recognition framework. IPSASs also do not have an equivalent to IFRS 13 Fair Value (in Australia, AASB 13).
The main areas in IPSAS 41 where additional the guidance provided may be of greatest assistance are (also refer to the IPSAS 41 Illustrative Examples and Implementation Guidance):
Application Guidance AG118—AG127 Concessionary Loans
Application Guidance AG128 – AG130 Equity instruments from non-exchange transactions
Application Guidance AG131 – AG136 Valuing financial guarantees issued through a non-exchange transaction
If considering the guidance on concessionary loans, you should consider the additional disclosures IPSASB require, that are located in IPSAS 30 (IPSASB’s version of AASB 7). These include disclosures of a reconciliation of concessionary loans, including reference to nominal value, separately for amortised cost and fair value.
I personally would have liked additional guidance included in IPSAS 41 for:
In the meantime, I think that the IPSAS 41 guidance (adjusted for Australian standards) should be included in AASB 9 as not-for-profit amendments.