New IFAC study assists public sector entities with transition from cash basis to accrual basis of accounting
The International Federation of Accountants« (IFAC»s) Public Sector Committee (PSC) has released a Study on Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities. This study identifies key issues to be addressed in the migration from the cash basis to the accrual basis of accounting and alternate approaches that can be adopted in implementing the accrual basis in an efficient and effective manner in the public sector. It also identifies key requirements of International Public Sector Accounting Standards (IPSASs) and other relevant sources of guidance.
«This study was prepared in response to requests from IFAC constituents to provide guidance to assist in the transition from the cash basis of accounting to the accrual basis of accounting» announced Ian Mackintosh, chairman of the Public Sector Committee.
PSC Study 14 may be downloaded at no charge from the IFAC web site (http:/www.ifac.org/store).
The study contributes to the ongoing body of guidance being developed by the PSC to enhance the accountability and financial management of governments worldwide. To date, the PSC has developed 17 International Public Accounting Standards (IPSASs) to assist governments applying accrual accounting to report comparable, relevant and understandable financial information.
Visit the PSC section of the IFAC web site (http://www.ifac/org) for updates and to learn more about the standards that are currently available.
IFAC PSC issues IPSAS on segment reporting by governments
The international Federation of Accountants« (IFAC»s) Public Sector Committee (PSC) has released International Public Sector Accounting Standard IPSAS 18 Segment Reporting and Glossary of Defined Terms. These documents have been issued as part of PSC's ongoing project to develop a comprehensive body of international accounting standards for governments and their agencies around the world.
The Glossary is a useful reference as it compiles is one document the terms defined in the 18 IPSASs released by the PSC.
IPSAS 18 establishes for reporting financial information about distinguishable activities of government or other public sector entity appropriate for evaluating the entity's past performance in achieving its objectives and for making decisions about the future allocation of resources.
«The disclosure of this information will help users of the financial statements to better understand the entity's past performance and to identify the resources to support the major activities of the entity. It will enhance the transparency of financial reporting and enable the entity to better discharge its accountability obligations», explained Ian Mackintosh, chairman of the Public Sector Committee.
IPSAS 18 and the Glossary may be downloaded at no charge from IFAC's web site or by calling 1-212-286-9344.
The 2002 IFAC Handbook of Auditing and Ethics Pronouncements and 2001 IFAC Handbook of International Public Sectors Accounting Pronouncements is available.
If you are interested in ordering the print version of the handbook, please e-mail at damarysgil@ifac.org.
Additionally, please be aware that all pronouncements included in the handbook are available free of charge through IFAC's web site beginning January 1,2003.
Auditing Fair Value Measurements Subject of New International Auditing Standard
To address the increasing number of complex accounting pronouncements containing measurement and disclosure provisions based on fair value, the International Federation of Accountants (IFAC's) International Auditing and Assurance Standards Board (IAASB) has developed a new International Standard on Auditing (ISA) entitled Auditing Fair Value Measurements and Disclosures.
The ISA addresses audit considerations relating to the valuation, measurement, presentation and disclosure for material assets, liabilities, and specific components of equity presented or disclosed at fair value in financial statements.
Specifically, the ISA provides information on the following:
- Understanding the entity's process for determining fair value measurements and disclosures and relevant control procedures;
- Assessing the appropriateness of fair value measurements and disclosures;
- Using the work of an expert;
- Testing the entity's fair value measurements and disclosures;
- Evaluating the results of audit procedures;
- Management's process for determining fair value and management representations; and
- Communication with those charged with governance.
The appendix to the ISA discusses fair value measurements and disclosures under different financial reporting frameworks.
A print copy of Auditing Fair Value Measurements and Disclosures may be purchased for US $25 plus shipping by calling IFAC«s publications department at +1 (212) 286 9344. All ISAs may be downloaded (http://www.ifac.org/store) free of charge beginning January 1, 2003.
NATO Adopts IFAC's International Public Sector Accounting Standards
The North Atlantic Treaty Organization (NATO) has announced it will adopt the International Public Sector Accounting Standards (IPSASs) developed by the International Federation of Accountant«s (IFAC»s) Public Sector Committee (PSC) for its financial statements starting January 1, 2006. NATO reports that most of the 14 NATO entities will adopt IPSASs even sooner – in January 2003 or 2004.
IPSASs set out the requirements for financial reporting by governments and other public sector organizations with the ultimate objective of enhancing the accountability and financial management of governments worldwide. To date, the PSC, with funding from the World Bank, United Nations Development Program, Asian Development Bank, and IMF, has developed 18 IPSASs as part of its comprehensive Standards Project to assist governments in reporting comparable, relevant and understandable financial information.
«The Organisation for Economic Cooperation and Development (OECD) has adopted IFAC's International Public Sector Accounting Standards for its own financial reporting. Its 2000 financial statements were audited against these standards.
The PSC adopts a transparent due process for the development of IPSASs which enables interested parties to monitor and provide comment to the PSC on proposed IPSASs during the IPSAS development stage.
IFAC Commits to Translating Public Sector Accounting Standards
Furthering its efforts to improve financial reporting by governments worldwide, the International Accounting Standards Board (IASB) and the Public Sector Committee (PSC) of the International Federation of Accountants (IFAC) will work together to translate the accrual basis International Public Sector Accounting Standards (IPSASs) into languages other than English. These IPSASs are based on International Accounting Standards (IASs) to the extent that the requirements of those IASs are applicable to the public sector.
«We are very grateful that the IASB has agreed to assist in translating the IPSASs. Translation of the IPSASs into different languages is essential to ensure that these standards are available to public sector entities around the world. This arrangement will enable the PSC to leverage the experience the IASB has gained in translating IASs and will ensure that the translations will be of a consistently high quality and prepared on a cost – efficient basis,» said Ian Mackintosh, PSC Chairman.
IFAC PSC Advances Public Sector Standard Setting Program with Release of Two New Accrual-Based Standards
As part of its ongoing program to strengthen public sector financial reporting and contribute to increased transparency by governments worldwide, the International Federation of Accountants (IFAC) Public Sector Committee (PSC) has released two new International Public Sector Accounting Standards (IPSASs).
- IPSAS 19 – Provisions, Contingent Liabilities and Contingent Assets. This Standard defines provisions, contingent liabilities and contingent assets, sets out criteria for the recognition and disclosure of provisions, and rules for measuring those provisions. This standard excludes from its scope provisions and contingent liabilities arising from social benefits such as age pensions, child benefits and disaster relief, which are being considered in detail by a separate PSC Steering Committee on Social Policy Obligations.
- IPSAS 20 – Related Party Disclosures. This Standard requires entities to disclose the existence of related party relationships where control exists, and information about transactions between the entity and its related parties that occur outside the normal supplier or client/recipient relationship. It also requires disclosure of certain transactions with key management personnel and their close family members.
IFAC Issues Exposure Draft on Compliance with International Financial Reporting Standards
The International Federation of Accountant«s International (IFAC»s) Auditing and Assurance Standards Board (IAASB) is proposing new guidance designed to clarify when financial statements are in full compliance with International Financial Reporting Standards (IFRSs), thus contributing to greater consistency in the application of these standards.
The exposure draft of International Auditing Practice Statement (IAPS) Reporting on Compliance with International Financial Reporting Standards makes clear that when an entity references compliance with IFRSs, auditors should issue an audit report with an unqualified opinion only if the entity complies fully with all applicable IFRSs.
The proposed practice statement supplements guidance provided in ISA 200, Objectives and General Principles Governing an Audit of Financial Statements, and ISA 700, The Auditor's Report on Financial Statements. Specifically, it provides additional guidance when the auditor expresses an opinion on financial statements prepared –
- In accordance with IFRSs;
- In accordance with both IFRSs and relevant national standards and practices; and
- In accordance with relevant national standards or practices, but which disclose in the notes to the financial statements the extent of compliance with IFRS.
The ED on Reporting on Compliance with International Financial Reporting Standards may be downloaded at no charge from IFAC«s website (http://www.ifac.org).
International Auditing and Assurance Standards Board Seeks Comments on Audit Risk Guidance
Contributing to the improvement of audit quality worldwide, the International Federation of Accountant's (IFAC) International Auditing and Assurance Standards Board (IAASB) has proposed new standards to help auditors identify and address audit risks. On an international level, the proposed new guidance represents significant changes to the standards governing audits of financial statements.
Three International Standards on Auditing (ISAs) are exposed for comment:
- Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement;
- The Auditors Procedures in Response to Assessed Risks; and
- Audit Evidence.
In addition, the IAASB is proposing an Amendment to ISA 200, Objective and General Principles Governing an Audit of Financial Statements. The deadline for comments on all four documents is March 31, 2003.
It is anticipated that the proposed ISAs will increase audit quality as a result of better risk assessments and improved design and performance of audit procedures to respond to risk. Because implementation of the new standards will result in improved linkage of audit procedures and assessed risks, ultimately this should enable auditors to more clearly focus on areas where there is a greater risk of misstatement of the financial statements.
«The guidance has been developed for auditors, but the public will be a significant beneficiary,» emphasizes Dietz Mertin, IAASB chair. «The proposed standards require auditors to have a deeper understanding of an entity's business environment, to make risk assessments in all audits, and to link the nature, timing and extent of the procedures to the assessed risk. These changes will help to raise standards of audit practice and contribute to building public confidence in audited financial statements.»
The ISAs have been drafted for all entities. The requirement to consider the entity's risk assessment process, the importance of governance arrangements and monitoring of control are equally relevant to large and small entities. The IAASB will be considering whether any additional guidance is necessary for auditors of small entities.
The proposed ISAs are the product of the Audit Risk Project, jointly conducted with the American Institute of Certified Public Accountants Auditing Standards Board (ASB). By partnering with the ASB, the IAASB is furthering its goal of integrating the international standards setting process with national standard setters in order to promote the convergence and acceptance of an internal set of auditing standards.
The exposure drafts may be downloaded at no charge from IFAC«s website (http://www.ifac.org). An explanatory memorandum providing background on the development of this guidance and highlighting key changes is available with the EDs.
IFAC Releases Guidance on Reviewing Education Providers
One of the most significant challenges facing the accountancy profession today is to enhance the supply of well-qualified entrants into the accountancy profession. Two new publications developed by the International Federation of Accountants« (IFAC»s) Education Committee can assist professional accountancy organizations and other providers of pre-certification accounting education with meeting this challenge. The papers, entitled Recognition of Pre-Certification Education Providers by IFAC Member Bodies and Recognition of Pre-Certification Education Providers by IFAC Member Bodies: Illustrative Examples, offer guidance on developing a framework for establishing policies and processes for the review of external education providers.
Both publications are available in electronic form and may be downloaded at no charge from IFAC«s web site at (http://www.ifac.org/store). A print copy of Recognition of Pre-Certification Education Providers by IFAC Member Bodies may also be purchased for $US 25 plus shipping through IFAC»s online bookstore or by calling +1 (212) 286 9344.