IFAC News

IFAC Committee Approves New Standards and Eds

(New York / July 18,2001) – The International Federation of Accountants (IFAC) Public Sector Committee (PSC) has released four new International Public Sector Accounting Standards (IPSASs) and two new exposure drafts. The IPSASs and exposure drafts are part of the PSC’s ongoing project to develop a comprehensive body of international accounting standards for governments and other public sector entities around the world. These IPSASs and exposure drafts are based on International Accounting Standards (IASs) issues at August 1997 to the extent that the provisions of the IASs are appropriate for application to the public sector. Titles of the IPSASs and the exposure drafts are as follows:

• IPSAS 9 Revenue from Exchange Transactions establishes requirements for the accounting treatment of revenue from exchange transaction. Non-exchange revenue, such as taxation, is not addressed in this standard. Non-exchanged revenue is to be dealt with a separate project.
• IPSAS 10 Financial Reporting in Hyperinflationary Economies describes the characteristics of an economy that indicate whether it is experiencing a period of hyperinflation and provides guidance on restating the financial statements in a hyperinflationary environment to ensure useful information is provided.
• IPSAS 11 Construction Contracts deals with both commercial and non-commercial contracts and provides guidance on the allocation of contract costs and, where applicable, contract revenue to the reporting periods in which construction work is performed.
• IPSAS 12 Inventories establishes the accounting treatment of inventories held by public sector entities and deals with inventories held for sale in an exchange transaction and certain inventories held for distribution at no nominal charge. The IPSAS excludes from its scope work-in progress of services to be provided at no normal charge from recipients because they are not dealt with by IAS 2 Inventories and because they involve public sector issues which require further consideration.
• ED 20 Related Party Disclosures is based on International Accounting Standard (IAS) 24 – related Party Disclosures. However, the ED explains that in the public sector the incidence and consequences of certain related party relationships and transactions differs from the private sector. Consequently, the ED includes additional guidance on the nature of related party relationships that arise in the public sector, the identity of key management personnel of public sector entities, and the information about related party relationships and transactions that should be disclosed for accountability purposes.
• ED 21 Provisions, Contingent liabilities and Contingent Assets is based on IAS 37, Provisions, Contingent Liabilities and Contingent Assets. IAS 37 does not deal with provisions and contingent liabilities arising from a range of «social benefits» that governments provide to constituents for no or nominal charge. Accounting these «social benefits» raise a number of public sector specific issues, the resolution of which can have a significant impact of the financial statements of governments and their agencies. The ED proposes that this issue be dealt with as a separate public sector project.

Comments on the exposure drafts are to be submitted by November 31 to EDComments@ifac.org or faxed to the IFAC Secretariat: +1 (212) 286 9570.

New IFAC Study Focuses on Governance in the Public Sector

As part of its ongoing efforts to enhance the accountability of governments worldwide, the International Federation of Accountants (IFAC’s) Public Sector Committee has released a new study entitled «Governance in the Public Sector: A Governing Body Perspective.» The study outlines principles of governance and their application to public sector entities, including national governments, regional governments (e.g., state, provincial, territorial), local governments (city, town), related governmental entities, and government business enterprises.

«The study focuses on governance arrangements in the public sector and specifically, the responsibilities of a governing body of a public sector-controlled entity. The PSC believes that the publication of this study will contribute to good governance and accountability in the public sector throughout the world,» emphasizes Ian Mackintosh, Public Sector Committee chairman.

In addition to providing principles of governance, the study includes an overview of the various types of accountability arrangements in the public sector and recommendations on governance – including standards of behavior, organizational structures and processes, control, and external reporting. It also features a governance checklist for governing bodies.

«Circumstances vary in different jurisdictions and factors affecting governance in a particular jurisdiction are often unique to that jurisdiction. However, the guidance in the study will be useful for developing regional and national guidance on governance,» points out Jim Sylph, IF AC technical director.

Study may be downloaded at no charge from the IFAC web site at http://www.ifac.org.

IFAC Encourages Increased Focus on IT Governance

With large investments in information technology (IT) and the critical risks involved, there is a growing necessity for senior executives and boards of directors to put IT firmly on the board’s agenda. Two new publications developed by the IT Governance Institute with the input of IFAC’s Information Technology Committee describe why IT and IT security have become critical to enterprise governance and how boards and management need to address the issues and risks involved in IT.

The publications, Board Briefing on IT Governance and Information Security Governance for Boards of Directors and Executive Management, can be downloaded at no charge from IFAC’s web site at www.ifac.org. Print copies may be ordered by contacting the IT Governance Institute at +1 (847) 253 1545 ext. 401 or bookstore@isaca.org

«Successful IT governance helps organizations reduce loss of business revenue or reputation, optimize technology, foster innovation, use IT resources responsibly and manage IT risks appropriately,» emphasizes Everett Johnson, chairman of IFAC’s IT Committee. «These board briefings help leaders understand their evolving roles and responsibilities in ensuring stakeholder expectations for IT are met and IT risks are mitigated.»

The Board Briefing includes a high-level IT governance framework, performance measures for board members and questions board members should ask. It outlines the issues that boards and management need to address and how IT governance is an essential segment of overall good corporate governance.

Information Security Governance provides overviews on how to evaluate information security status, what security governance should deliver, and questions to ask to uncover potential security weaknesses.

«Applying the concepts in these publications will lead to better governance over IT-related activities, risks, and security,» said Robert Roussey, international president of the Information Systems Audit and Control Association. «IT governance is not a luxury, but a necessity. Organization should not wait for an IT-related disaster to bring IT governance to the board level.»

IFAC Seeks Comments on Role of International Auditing Committee

(New York/July 19, 2001) – A special task force of the International Federation of Accountants (IFAC) has issued a report containing recommendations for improving the membership, organizations, and procedures of the International Auditing Practices Committee (IAPC), the IFAC committee responsible for establishing international auditing guidance for the world’s accountants.

«Trends in IFAC member body usage of International Standards on Auditing (ISAs) demonstrate that the need for a global set of auditing standards is gaining momentum and support. With the growth of global capital markets, high quality internationally recognized auditing standards are seen to be essential for the effective and efficient functioning of the markets,» states Manuel Sanchez y Madrid, chairman of the IAPC Review Task Force.

The report, presented to IFAC’s Board earlier this month, contains many recommendations that could lead to significant changes in the operations and transparency of the work of IAPC. IFAC’s Board is inviting public comments on the report, which is posted on the IFAC web site at http:/www.ifac.org/Guidance/EXD-outstanding.tmpl and is available through the IFAC office in New York.

Among its recommendation, the Review Task Force proposes that IAPC –

• Strengthen IAPC objectives by focusing on its role in developing «very high quality auditing standards» that serve the public interest and are ultimately endorsed by IOSCO (the International Organization of Securities Commissions);
• Enhance transparency by making its meetings and meeting materials accessible to the public;
• Work more closely with national auditing standard setters on matters important to its goals;
• Undertake more proactive public relations; and
• More clearly establish and communicate the authority of IAPC International Standards on Auditing and other guidance.

Additional recommendations focused on IAPC compositions, selection criteria, and consultative process, as well as the scope of its work and resources needed to accomplish an expanded work plan.

To be considered by the Task Force in final recommendation, comments must be received by September 21, 2001. They can be e-mailed to Manuel Sanchez y Madrid, chairman of the IAPC Review Task Force, at Edcomments@ifac.org for faxed to his attention at +1 (212) 286 9570.

South African Government Adopts IFAC’s Public Sector Accounting Standards

The International Federation of Accountants (IFAC) International Public Sector Accounting Standards IPSASs) are to be adopted in South Africa as the basis for the development of public sector Generally Recognized Accounting Practice (GRAP). South Africa is the first country to formally announce that it intends to use the IPSASs for the development of GRAP for its national government.

The IPSASs set out the requirements for financial reporting by governments and other public sector organizations. The IPSASs issued to date are based on International Accounting Standards (IASs) issued at August 1997 to the extent that the provisions of the IASs are appropriate for application to the public sector.