Exposure Draft (ED) 18 Financial Instruments - Disclosure & Presentation Proposed International Public Sector Accounting Standa
Comments from the Association of Chartered Certified
Accountants
May 2001
ACCA welcomes IFAC's proposal to publish an IPSAS to establish requirements for the presentation and disclosure of Financial Instruments. In general ACCA is supportive of the proposed standard which, if adopted by countries world wide, should help to harmonise the existing diverse range of financial reporting practices and hence aid comparability of general purpose financial reports globally. We respond to the specific matters raised for comment as follows.
Specific Matters for Comment
(a) ACCA supports the view that the standard should apply to all public sector entities (at both local and national levels) so as to provide useful information to users of financial statements for decision making purposes.
(b) We do not see any reason why, in circumstances where public sector entities issue financial instruments, the treatment in IAS 32 (which requires financial instruments, or their component parts, to be categorised as either liabilities or equity) should not apply to the public sector.
(c) ACCA agrees that when comparative information for prior periods is not available when the standard is adopted and it would be too onerous to produce such information, it would not be appropriate to require such information for the initial year of adoption of the standard.
(d) It is our view that the disclosure requirements of risk management policies (paragraph 49) should be classified in such a way that allows users of financial statements to determine whether individual hedging arrangements were entered into for the purpose of:
- minimising the risks associated with an increase
in interest rates by providing a degree of certainty in any given period
through effectively turning a variable rate into a fixed rate
- anticipating a financial gain from speculating about future fluctuations in interest rates. It is our view that it is inappropriate for public sector entities to incur unnecessary transaction costs in the form of an arrangement fee purely for speculative purposes.