Exposure Draft (ED) 16 - Events after the Reporting Date Proposed International Public Sector Accounting Standard (IPSAS)
Comments from the Association of Chartered Certified
Accountants
May 2001
ACCA welcomes IFAC's proposal to publish an IPSAS to establish requirements for accounting treatment of events after the reporting date. In general ACCA is supportive of the proposed standard which, if adopted, should help to harmonise the existing diverse range of financial reporting practices and hence aid decision making and enhance public sector accountability globally. We respond to the specific matters raised for comment as follows.
Specific Matters for Comment
(a) ACCA believes that the additional commentary provided at paragraphs 5, 6 and 7 is useful for determining the date of authorisation for issue. (b) The expanded discussion on the going concern assumption provides useful guidance to individual public sector entities and government as a whole for determining when it is appropriate to disclose information regarding a deterioration of operating results and financial position in a period after the reporting date.
It is ACCA's view that when:
- activities of one entity are to be transferred to another and where the entities are using the same basis for measuring their assets, there does not appear to be any need for a fundamental change in the basis of accounting;
- an entity, which measures its assets on the basis of going concern, is due to be wound up and its assets are to be sold then the break up value of the entity and hence its assets should be stated at net realisable value; and
- in the situation where an entity, which measures its assets on a historical cost basis, is to be transferred or sold as an economic unit to another entity, which measures its assets at current value in use, then the receiving entity should be required to undertake a fundamental change to the basis of accounting for its assets.
ACCA agrees that IAS 10 does not provide specific guidance on the impact on the financial statements of a fundamental change in the basis of accounting, when the going concern assumption is no longer relevant and hence the IPSAS should provide specific guidance on the implications to public sector entities.
(c) It is ACCA's view that powers to amend financial statements after they have been issued varies between jurisdictions globally. While some entities may find such examples useful, other entities may find them confusing and they may actually be misleading to developing nations which may interpret a particular example as being endorsed in the standard. In the UK for example:
- powers to amend accounts which have already been issued in the private sector rests with those who have the authority to manage the entity's affairs (i.e. directors or their equivalent) as owners of an entity do not necessarily have simultaneous powers of management;
- the responsibility for the propriety and regularity of a public sector entity's finances rests with the responsible finance officer or accounting officer as derived from statute; for example a permanent secretary of a government department, a section 151 officer of a local authority or an accounting officer in the NHS who is also the chief executive officer.