28 July 2016

IFAC: IPSASB publishes consultation paper on public sector specific financial instruments

The IPSASB released for comment Public Sector Specific Financial Instruments. The Consultation Paper includes three main topics related to accounting for public sector financial instruments.

IPSASs do not currently provide guidance on how to account for a number of monetary items that the IPSASB has termed “public sector specific financial instruments.” The lack of guidance leads to reporting that is inconsistent between entities and, as a result, users may not have the information they need for accountability and decision-making purposes.

“For entities responsible for public sector financial instruments, the topics in this Consultation Paper are critically important because users need better information to evaluate the impact of these significant items on government finances,” said IPSASB Chair Ian Carruthers. “This Consultation Paper is the first step in developing consistent financial reporting for public sector specific financial instruments. We look forward to receiving constituents’ views on the accounting approaches identified for each topic.”

The CP includes three main topics related to accounting for public sector financial instruments:

Currency in Circulation. The CP considers currency in circulation by reference to the definitions of the elements of a liability and revenue in The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework). The key issue is whether the issuance of currency gives rise to a present obligation, with two accounting approaches proposed, which depends on whether a liability should be recognized and, if not, alternatives for recognizing revenue.

Monetary Gold. The CP considers which gold assets meet the proposed definition of monetary gold and the appropriate measurement bases for initial and subsequent measurement of such assets. Two accounting approaches are proposed for monetary gold, each linked to the intention of a monetary authority in holding such assets:

• Approach 1—Measurement at market value linked to an intention to hold gold because it can be traded in the global liquid markets; and
• Approach 2—Measurement at historical cost when the intention is to hold gold for an indeterminate period of time to support economic stability.

International Monetary Fund (IMF) Quota Subscription and Special Drawing Rights (SDRs). The CP is informed by the Conceptual Framework, and puts forward the IPSASB’s view of the appropriate recognition and measurement of the IMF Quota Subscription, SDR holdings, and SDR allocations.

Comments on the Consultation Paper are requested by December 31, 2016.

Full press release

Consultation paper

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