International Public Sector Financial Reporting Framework

International Public Sector Financial Reporting Framework

GENERAL CONCEPT OF FINANCIAL REPORTING

Financial Management Lifecycle

Financial Accounting

Financial Decisions

Financial Reporting

What is the objective of Financial Statements of an organization?

Users
Who are the users of the financial statements of public sector organizations?
. . . . .

Needs of the Users

What are the needs of different users of the financial statement of public sector organizations?
. . . . .

Whose needs are being addressed by the financial statements?

Bottom line
Financial reporting is a link between
Financial accounting Financial management

The output of the financial reporting process is the General Purpose Financial Statement. It serves the general needs of an array of users.

International Public Sector Financial Reporting Framework

THE NATURE OF PUBLIC SECTOR ORGANIZATIONS

Public Sector V Private Sector

Public Sector Organizations

General Government Public Corporations
Financial Nonfinancial

City

Provincial

Federal

Basis of Reporting Frameworks

Cash Basis

Mixed

Accrual Basis

School Going Kid

Managing Complete Family

The Transition

Basis of Reporting Frameworks

Cash Basis

Mixed

Accrual Basis

Reporting Framework
IPSAS
Cash Basis

IFRS
Accrual Basis Accrual Basis

Modified Cash Basis

Cash Versus Accrual Basis

Description Cash Basis Accrual Basis

Revenue recognition Expenses

Elements of FS

When cash is received

When cash is paid Receipts & Payments

When earned
When resource is consumed Equity, Assets, Liabilities, revenue & Expenses Five components More focused on profitability

Components Only one component of FS Focus More focused on Accountability and governance

Which is better ?
Accrual Basis

Cash Basis

International Public Sector Financial Reporting Framework

ACCRUAL BASED FINANCIAL REPORTING FRAMEWORK

Accrual Basis
A basis of accounting under which transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate.

Example 1
Purchase of a computer system:
Price PKR 5 million Price paid in year 1 Useful life is 5 years

Example 2
Payment of operating lease rental
Rent is PKR 24 million For this year and the next year

Example 3
Electricity expense
Amount is 1 million Paid in year 2 Electricity consumed in year 1

Qualitative Aspects of Framework

Understand -ability

Constraints

Relevance

Reliability

Going concern
Prudence Consistency

Substance over form

Accounting Principles

Materiality

Retrospective & prospective changes Comparative information

Undue offsetting

How IPSAS Function !

Disclosure

Recognition

Measurement

International Public Sector Financial Reporting Framework

COMPONENTS OF FINANCIAL STATEMENTS OF PUBLIC SECTOR ENTITY

Components of Financial Statements

What are the components of financial statements?
. . . . .

Statement of Financial Position

It should include the following (IPSAS 1.88):
. . . . . . .

Statement of Financial Performance

It should include the following (IPSAS 1.102 and IPSAS 1.103):
. . . . . . .

Statement of Cash-flow
It should include the following :
. . . . . . .

Statement of Changes in Equity

It should include the :
. . . . . . .

Notes to the Accounts

It should include the following:
. . . . . . .

Bottom line!
Public sector organizations need to prepare General Purpose Financial Statements The accounting and reporting depends on the nature of the organization Reporting framework may be cash based, accrual based or a hybrid one Best practice reporting frameworks (IPSAS and IFRS) are based on Accrual Concept IPSAS, the public sector reporting framework, prescribes principles for recognition, measurement and disclosure There are five components of financial statements under accrual basis and only one component under cash basis The qualitative characteristics and accounting principles of accrual based reporting framework are universally accepted by the stakeholders of public sector organizations

Thank you !