Internatoinal Public Sector Financial Reporting Framework

7/31/2019 Internatoinal Public Sector Financial Reporting Framework

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International Public Sector

Financial Reporting Framework


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GENERAL CONCEPT OF FINANCIALREPORTING




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Financial Management Lifecycle

Financial

Accounting

FinancialReporting

FinancialDecisions


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What is the objective of Financial

Statements of an organization?


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Users

Who are the users of the financial statements

of public sector organizations?

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Needs of the Users

What are the needs of different users of the

financial statement of public sector

organizations?

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Whose needs are being addressed by

the financial statements?


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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.


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THE NATURE OF PUBLIC SECTORORGANIZATIONS




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Public Sector V Private Sector


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Public Sector Organizations

General Government

City Provincial Federal

PublicCorporations

FinancialNon-

financial


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Managing Complete Family


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The Transition


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Basis of Reporting Frameworks

Cash

BasisMixed

Accrual

Basis


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Reporting Framework

IPSAS

Cash

Basis

ModifiedCash

Basis

Accrual

Basis

IFRS

Accrual

Basis


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Cash Versus Accrual Basis

Description Cash Basis Accrual Basis

Revenue

recognition

When cash is received When earned

Expenses When cash is paid When resource is

consumed

Elements of

FS

Receipts & Payments Equity, Assets, Liabilities,

revenue & Expenses

Componentsof FS

Only one component Five components

Focus More focused on

Accountability and

governance

More focused on

profitability


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Which is better ?

AccrualBasis

Cash Basis


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ACCRUAL BASED FINANCIALREPORTING FRAMEWORK




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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 theperiods to which they relate.


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Example 1

Purchase of a computer system:

Price PKR 5 million

Price paid in year 1

Useful life is 5 years


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Example 2

Payment of operating lease rental

Rent is PKR 24 million

For this year and the next year


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Example 3

Electricity expense

Amount is 1 million

Paid in year 2

Electricity consumed in year 1


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Qualitative Aspects of Framework

Understand

-ability

Relevance

Constraints

Reliability


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AccountingPrinciples

Going

concern

Consistency

Materiality

Undue

offsetting

Comparative

information

Retrospective

& prospective

changes

Substanceover form

Prudence


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Measurement

Disclosure

Recognition

How

IPSAS

Function !


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COMPONENTS OF FINANCIALSTATEMENTS OF PUBLIC SECTOR ENTITY




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Components of Financial Statements

What are the components of financial

statements?

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Statement of Financial Position

It should include the following (IPSAS 1.88):

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Statement of Financial Performance

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

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Statement of Cash-flow

It should include the following :

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Notes to the Accounts

It should include the following:

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Bottom line!

Public sector organizations need to prepare General PurposeFinancial Statements

The accounting and reporting depends on the nature of theorganization

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 principlesfor recognition, measurement and disclosure

There are five components of financial statements under accrualbasis and only one component under cash basis

The qualitative characteristics and accounting principles of accrualbased reporting framework are universally accepted by thestakeholders of public sector organizations


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Thank you !

Documents

Internatoinal Public Sector Financial Reporting Framework