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differences between
IPSAS and IFRS
April 2013
Introduction
The ongoing sovereign debt crisis in several countries around the world has demonstrated the challenges of maintaining financial stability
for these governments. Many governments are exploring the adoption of accrual-based accounting frameworks in order to improve their
decision-making ability to prevent and respond to these issues. International Public Sector Accountancy Standards (IPSAS) is considered
the definitive set of accrual-based international accounting standards for the public sector.
There is a close relationship between IPSAS and International Financial Reporting Standards (IFRS) due to the fact that IPSAS standards
are largely based on the principles of IFRS. The rationale for drawing from IFRS is to ensure greater comparability between private and
public sector reporting when accounting for similar types of transactions. However, IFRSs are developed primarily for profit-oriented
entities, whereas IPSASs are written for public sector entities that provide services to enhance and maintain the well-being of the citizens
of a state. These differences between the two reporting frameworks stem primarily from the following three sources:
Changes made by the IPSASB when developing an equivalent IPSAS based on an IFRS, to reflect differences between the public and
private sectors
Differences in the range of topics covered by the two sets of standards because of differences in the prevalence of particular types of
transactions, such as non-exchange transactions
Differences in the timing of when new or amended requirements are introduced into each set of standards
IPSASB standard-
setting process
which considers Due process
An IASB Issue an
public sector specific through public
standard IPSAS
requirements consultation
through sector-
focused research
4) Income tax
IPSAS presumes that entities that operate within the public sector are generally exempt from income taxes and therefore does not
cater for the accounting of income taxes. In the unlikely event that an entity reports using IPSAS but is liable for tax, reference
should be made to IFRS (IAS 12 Income Taxes) for guidance.
1
Service potential indicates the capacity of an asset to provide goods and services in accordance with an entitys objectives, without necessarily generating any net cash in-flows.
10) Growing divergence in the conceptual framework of the IPSASB and IASB
The IPSASB is in the process of developing its own conceptual framework, proposing concepts that may be more suitable in the
public sector context. We may see further differences in the outlook and focus of the IPSASB and IASB in the future.
Symbol Meaning
The two frameworks have minor differences that mostly result from terminology differences and public sector specific
additional guidance.
The frameworks are moderately different in this respect and encompass differences in classification, recognition,
measurement and/or disclosure requirements.
Significant differences noted in the classification, recognition, measurement and/or disclosure requirements.
No equivalent standard in the comparative framework and therefore an entity may need to refer to other frameworks or
pronouncements for guidance.
2
his comparison takes into consideration those IFRSs and IPSASs that are effective as at 1 January 2013 and does not consider IPSAS or IFRS projects currently under
T
development. For more information on current IPSASB Projects, see our newsletter, IPSAS Outlook, available at www.ey.com/ipsas.
3
New IFRSs refers to IFRS 9 (effective 1 January 2015), IFRS 10, IFRS 11, IFRS 12 and IFRS 13 (effective 1 January 2013).
4
IFRS only considers government grants and does not address the broader range of non-exchange transactions covered in IPSAS.
Degree of
difference
4
Significant
10
20
Moderate
14
5
Minor
5
Number of
5 10 15 20 topics
After the new IFRSs become effective and before IPSASB concludes on whether to adopt the changes
The graph above shows that prior to the new IFRSs becoming effective, four out of 29 topics are significantly different between IPSAS
and IFRS. The number of topics with significant differences between the two GAAPs increases after the new IFRSs become effective.
Going forward
This publication highlights the key differences between IPSAS and IFRS, amongst the many other differences between the two
frameworks. Although the IPSASB has not yet considered many of the more recent new or amended IFRSs, as a result of its focus on
completing the conceptual framework project, it has started to look at some of the new IFRSs, for example IFRS 10, IFRS 11 and IFRS 12.
It is worth noting that the IPSASB sees, as part of its role, the need to also address issues outside the boundaries of general purpose
financial statements, including the presentation of long-term fiscal sustainability information and service performance information.
We encourage you to refer to our quarterly newsletter, IPSAS Outlook, which provides regular update on the activities and progress of the
IPSASBs projects. This newsletter and other IPSAS-related publications are available on www.ey.com/IPSAS.
5
New IFRSs refers to IFRS 9 (effective 1 January 2015), IFRS 10, IFRS 11, IFRS 12 and IFRS 13 (effective 1 January 2013).