World Bank: May 2009

1. International Federation of Accountants International Public Sector Accounting Standards Board (IPSASB) Andreas Bergmann: IPSASB Member John Stanford : Deputy Technical Director World Bank: May 2009

2. To serve the public interest by developing high quality accounting standards for use by public sector entities around the world, including international organisations, in the preparation of general purpose financial statements. IFAC IPSASB is providing the benchmark The IFAC IPSASB Mission World Bank: May 2009

3. IPSASB’s Current Pronouncements • 26 Accrual Based IPSASs • Majority primarily drawn from IAS/IFRS • Public sector specific (or hybrid) e.g. • IPSAS 21, “Impairment of Non-Cash-Generating Assets” • IPSAS 22, “Disclosure of Information about the General Government Sector” • IPSAS 23, “Revenue from Non-Exchange Transactions” • Cash Basis IPSAS, “Financial Reporting under the Cash Basis of Accounting’ World Bank: May 2009

4. UN System (28 bodies) OECD, NATO (21 bodies), EC, IFAC, INTERPOL Over 70 countries have agreed processes, have a project in place to adopt IPSASs, align with IPSASs or use IPSASs as a benchmark Strong Evidence of Progress World Bank: May 2009

5. Today… next year… 5 years on…. • Adopted/Adopting–Switzerland, S Africa, Ghana, Philippines, Armenia, United Nations Systems + • We need to provide support • Benchmark – Canada, US, Australia, NZ, UK • We must collaborate to encourage convergence • Leadership and Promotion – India, China • We need to promote to encourage adoption World Bank: May 2009

6. Implementing IPSASs • Strong implementation of cash basis a solid first step toward accrual accounting • Consider adopting cash basis and ensure that institutional framework supports this standard • Plan adequately for transition to accruals • Realistic timelines • Help from experienced governments World Bank: May 2009

7. Current IPSASB Strategic Themes • Public sector conceptual framework • Public sector specific projects • IFRS convergence • Promotion and communications World Bank: May 2009

8. Public Sector Conceptual Framework (1) • Group 1 Consultation Paper (CP) June 2008 • Objectives & users • Scope • Reporting entity • Qualitative characteristics Preliminary analysis of 54 responses at May 2009 meeting World Bank: May 2009

9. Public Sector Conceptual Framework (2) • Headline points: • Overall:Positive support but in some cases qualified-mostly over scope • Scope of financial reporting:Disquiet over non-financial service information and prospective information • Users:Need for identification of priority group • Approach:Too responsive to private sector (typically Europe)/departs too readily from IASB approach (typically Australasia) World Bank: May 2009

10. Public Sector Conceptual Framework (3) • Phase 2 -Elements –CP late 2009 • Phase 3-Measurement- CP late 2009 • Phase 4: Concepts underpinning Cash Basis-not yet started World Bank: May 2009

11. Conceptual Framework: Elements (1) • Led by Canadian PSAB • Purpose • Identification and defining elements of General Purpose Financial Statements • Key Issues • Is net assets/equity an element? • Asset and liability approach v revenue and expense approach • Evaluation of comprehensive income approach • Holding of right to tax giving rise to asset? • Constructive obligations World Bank: May 2009

12. Public Sector Specific Projects • Social benefits –now being developed with Conceptual Framework elements component • Long-term fiscal sustainability • Service concessions- grantor perspective • Narrative reporting and non-financial performance reporting (service delivery and accomplishments)-decision to be made based on response from Conceptual Framework World Bank: May 2009

13. Long-Term Fiscal Sustainability (1) • Catalyst- lack of consensus on timing and extent of liabilities re: social benefits • Fiscal sustainability a significant feature of public reporting in many jurisdictions • View that financial reporting needs to include prospective information but some reservations • Limited involvement of accountants • Task Force formed to develop proposals World Bank: May 2009

14. Long-Term Fiscal Sustainability (2) • Distillation of complex and voluminous information • Ambiguity whether fiscal sustainability reports are general purpose financial reports • US Financial Statements include: • Statement of Social Insurance incl. 75 year projections for Medicare & Social Security • US FASAB propose: • Broader Statement of “Long-Term Fiscal Projections of US Government” • Mandating a prospective financial statement may be premature World Bank: May 2009

15. IFRS Convergence (1) • Target date December 31, 2009 of IFRS @ December 31, 2008 • Clear and publicly available guidelines on departures from IFRS- Rules of the Road • Recently issued EDs • ED 36, “Agriculture” • ED 37, “Financial Instruments: Presentation” • ED 38,”Financial Instruments: Recognition and Measurement” • ED 39, “Financial Instruments: Disclosure” World Bank: May 2009

16. Financial Instruments: Approach • Retain core text of IAS 32, IAS 39 & IFRS 7 • Public sector issues & modifications: • Financial guarantee contracts issued at nil or nominal consideration not to be treated as insurance contracts • Concessionary loans: expensing of difference between transaction price and fair value • Financial guarantees at nil or nominal consideration: should mathematical models be used where active market not evident or default to IPSAS 19? • Additional disclosures for concessionary loans World Bank: May 2009

17. IFRS Convergence (2) • Also issued: • ED 40, “Intangible Assets” • ED 41, “Entity Combinations from Exchange Transactions” • Consultation concluded: • ED 35.”Borrowing Costs” • Renewed focus on relationship with IASB • Bi-annual member level meetings • More regular attendance at IPSASB meetings World Bank: May 2009

18. Cash Basis Review (1) • Cash Basis IPSAS first issued in 2003 • Structure • Part 1: Requirements • Part 2: Encouraged Additional Disclosures • Further disclosure requirements subsequently added • Comparison of Budgets and Actuals (2006) • External Assistance (2007) World Bank: May 2009

19. Cash Basis Review (2) • Format of Review • Task Force chaired by Deputy Chair and main staff support former IPSASB Technical Director • Members include representatives from: • World Bank • IFAC DNC • OECD • ADB • IADB • IMF World Bank: May 2009

20. Cash Basis Review (3) • Purpose is to identify: • Technical challenges in implementation requiring modification • Additional reporting requirements • Encouraged disclosures that should become mandatory • Approach : • Development of survey • Interviews with key Finance/Treasury Staff World Bank: May 2009

21. Promotion Communication Outreach • Proactive rather than reactive • More focused • Improvement of leadership credentials • Widespread adoption is ultimate goal • Accra, Ghana in 2007 – a highlight in outreach and an example of what must be possible – a Seminar hosted by the Vice President of Ghana and TV and Press coverage to the whole of West Africa! World Bank: May 2009

22. Partnership Working • World Bank and Development Banks – External Assistance and Cash Basis Review • IMF – Fiscal Sustainability & Statistical Convergence • OECD-Fiscal Sustainability & Statistical Convergence • IFAC – DNC – Cash Basis Review • IASB – Service Concessions and Conceptual Framework • National Standard Setters - Conceptual Framework World Bank: May 2009

23. Translation • 2007 Handbook translated into Spanish and French version being finalized • IASC Foundation • QA Panels • French panel co-ordinated by former Chair • Spanish panel co-ordinated by former member • Costly process • E-News translated into Spanish and French in-house • Other translations in accordance with IFAC translation policy World Bank: May 2009

24. International Federation of Accountants www.ifac.org World Bank: May 2009