News
IPSAS 40, Public Sector Combinations, Improves Reporting of Government Restructurings
02-Mar-2017
NEW YORK – The International Public Sector Accounting Standards Board® (IPSASB®) issued a new accounting standard—IPSAS 40, Public Sector Combinations. IPSAS 40 provides the first international accounting requirements that specifically address the needs of the public sector when accounting for combinations of entities and operations.
Public sector combinations—for example, reorganizations of government departments or restructurings of municipalities—occur frequently. In the public sector, these transactions raise different accounting issues from those encountered in the private sector.
“In the past, governments either had to develop their own approach for combinations, or refer to private sector accounting standards. Yet our stakeholders have told us that these private sector standards are not suitable for the public sector,” said IPSASB Chair Ian Carruthers. “IPSAS 40 responds to our stakeholders’ concerns, and fills an important gap in the IPSASB’s literature. Governments now have appropriate, public sector-specific requirements they can apply. This ensures they can provide users of financial statements with relevant information about combinations.”
IPSAS 40 recognizes two types of public sector combinations: amalgamations and acquisitions. By contrast, International Financial Reporting Standards, used by private sector entities, treat all combinations as acquisitions, which requires obtaining fair value information. Amalgamations, which are much more common in the public sector, do not require this information. The accounting requirements for amalgamations in IPSAS 40 are based on existing information, which enables public sector entities to avoid unnecessary valuation costs, while still meeting users’ needs.
IPSAS 40 applies from January 1, 2019, with earlier adoption encouraged. To help governments understand the new requirements, IPSASB staff have developed an At-a-Glance summary and an introductory webinar.
.https://www.ifac.org/news-events/2017-01/ipsas-40-public-sector-combinations-improves-reporting-government-restructurings