The Board agreed that IPSAS 42 on Social Benefits will be used as a starting point in the development of a Standard of GRAP. However, the Board has identified the need to depart in certain key areas.
The Board discussed and agreed preliminary conclusions in the following areas: | Area | Preliminary decision | Reasoning |
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| Definitions and scope | Social benefits will include in-kind benefits. This phase of the project will continue to develop guidance for cash benefits only. | Stakeholders prefer a holistic approach to accounting for social benefits. The dissimilar nature of cash and in-kind benefits requires that in-kind benefits are dealt with separately. Guidance on in-kind benefits will be considered after the IPSASB finalised their transfer expenses project. | | The definition of a social risk will be amended to refer to events or circumstances that relate to the characteristics of individuals and households directly. | It is difficult in practice to distinguish social benefits arising from social risks, from benefits that arise from other risks. Emphasising the direct relationship needed between the individual/household and the risk the benefit aims to address will help entities to make the distinction. | | Explanatory guidance is needed to interpret the application of the concept of “address the needs of society as a whole”. | The concept is necessary to distinguish social benefits from insurance. This is particularly important in the local environment for benefits provided through a similar individualised process to insurance. | | Whether benefits paid to individuals and households are social benefits is assessed at a benefit level. | Some entities and schemes provide a mix of benefits that are social benefits and other benefits. The assessment could come to an incorrect conclusion if it is made at an entity or scheme level. | | Types of benefits | Guidance will distinguish the accounting treatment for contributory and non-contributory benefits: - Contributory benefits are funded directly or indirectly by contributions from the same individuals or households who may become beneficiaries of the benefits.
- Non-contributory benefits are funded by annual government appropriations on a “pay-as-you-go” basis. There is no relationship between the funding of the benefit and the benefits paid.
| The nature of benefits in the environment differs. Stakeholders suggested differentiating benefits for accounting purposes will ensure relevant information is provided to users. | | Different accounting for different types of benefits | While a limited liability may be appropriate for non-contributory benefits based on claims that an entity has verified, an earlier recognition point is appropriate for contributory benefits. This recognition point could be as early as when the incident that the benefit intends to compensate for occurs. | The nature of contributory benefits is that beneficiaries contribute over a period of time to qualify for benefits when a certain event occurs in the future. The contributions intend to compensate an entity for the risk it accepts by providing the benefits, being that an incident occurs that gives rise to benefits. When the incident occurs, the entity has no realistic alternative but to settle the obligation. |
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