Highlights of IPSASB meeting

The IPSASB met in March 2020 to discuss key issues to progress a number of projects. These decisions are discussed below.

Existing projects

Measurement
The IPSASB issued a Consultation Paper on Measurement in 2019 and is in the process of analysing the comment received from stakeholders. The first issue that the IPSASB is dealing with is borrowing costs.
At present, the accounting treatment in IPSAS 5 on Borrowings Costs is as follows:

• Benchmark accounting treatment – expense all borrowings costs.
• Allowed alternative treatment – capitalise borrowing costs that are directly attributable to the construction, acquisition or production of a qualifying asset, i.e. an asset that takes a substantial period of time to get ready for its intended use or sale.

The IPSASB proposed expensing all borrowing costs in the Consultation Paper, mainly because of the complexity in allocating borrowing costs to assets when borrowing is done centrally.

Respondents to the Consultation Paper expressed mixed views about the proposal. While many supported expensing borrowing costs for the reasons outlined in the Consultation Paper, many did not. Those respondents that did not support the expensing of borrowing costs did not believe that borrowing costs should be treated differently for public sector entities as the issues – particularly for centralised borrowings and general borrowings – are the same in the private sector. They also noted conceptual arguments for capitalising borrowing costs.

Given the diversity of views either in support of expensing or capitalising borrowing costs, the IPSASB agreed to retain both options in IPSAS 5. Proposed guidance will be added to IPSAS 5 to deal with the allocation of borrowing costs and explaining the results of the IPSASB’s consultation on the issue. Any amendments to IPSAS 5 will be published as part of the IPSASBs annual improvements project in June 2020.

Accounting for heritage and infrastructure assets
The IPSASB has been working on developing guidance on heritage assets based on feedback received to its Consultation Paper issued in April 2017. The proposed guidance will be included in IPSAS 17 on Property, Plant and Equipment. Guidance will be provided on when a heritage item meets the definition of an asset, when it should be recognised, and issues on subsequent measurement, for example, depreciation and impairment.

The IPSASB has been through a process of identifying issues on infrastructure assets where additional guidance is needed. The IPSASB will also include guidance on these issues in IPSAS 17.
As amendments are being made to IPSAS 17 for both heritage and infrastructure assets, the amendments to IPSAS 17 will be issued for comment.
 
New projects
The IPSASB approved project briefs on:

1. A limited scope review of the Conceptual Framework for General Purpose for Financial Reporting by Public Sector Entities. The review will focus on key amendments made to the revised Conceptual Framework for Financial Reporting issued by the IASB in 2018, and issues identified by the IPSASB in using the Conceptual Framework to set Standards since its issue. The project will look at the following:

• • Whether amendments are required to the measurement bases identified in the Conceptual Framework, particularly whether “fair value” and “fulfilment value” should be introduced.
  • A review of the qualitative characteristics.
  • Consider whether concepts of the unit of account, executory contracts and capital maintenance should be introduced.

2. Natural resources. The project will focus on identifying whether natural resources should be recognised in the financial statements. The first phase of the project will be a Consultation Paper.

The IPSASB discussed whether to commence a project to issue an equivalent of IFRS 5 on Non-current Assets Held for Sale and Discontinued Operations. Some respondents to the IPSASB’s recent projects have identified this as a gap in the IPSASB’s existing literature. The IPSASB discussed a draft project brief and agreed that the Consultative Advisory Group should review the project brief in June 2020 before making a final decision.

Accessing information about the meeting
The meeting highlights can be accessed on the IPSASB’s website on www.ipsasb.org.