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Financial Reporting Under the Cash Basis of Accounting (The Cash Basis IPSAS)

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Financial Reporting Under the Cash Basis of Accounting (The Cash Basis IPSAS) February 2016 Proposed International Public Sector Accounting Standard™ as Amended by Exposure Draft 61, Amendments to Financial Reporting under the Cash Basis of Accounting (the Cash Basis IPSAS) Financial Reporting under the Cash Basis of Accounting Please note: This is not a consultative document. Parties wishing to comment on the proposed amendments to this IPSAS should refer to Exposure Draft 61. This document was developed and approved by the International Public Sector Accounting Standards Board® (IPSASB®). The objective of the IPSASB is to serve the public interest by setting high-quality public sector accounting standards and by facilitating the adoption and implementation of these, thereby enhancing the quality and consistency of practice throughout the world and strengthening the transparency and accountability of public sector finances. In meeting this objective the IPSASB sets International Public Sector Accounting Standards™ (IPSAS™) and Recommended Practice Guidelines (RPGs) for use by public sector entities, including national, regional, and local governments, and related governmental agencies. IPSAS relate to the general purpose financial statements (financial statements) and are authoritative. RPGs are pronouncements that provide guidance on good practice in preparing general purpose financial reports (GPFRs) that are not financial statements. Unlike IPSAS RPGs do not establish requirements. Currently all pronouncements relating to GPFRs that are not financial statements are RPGs. RPGs do not provide guidance on the level of assurance (if any) to which information should be subjected. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants® (IFAC®). Copyright © February 2016 by the International Federation of Accountants® (IFAC®). For copyright, trademark, and permissions information, please see page 138. REQUEST FOR COMMENTS This Exposure Draft, Amendments to Financial Reporting under the Cash Basis of Accounting (the Cash Basis IPSAS), was developed and approved by the International Public Sector Accounting Standards Board® (IPSASB®). The proposals in this Exposure Draft may be modified in light of comments received before being issued in final form. Comments are requested by July 31, 2016. Respondents are asked to submit their comments electronically through the IPSASB website, using the “Submit a Comment” link. Please submit comments in both a PDF and Word file. Also, please note that first-time users must register to use this feature. All comments will be considered a matter of public record and will ultimately be posted on the website. This publication may be downloaded from the IPSASB website: www.ipsasb.org. The approved text is published in the English language. INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARD: FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING Structure of the Standard This Standard comprises two parts: • Part 1 is mandatory. It sets out the requirements which are applicable to all entities preparing general purpose financial statements under the cash basis of accounting. It defines the cash basis of accounting, establishes requirements for the disclosure of information in the financial statements and supporting notes, and deals with a number of specific reporting issues. The requirements in this part of the Standard must be complied with by entities which claim to be reporting in accordance with the International Public Sector Accounting Standard Financial Reporting under the Cash Basis of Accounting. Sections 1.1 to 1.8 of Part 1 of this Standard were issued in 2003. Section 1.9 of Part 1, “Presentation of Budget Information in Financial Statements” was issued in 2006. Amendments were made to paragraphs 1.3.4(c), 1.3.7, 1.3.9(c) and Appendix 1 of Part 1 in 2006 as a consequence of the issue of Section 1.9. Section 1.10 of Part 1, “Recipients of External Assistance” was issued in 2007. Amendments were made to paragraphs 1.3.18 and Appendix 1 of Part 1 in 2007 as a consequence of the issue of Section 1.10. • Part 2 is not mandatory. It identifies additional accounting policies and disclosures that an entity is encouraged to adopt to enhance the usefulness of its financial statements for accountability and decision-making purposes and to support its transition to the accrual basis of financial reporting and adoption of accrual IPSASs.its financial accountability and the transparency of its financial statements. It includes explanations of alternative methods of presenting certain information. Paragraphs 2.1.1 to 2.1.59 of Section 2.1, Section 2.2 and Appendices 2, 3, 4 and 5 were issued in 2003. Paragraphs 2.1.37 to 2.1.40 were added to Part 2 in 2006 to encourage certain disclosures about budget and actual amounts, and paragraph 2.1.36 and Appendix 2 were revised as a consequence. Paragraphs 2.1.64 to 2.1.93 were added to Part 2 in 2007 to encourage certain disclosures about external assistance, and paragraphs 2.1.25, 2.1.30 and Appendix 2 were revised as a consequence. • The Cash Basis IPSAS was issued in January 2003. The IPSAS was updated with additional requirements and encouragements dealing with the presentation of budget information in 2006 and external assistance in 2007. Exposure Draft 61 (ED 61), Amendments to Financial Reporting Under the Cash Basis of Accounting (the Cash Basis IPSAS) was issued in February 2016. Comments are sought by July 31, 2016. The objectives of ED 61 are to propose amendments to the Cash Basis IPSAS to: (a) Remove obstacles to the adoption of the Cash Basis IPSAS represented by the existing requirements dealing with consolidation, external assistance and third party payments: in particular, to recast the requirements in Part 1 of the IPSAS to prepare consolidated financial statements and disclose information about external assistance and third party payments as encouragements in Part 2 of the IPSAS; (b) Ensure that requirements and encouragements in the Standard are not contrary to those of the equivalent accrual IPSASs, except where such differences are appropriate to reflect adoption of the cash basis; and 3 (c) Clarify that the role the Cash Basis IPSAS is intended to play in the IPSASB’s overall standards setting strategy is primarily as a step on the path to adoption of the accrual basis IPSASs, rather than as an end in itself. ED 61 is available on the IPSASB website at www.ipsasb.org 4 MARKED-UP PROPOSED IPSAS: FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING CONTENTS Introduction Structure of the Standard Part 1: Requirements Objective Paragraphs 1.1 Scope of the Requirements ............................................ 1.1.1 – 1.1.67 1.2 The Cash Basis ................................................................ 1.2.1 – 1.2.109 Definitions .......................................................................... 1.2.1 – 1.2.9 Cash Basis of Accounting ............................................. 1.2.2 Cash Equivalents .......................................................... 1.2.3 – 1.2.5 Cash Controlled by the Reporting Entity ........................ 1.2.6 – 1.2.109 1.3 Presentation and Disclosure Requirements .................. 1.3.1 – 1.3.338 Definitions .......................................................................... 1.3.1 – 1.3.3 Financial Statements ......................................................... 1.3.4 – 1.3.11 Information to be Presented in the Statement of Cash Receipts and Payments ..................................................... 1.3.12 – 1.3.249 Classification ................................................................. 1.3.17 – 1.3.18 Line Items, Headings and Sub-totals ............................ 1.3.198 Reporting on a Net Basis .............................................. 1.3.2019 – 1.3.243 Payments by Third Parties on Behalf of the Entity ........ 1.3.24 – 1.3.29 Accounting Policies and Explanatory Notes ....................... 1.3.2530 – 1.3.338 Structure of the Notes .................................................... 1.3.2530 – 1.3.2631 Selection and Disclosure of Accounting Policies ........... 1.3.2732 – 1.3.338 1.4 General Considerations ................................................... 1.4.1 – 1.4.25 Reporting Period ................................................................. 1.4.1 – 1.4.3 Timeliness .......................................................................... 1.4.4 Authorization Date .............................................................. 1.4.5 – 1.4.6 Information About the Entity ............................................... 1.4.7 – 1.4.8 Restrictions on Cash Balances and Access to Borrowings 1.4.9 – 1.4.12 Consistency of Presentation .............................................. 1.4.13 – 1.4.15 5 MARKED-UP PROPOSED IPSAS: FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING Comparative Information ................................................... 1.4.16 – 1.4.20 Identification of Financial Statements ................................ 1.4.21 – 1.4.25 1.5 Correction of Errors ........................................................ 1.5.1 – 1.5.5 1.6 Consolidated Financial Statements ............................... 1.6.1 – 1.6.21 Definitions .......................................................................... 1.6.1 – 1.6.4 Economic Entity ............................................................ 1.6.2 – 1.6.4 Scope of Consolidated Statements ................................... 1.6.5 –
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