IPSAS 40, New Public Sector Accounting Standard Issued by the IPSASB

The IPSASB^{® _} International Public Sector Accounting Standards Board^® has recently issued an accounting standard, which is IPSAS 40-public sector combinations. This standard contains requirements and guidance that specifically cater the needs with reference to the government organizations when accounting for various combinations of entities and operations.

Examples of combinations in relation to the organizations that are controlled by the government can be that of the reorganizations occurring in relation to the different departments of the government or restructuring taking place with respect to local municipal authorities. For the government organizations, these kinds of transactions raise accounting issues that are different from the ones that the private organizations faces as a result of the very same transactions. 

Before the issuance of this standard, the governments either followed their own developed approach with regards to dealing with combinations or had to follow accounting standards which were developed for the private entities. IPSAS 40 basically responds to the concerns of the stakeholders and is an attempt to provide the government with proper guidance in relation to dealing with combinations. With the issuance of this standard, the Governments are now provided with a standard that outlines requirements and gives guidance that specifically relates to the public sector.

IPSAS 40 classifies public sector organizations in two types, the first one is acquisitions and the other one is amalgamations. In IFRSs, which are used and followed by private organizations, all the combinations are treated as acquisitions and these also involves the usage of information regarding the fair value of the entities and operations. The Amalgamations that are most commonly used by the government organizations, does not require such kind of information. The requirements and guidance outlined in the newly issued standard with reference to the amalgamations are basically based on the information that already exists, which helps the government organizations in avoiding any unnecessary valuation cost, while still satisfying the needs of the users.

IPSAS 40 will effectively be applied from January 1, 2019, although earlier adoption is encouraged. The staff of IPSASB has developed a summary so that to aid governments in understanding the requirements of the new standard.