On the first day of its quarterly meeting in Kuala Lumpur this week, the board accepted IPSAS 42. This outlines how governments should account for social benefits such as unemployment benefits and state pensions.
Board chair Ian Carruthers said approval marked a “major milestone” and “fills one of the key gaps in public sector accounting literature”.
He told PF International: “The long journey to approval is indicative of the strong and diverse views on recognising and measuring social benefits, as well as the rigorous due process necessary to develop high-quality standards.”
.@PMasonCPFA in action gaining approval for #IPSAS 42, Social Benefits. This standard has been 16 years in the making - a monumental effort to address an important gap in the IPSASB literature! pic.twitter.com/vVwJd7j0NB
— IPSASB (@IPSASB_News) 4 December 2018
The board released exposure draft 63 for consultation in October last year and, in a first, included an alternative view reflecting the lack of consensus. This set out the reasons three dissenting board members had for deviating from the opinion of the majority.
Exposure draft 63 presented a single ‘recognition point’ for the liability presented by social benefits – when an individual becomes eligible for payments through for example retiring or becoming unemployed.
But according to the alternative view, the ‘recognition point’ would be earlier, typically when people start working but before they are in receipt of the benefits.
At its June meeting, the board reviewed feedback received on the standard and agreed to go with the scope proposed – not the alternative view – but to clarify some definitions as some respondents said key terms needed to be clearer.
Paul Mason, principal and staff lead at the board, explained: “IPSAS 42 will be a cornerstone for governments to gain a more accurate view of the sustainability of their social benefits schemes.
“However, it will be important to complement the information generated by implementation of IPSAS 42 with longer-term projections.”
He added that the board provides additional guidance on reporting long-term sustainability in its Recommended Practice Guideline 1, Reporting on the Financial Sustainability of an Entity’s Finances.
Carruthers said the development was “a leap forward for global accrual-based public sector financial reporting”.
Last month, CIPFA and the International Federation of Accountants predicted two out of three governments around the world will shift to accrual-based accounting within the next five years.
Manj Kalar, public finance consultant, told PF International approval of IPSAS 42 “marks a huge shift in greater transparency and accountability”.
