Fans of The Hitchhiker’s Guide to the Galaxy will immediately recognise the number ‘42’ as the answer to the ultimate question of ‘life, the universe and everything’.
So can the same be said about IPSAS 42, Social Benefits, which the IPSASB approved at its recent meeting in Kuala Lumpur?
Social benefits has been the IPSASB’s longest running and most challenging project to-date.
Work on this subject began in 2002, so the board has been trying to get to a standard for almost sixteen years – a very long time (but still an impressive 7,499,984 fewer years than Douglas Adams’ Deep Thought).
IPSAS 42 fills a gap in the international accounting literature. For the first time, governments following international standards will be required to include a liability for social benefits on their balance sheet. This is a major step forward for transparency and accountability.
However, not everyone will think that IPSAS 42 goes far enough. IPSAS 42 requires liabilities, such as those resulting from state retirement benefits and unemployment benefits, be recognised for the next payment only.
During the development of this standard, some IPSASB members put forward an alternative view that would have seen much larger, long-term liabilities recognised for some – but not all – benefits, in particular for contributory pensions.
As with previous consultations, respondents split into two camps, with some supporting the IPSASB’s proposed standard and some supporting the alternative view.
Ultimately, the IPSASB decided to continue with its proposed approach. The board noted the differing views, but saw no way of bridging the gap between those views until preparers had started recognising liabilities, and users can decide if the information presented by governments meets their needs.
In The Hitchhiker’s Guide to the Galaxy, finding out that ‘42’ was the answer to life, the universe and everything was not the end of the story. We knew the answer, but didn’t really understand the question. A new, even greater computer (‘the Earth’) was built to determine the ultimate question.
Similarly, IPSAS 42 is unlikely to be the final word in accounting for social benefits. It is likely that the IPSASB will carry out a post-implementation review of IPSAS 42 once it has been in use for a number of years.
This review could provide valuable information about whether IPSAS 42 meets users’ needs, or whether further standard-setting work is required. (Assuming, of course, that the review doesn’t fall victim to another Vogon hyperspace bypass.)
IPSAS 42 will be published in early 2019, and will have an effective date of January 1, 2022.
I would encourage you to read the new standard as soon as possible, and begin preparations early.
And while you’re waiting for IPSAS 42 to be published, it’s well worth exploring or re-exploring The Hitchhiker’s Guide to the Galaxy.
