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International Public Sector Accounting StandardsBoardConceptual Framework forGeneral Purpose FinancialReporting by Public SectorEntities:Presentation in GeneralPurpose Financial ReportsInternationalPublic SectorAccountingStandards BoardConsultation PaperJanuary 2012Comments are requested by May 31, 20122REQUEST FOR COMMENTSThe International Public Sector Accounting Standards Board (IPSASB), an independent standard-settingbody within the International Federation of Accountants (IFAC), approved for publication in January 2012this Conceptual Framework Consultation Paper, Conceptual Framework for General Purpose FinancialReporting by Public Sector Entities: Presentation in General Purpose Financial Reports.The proposals in this Consultation Paper may be modified in light of comments received before beingissued in final form. Comments are requested by May 31, 2012. Respondents are asked to submit theircomments electronically through the IFAC website (www.ifac.org), using the ?Submit a Comment? link onthe Exposure Drafts and Consultation Papers page. Please note that first-time users must register to usethis feature. All comments will be considered a matter of public record and will ultimately be posted on theIFAC website.Although IFAC prefers that comments be submitted electronically, e-mail may be sent tostepheniefox@ifac.org. Comments can also be faxed to the attention of the IPSASB Technical Director at+1 (416) 204-3412, or mailed to:The Technical DirectorInternational Public Sector Accounting Standards BoardInternational Federation of Accountants277 Wellington Street West, 6th FloorToronto, Ontario M5V 3H2 CANADACopies of this Consultation Paper may be downloaded free-of-charge from the IFAC website atwww.ifac.org.Copyright © January 2012 by the International Federation of Accountants (IFAC). All rights reserved.Permission is granted to make copies of this work to achieve maximum exposure and feedback providedthat each copy bears the following credit line: Copyright January 2012 by the International Federation ofAccountants (IFAC). All rights reserved. Used with permission of IFAC. Permission is granted to makecopies of this work to achieve maximum exposure and feedback.ISBN: 978-1-60815-100-4Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports3Background to the Conceptual FrameworkThe Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (theConceptual Framework) will establish and make explicit the concepts that are to be applied in developingInternational Public Sector Accounting Standards (IPSASs) and other documents that provide guidanceon information included in general purpose financial reports (GPFRs).IPSASs are developed to apply across countries and jurisdictions with different political systems, differentforms of government and different institutional and administrative arrangements for the delivery ofservices to constituents. The International Public Sector Accounting Standards Board (IPSASB)recognizes the diversity of forms of government, social and cultural traditions, and service deliverymechanisms that exist in the many jurisdictions that may adopt IPSASs. In developing this ConceptualFramework, the IPSASB has attempted to respond to and embrace that diversity.The Accrual Basis of AccountingThis Consultation Paper (CP) deals with concepts that apply to general purpose financial reporting(hereafter referred to as financial reporting) under the accrual basis of accounting.Under the accrual basis of accounting, transactions and other events are recognized in financialstatements when they occur (and not only when cash or its equivalent is received or paid). Therefore, thetransactions and events are recorded in the accounting records and recognized in the financialstatements of the periods to which they relate.Financial statements prepared under the accrual basis of accounting inform users of those statements ofpast transactions involving the payment and receipt of cash during the reporting period, obligations to paycash or sacrifice other resources of the entity in the future and the resources of the entity at the reportingdate. Therefore, they provide information about past transactions and other events that is more useful tousers for accountability purposes and as input for decision making than is information provided by thecash basis or other bases of accounting and financial reporting.Project DevelopmentThe IPSASB is developing the Conceptual Framework with input from an advisory panel comprising anumber of national standard setters and similar organizations with a role in establishing financial reportingrequirements for governments and other public sector entities in their jurisdictions. Earlier drafts of this CPhave benefited greatly from comments received from the advisory panel.The purpose of the IPSASB’s Conceptual Framework project is to develop concepts, definitions andprinciples that:? Respond to the objectives, environment and circumstances of governments and other public sectorentities
and therefore? Are appropriate to guide the development of IPSASs and other documents dealing with financialreporting by public sector entities.Many of the IPSASs currently on issue are based on International Financial Reporting Standards (IFRSs)issued by the International Accounting Standards Board (IASB), to the extent that the requirements ofthose IFRSs are relevant to the public sector. The IPSASB’s strategy also includes maintaining thealignment of IPSASs with IFRSs where appropriate for the public sector.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports4The IASB has a joint project with the Financial Accounting Standards Board (FASB) of the USA todevelop an improved Conceptual Framework for private sector business entities. Currently this project ispaused until the IASB concludes its agenda consultation about its future work plan. Developmentsrelating to the IASB’s Conceptual Framework are being closely monitored. However, development of theIPSASB’s Conceptual Framework is not an IFRS convergence project, and the purpose of the IPSASB’sproject is not to interpret the application of the IASB Framework to the public sector.The concepts underlying statistical financial reporting models, and the potential for convergence withthem, are also being considered by the IPSASB in developing its Conceptual Framework. The IPSASB iscommitted to minimizing divergence from the statistical financial reporting models where appropriate.Consultation Papers and Exposure DraftsAlthough all the components of the Conceptual Framework are interconnected, the ConceptualFramework project is being developed in phases. The components of the Conceptual Framework havebeen grouped as follows, and are being considered in the following sequence:Phase 1?the scope of financial reporting, the objectives of financial reporting and users of GPFRs, thequalitative characteristics (QCs) of information included in GPFRs, and the reporting entity
Phase 2?the definition and recognition of the ?elements? of financial statements
Phase 3?consideration of the measurement basis (or bases) that may validly be adopted for theelements that are recognized in the financial statements
andPhase 4?consideration of the concepts that should be adopted in deciding how to present financial andnon-financial information in GPFRs.The project initially involves the development and issue for comment of CPs that draw out key issues andexplore the ways in which those issues could be dealt with. The CP dealing with Phase 1 was issued inSeptember 20081. CPs dealing with Phase 2 and Phase 3, and the Exposure Draft (ED) dealing withPhase 1 were issued in December 20102. The IPSASB commenced its consideration of the responses tothese documents in September 2011.The IPSASB intends to issue EDs dealing with each of Phases 2, 3 and 4 of the Conceptual Frameworkafter it has completed its consideration of responses to the CPs dealing with those Phases. The processfor developing the finalized Conceptual Framework will be determined in light of the responses receivedto the CPs and EDs. The IPSASB will not make a decision on whether to issue an umbrella or integratedED of the full Conceptual Framework until work on the individual Phases is further advanced.1 Consultation Paper, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: The Objectivesof Financial Reporting
The Scope of Financial Reporting
The Qualitative Characteristics of Information Included in GeneralPurpose Financial Reports
The Reporting Entity.2 Consultation Paper, Elements and Recognition in Financial Statements (CF—CP2—Elements), Consultation Paper,Measurement of Assets and Liabilities in Financial Statements (CF—CP3—Measurement), and Conceptual FrameworkExposure Draft 1 (CF—ED1), Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Role,Authority, and Scope
Objectives and Users
Qualitative Characteristics
and Reporting Entity.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports5Objective of the Consultation PaperThis CP, The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports, sets out the specific matters on which comments arerequested. The IPSASB has not provided preliminary views on the issues so as to get the widest possibleconsultation. Respondents may choose to address all or just some selected matters, and are welcome tocomment on any other matter they think the IPSASB should consider in forming its views.Guide for RespondentsThe IPSASB welcomes comments on all of the matters discussed in this CP. Comments are most helpfulif they indicate the specific paragraph or group of paragraphs to which they relate, and contain a clearrationale, including reasons for agreeing or disagreeing. If you disagree, please provide alternativeproposals.The Specific Matters for Comment requested in the CP are provided below.Specific Matter for Comment 1 (See paragraphs 2.1 to 2.18)With respect to the descriptions of ?presentation?, ?display?, ?disclosure?, ?core information?, and?supporting information?, and the proposed relationships between these terms:(a) Do you agree that the proposed descriptions and relationships are appropriate and adequate?(b) Do you agree that identification of core and supporting information for GPFRs should be made at astandards level rather than as part of the Conceptual Framework?Specific Matter for Comment 2 (See paragraphs 3.1 to 3.12)With respect to the IPSASB’s approach to presentation of information:(a) Do you agree with the development of presentation concepts that can be adopted for the morecomprehensive scope of GPFRs including, but not restricted to, financial statements?(b) Do you agree with the approach of (i) focusing on user needs to identify presentation objectives, (ii)application of the qualitative characteristics (QCs) to presentation decisions, and (iii) separatepresentation concepts?Specific Matter for Comment 3 (See paragraphs 4.1 to 4.5)This CP discusses the importance of developing presentation objectives as part of standard setting.(a) Do you agree that presentation objectives should be developed?(b) If so, in your view, should they be developed at a standards level, or as part of the ConceptualFramework?Specific Matter for Comment 4 (See paragraphs 6.1 to 6.27)This CP proposes three presentation concepts. Please provide your views on these concepts, inparticular whether:(a) Any of these concepts should be excluded from the Conceptual Framework
and(b) The description of each concept could be improved and, if so, indicate how. Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports6Specific Matter for Comment 5 (See paragraphs 6.1 to 6.27)In addition to the three concepts proposed in Section 6, please provide your views on:(a) Whether there are further concepts that should be included in the Conceptual Framework
and(b) What those further concepts should be.Specific Matter for Comment 6 (See paragraphs 6.12, 6.17, 6.24, and 6.27)Each presentation concept refers to the possibility of developing criteria to determine the presentationtechniques to be used in setting accounting standards. Please provide:(a) Your views on whether it would be useful and workable for the IPSASB to apply such techniques
and(b) Any suggestions you have for developing these techniques.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports7Executive SummaryThis Consultation Paper (CP) explores concepts applicable to presentation of information in the GPFRs ofpublic sector entities, including General Purpose Financial Statements (GPFSs). It begins, in Section 1,by explaining the relevance of the first three phases of the IPSASB’s Conceptual Framework project.Phase 1 is particularly relevant, because Phase 1’s proposals with respect to users’ information needsand the qualitative characteristics (QCs) are central to the approach to presentation of informationdescribed in this paper.Next, Section 2 describes what is meant by ?presentation?. Presentation is the selection, location andorganization of information that is displayed and disclosed in the GPFRs to meet the objectives offinancial reporting, needs of users, and QCs. Presentation covers both ?display? and ?disclosure? ofinformation. Display relates to ?core information?, which is central to achievement of user needs andshould be shown prominently. Disclosure of core information is not a substitute for its display. Disclosureapplies to the provision of ?supporting information?. Supporting information provides detail related to thecore information, makes core information more useful, and is equal in importance to core information.Section 3 describes the three perspectives that the IPSASB considered in developing its approach to thepresentation of information, then provides a brief overview of that approach. The approach involves: (1)recognition that identification of user needs focused objectives for information areas is central topresentation
(2) application of the QCs to presentation decisions
and, (3) application of separatepresentation concepts. The following three sections then provide further explanation of each part of thisapproach. Section 4 focuses on user needs and presentation objectives. Section 5 sets out threepresentation decisions and describes the application of the QCs to those decisions. Section 6 describesthree presentation concepts, derived from the application of the QCs and the constraints on information tothe presentation decisions. The three presentation concepts are:1. Select information that meets user needs, satisfies the cost-benefit test, and is sufficiently timely
2. Locate information to meet user needs
and,3. Organize information to make important relationships clear and support comparability.These presentation concepts are intended to guide the development of presentation requirements withinpronouncements issued by the IPSASB, and to guide preparers as they consider aspects of financialreporting not addressed within pronouncements. As explained in Section 3, these three presentationconcepts would be applied in combination with (a) the identification of user needs focused presentationobjectives, and (b) application of the QCs to presentation decisions.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports8CONTENTS PAGEPageBackground to the Conceptual Framework........................................................................... 3The Accrual Basis of Accounting.................................................................................... 3Project Development ...................................................................................................... 3Consultation Papers and Exposure Drafts ..................................................................... 4Objective of the Consultation Paper ..................................................................................... 5Guide for Respondents ......................................................................................................... 5Executive Summary.............................................................................................................. 71. Introduction..................................................................................................................... 10Overview of CP............................................................................................................... 10Relevance of Work Done in Phase 1 of Conceptual Framework................................... 10Relevance of Work Done in Phase 2 Elements and Phase 3 Measurement................. 11Impact of New Technology............................................................................................. 112. Meaning of Presentation, Display, and Disclosure......................................................... 12Presentation.................................................................................................................... 12Display and Disclosure................................................................................................... 12Alternative View – Core and Supporting Information ..................................................... 153. IPSASB Approach to Presentation of Information.......................................................... 16(i) Focus on User Needs to Identify Presentation Objectives ...................................... 16(ii) Application of QCs ................................................................................................... 17(iii) Presentation Concepts............................................................................................. 174. Identification of Presentation Objectives ........................................................................ 18Presentation Objectives Consistent with Financial Reporting Objectives...................... 18Presentation Objectives Based on User Needs ............................................................. 185. Relationship of the QCs to Presentation Decisions........................................................ 206. Presentation Concepts ................................................................................................... 23Concept 1: Select information that meets user needs, satisfies the cost-benefittest, and is sufficiently timely ................................................................................... 23Concept 2: Locate information to meet user needs........................................................ 25Concept 3: Organize information to make important relationships clearand support comparability........................................................................................ 26Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports9Appendix A: CF—ED1 Information Needs of the Primary Users of GPFRsand Information Provided by GPFRs.............................................................................. 30Appendix B: CF—ED1 The Qualitative Characteristics of, and Constraints on,Information Included in GPFRs ...................................................................................... 35Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports101. Introduction1.1 This Consultation Paper (CP) is the first step in the development of Phase 4 of the ConceptualFramework for General Purpose Financial Reporting by Public Sector Entities. It explorespresentation concepts that could be adopted for public sector General Purpose Financial Reports(individually, a GPFR, and collectively, GPFRs) including General Purpose Financial Statements(GPFSs, hereafter financial statements). It considers presentation within the context of the morecomprehensive scope for general purpose financial reporting that has been proposed in Phase 1.This introduction begins with a brief overview of the CP, and then explains the relevance of the firstthree phases of the Conceptual Framework for presentation, followed by a brief consideration of theimpact of new technology on presentation in GPFRs.Overview of CP1.2 Section 2 describes what is meant by presentation. The meaning of presentation, underpins thediscussion of presentation concepts. Section 3 describes the three perspectives that the IPSASBconsidered in developing its approach to the presentation of information, and provides a briefoverview of that approach. The approach involves: (1) recognition that identification of user needsfocused objectives for information areas is central to presentation
(2) application of the qualitativecharacteristics (QCs) to presentation decisions
and, (3) application of separate presentationconcepts. The following three sections, Sections 4, 5 and 6, then provide further detail andexplanation for each part of this approach.Relevance of Work Done in Phase 1 of Conceptual Framework1.3 This CP is intended to be read within the context established in Exposure Draft 1, ConceptualFramework for General Purpose Financial Reporting by Public Sector Entities: Role, Authority, andScope
Objectives and Users
Qualitative Characteristics
and Reporting Entity (CF—ED1). CF—ED1 proposes that GPFRs of public sector entities include, but are more comprehensive than,financial statements, including their notes. CF—ED1 also proposes that the objectives of financialreporting are to provide information about the entity that is useful to users for accountability anddecision-making purposes. Presentation of information in GPFRs should support those objectives.Presentation also relates to the user needs proposed in Phase 1.1.4 With respect to user needs, CF—ED1 outlines the information that the primary users of GPFRs willneed for accountability and decision-making purposes. For example, information needs of servicerecipients and their representatives include information as input to assessments of such matters aswhether:? The entity is using resources economically, efficiently, effectively and as intended, andwhether such use is in their interests
? The range, volume and cost of services provided during the reporting period, and theamounts and sources of their cost recoveries, are appropriate
and? Current levels of taxes or other charges are sufficient to maintain the volume and quality ofservices currently provided.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports111.5 A fuller discussion of (a) information needed by the primary users of GPFRs, and (b) informationprovided in GPFRs to meet user needs, is contained in paragraphs 2.7 to 2.25 of CF—ED1. Thatcoverage is reproduced in Appendix A.1.6 Information should be presented so as to meet the QCs and constraints articulated in Phase 1. TheQCs are relevance, faithful representation, understandability, timeliness, comparability, andverifiability. The descriptions of these six QCs in CF—ED1 are provided in Appendix B. Each of theQCs is integral to, and works with, the other QCs to ensure that reported information is useful forachieving the objectives of financial reporting. However, in practice, all QCs may not be fullyachieved, and a balance or trade-off between certain of them may be necessary. CF—ED1 furthernotes that the extent to which the QCs can be achieved may differ depending on the degree ofuncertainty and subjective assessment or opinion involved in compiling financial and non-financialinformation. Materiality, cost-benefit, and achievement of an appropriate balance between the QCsare pervasive constraints on information included in GPFRs.Relevance of Work Done in Phase 2 Elements and Phase 3 Measurement1.7 Phase 2—Elements and Recognition and Phase 3—Measurement of the IPSASB’s conceptualframework project cover the definition, recognition, and measurement of the elements reported inthe financial statements. In December 2010 CPs were issued for each Phase. Consultation Paper,Elements and Recognition in Financial Statements:? Comments on the boundary between elements and presentation, noting thatsubclassifications within an element, and aggregations or combinations of elements, areissues for presentation rather than matters discussed within that CP
? Proposes that disclosure of information in the notes to the financial statements does notcompensate for a failure to recognize items that meet the definitions and specifiedrecognition criteria of elements
? Proposes that certain types of note disclosures with respect to recognized items can enhanceinformation for decision making and accountability
? Proposes that notes can provide further detail about recognized items
and? Notes that how elements are defined can impact on what needs to be presented on the facesof the different financial statements.1.8 The Consultation Paper, Measurement of Assets and Liabilities in Financial Statements states thatproper presentation and disclosure can ensure that the measurement bases used and the amountsreported on each basis are clear.Impact of New Technology1.9 During development of this CP the IPSASB considered how new technology, designed to allowusers to access data at different levels to suit their individual needs, could impact on presentation inGPFRs. Internet based tools potentially provide more scope than traditional, hardcopy formats todrill down from standardized summary presentation of information into more detailed underlyingdata. The approach to presentation of information described in this CP aims to be at a high-enoughlevel to remain relevant and support the development of appropriate presentation requirementswithin the context of changing information technology.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports122. Meaning of Presentation, Display, and DisclosurePresentation2.1 This section explores what is meant by presentation in GPFRs, and illustrates the relationshipbetween presentation, display, and disclosure. These issues have been addressed from aconceptual perspective by only a few standard setters, and the concepts developed have generallyonly focused on the financial statements and note disclosures. There are several projects beingconducted — by the IASB, national standard setters, and others — that relate to presentation,including projects on integrated reporting, note disclosures, and effective communication offinancial information3. The IPSASB is monitoring the progress of these projects. However, given thescope and objectives of these projects the IPSASB believes that it can progress this project withoutwaiting for these other projects to be finalized.2.2 In the context of financial statements, presentation has been viewed, in some jurisdictions, asaddressing information reported on the face of a statement, while disclosure addresses informationthat is reported in the notes. Because this CP is considering presentation in the broader context ofboth GPFRs that include financial statements and other GPFRs, that terminology needs to bemodified. Presentation is therefore described in this CP as the selection, location and organizationof information that is displayed and disclosed in the GPFRs to meet the objectives of financialreporting, needs of users, and QCs.2.3 This description of presentation also contrasts with the meaning of ?fair presentation? with respectto financial statements. IPSAS 1, Presentation of Financial Statements, states that:?Fair presentation requires the faithful representation of the effects of transactions, other events,and conditions in accordance with the definitions and recognition criteria for assets, liabilities,revenue, and expenses set out in IPSASs. The application of IPSASs, with additional disclosureswhen necessary, is presumed to result in financial statements that achieve a fair presentation.?2.4 This CP does not address all the issues encompassed by fair presentation. The recognition andmeasurement of elements, for example, are covered in Phases 2 and 3 of the ConceptualFramework, and discussed in the CPs issued in December 2010.Display and Disclosure2.5 Presentation covers both display and disclosure of information. In considering display anddisclosure this CP distinguishes between core information and supporting information.Display and Core Information2.6 Core information highlights key messages related to an information area4and so is central tomeeting the objectives of financial reporting and user needs. When developing presentation3For example, the Financial Accounting Standards Board’s (FASB’s) Disclosures project, the Federal Accounting StandardsAdvisory Board’s Concepts – The Financial Report project, the International Integrated Reporting Council’s project onintegrated reporting, and the European Financial Reporting Advisory Group’s Disclosures Framework project. Phase E of theIASB/FASB conceptual framework project will address presentation and disclosure.4 An ?information area? is either a GPFR or a major subsection within a GPFR. Examples of information areas include serviceperformance information, information on the long-term sustainability of an entity’s finances, financial statements, and financialstatement discussion and analysis.Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities:Presentation in General Purpose Financial Reports13requirements for a particular GPFR information area, it is important to identify (a) what coreinformation would need to be displayed, (b) where the information should be displayed, and (c) howit should be organized. Where core information has been identified it should be displayedprominently, using appropriate presentation techniques. Core information should be kept to anunderstandable level, so that users can focus on that information and not be distracted by anexcess of detail that could obscure the key messages that core information is intended to show. Butcore information should also be sufficient to effectively communicate the key messages related toan information area.2.7 For the financial statements, display applies to the information shown on the face of a statement.For information included in GPFRs but outside the financial statements, display refers to the waysin which core information is shown, such that the presentation provides an overview appropriate to(a) meeting the needs of users, and (b) the characteristics of the information shown. Examples ofpossible presentation techniques for this information include the use of lists (for example, lists ofcritical indicators), tables, statements, and graphs.2.8 Display and disclosure – disclosure is discussed below – do not differ based on the specificpresentation techniques used. For financial statements the difference is about information location:on the face of a financial statement or in the notes. For other information areas the presentationtechnique(s) used to more prominently display core information would be aligned with theinformation needs and presentation objectives of that area and reviewed against the QCs andpresentation concepts.2.9 For information to achieve the QCs, all core information should be displayed. Disclosure is not asubstitute for display of core information.Example: Accruals and cash2.10 The set of information produced for accrual-based financial statements is comprehensively differentfrom that produced for cash-based statements. One aspect of that difference relates to informationlocation and the identification of core and supporting information. Note disclosure of accrualinformation (for example, accrual-based values for assets and liabilities) as supporting informationin cash-based statements does not equate to display of accruals information on the face of thefinancial statements. Decisions about where information is shown (and how it is organized) areequally important to presentation as decisions about what information is shown.Disclosure and Supporting Information2.11 Supporting information makes core information more useful. It does this by p

 

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