7.1. Indices for implementation: The implementation of IPSAS is a process that entails different stages form mild to full/strong accrual. While there are different approaches and choices the final journey is full accrual IPSAS adoption. The technical committee on road map envisage to first go to cash basis IPSAS before accrual IPSAS. Table 7.1. Shows the adoption degree. Table 7.1. Degrees of Accrual Degree Assets Recognized Liabilities Recognized Mild accrual Current financial resources Current liabilities Moderate accrual Long-term financial resources in addition to current financial resources Long-term liabilities in addition to current liabilities Strong accrual Capital resources in addition to current and long-term financial resource Contingent liabilities in addition to current and long-term liabilities
exists for financial reporting purposes. political structure for FGN to consolidate SGA and LGA’s. 7 Accounting for Investments in Associates Requires all investments in associates to be accounted for in the consolidated financial statements using the equity method of accounting, except when the investment is acquired and held exclusively with a view to its disposal in the near future in which case the cost method is required. Consolidation is a difficult task even in private settings. IPSAS 8 Financial Reporting of Interests in Joint Ventures Requires proportionate consolidation to be adopted as the benchmark treatment for accounting for such joint ventures entered into by public sector entities. However, IPSAS 8 also permits – as an allowed alternative – joint ventures to be accounted for using the equity method of accounting. Accounting for joint venture using equity method will result in given undue advantage to government. IPSAS 9 Revenue from Exchange Transactions Establishes the conditions for the recognition of revenue arising from exchange transactions, requires such revenue to be measured at the fair value of the consideration received or receivable and includes disclosure requirements. Fair value consideration may results in directing financial reports to preparers’ interest (income smoothing). In governments this allows for the tendency of corruption. IPSAS 10 Financial Reporting in Describes the characteristics of a hyperinflationary economy and Financial restatement may
value treatment of financial instruments. 16 Investment Property Establishes the accounting treatment, and related disclosures, for investment property. It provides for application of either a fair value or historical cost model. Lack of adequate statistical data of government owned properties and estate is a big challenge. IPSAS 17 Property, Plant and Equipment Establishes the accounting treatment for property, plant and equipment, including the basis and timing of their initial recognition, and the determination of their ongoing carrying amounts and related depreciation. It does not require or prohibit the recognition of heritage assets. Inadequate statistical data on government assets and difficulty in classification. IPSAS 18 Segment Reporting Establishes requirements for the disclosure of financial statement information about distinguishable activities of reporting entities. This requirement is full of ambiguities, which is difficult even in private sector. IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets Establishes requirements for the recognition of provisions, and the disclosure of contingent liabilities and contingent assets. Its difficult to ascertain and contingent liabilities talk less of assets. IPSAS 20 Related Party Disclosures Establishes requirements for the disclosure of transactions with parties that are related to the reporting entity including Ministers, senior management, and close family members. Corruptions and related offenses are major impediments to the realization of this standard. IPSAS21 Impairment of Assets Ensure that non-cash-generating assets are carried at no more than recoverable service amount, and to prescribe how recoverable service amount is calculated. This standard is redundant as par as public entities are concerned. IPSAS 22 Disclosure of Financial Information About the General Government Sector Sets the disclosure requirements for governments that elect to present information about the general government sector (GGS) in their consolidated financial statements. The disclosure of appropriate information about the GGS of a A lot of statistical data are needed to realize the provisional requirements of the standard. Cash-Generating
government can provide a better understanding of the relationship between the market and activities of the government and between financial statements and statistical bases of financial reporting IPSAS 23. Revenue from Transactions (Taxes and Transfers) Prescribes requirements for the financial reporting of revenue arising from non-exchange transactions, other than transactions that give rise to an entity combination. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange Less challenge in application. Government grants aid form a substantial part of revenue at and LGA’s so its not a new thing. IPSAS 24 Presentation of Budget Information in Financial Statements Ensures that public sector entities discharge their accountability obligations and enhance the transparency of their financial statements by demonstrating compliance with the approved budget for which they are held publicly accountable and, where the budget and the financial statements are prepared on the same basis, their financial performance in achieving the budgeted results. Large history of variation may hamper honest presentation. Also poor budget performance history. 25 Employee Benefit Prescribes the accounting and disclosure for employee benefits. This includes: short-term benefits (wages, annual leave, sick leave, bonuses, profit-sharing and benefits); pensions; post-employment life insurance and medical benefits; termination benefits and other longterm employee benefits (long-service leave, disability, deferred compensation, and bonuses and longterm profit-sharing), except for share based transactions and The standard requires a lot of actuarial information, is currently not available.