What are the IPSASB’s next steps on measurement?

The International Public Sector Accounting Standards Board (IPSASB) published a suite of Exposure Draft (EDs) on measurement and related matters in 2021 as ED 76 to ED 79. The key proposals in the EDs included:

• adopting in IPSAS the meaning and guidance of “fair value” from IFRS 13 on Fair Value Measurement;
• a new public sector-specific measurement basis for assets held for operational capacity – current operational value (COV);
• enhanced guidance on the recognition and measurement of infrastructure and heritage assets that are property, plant and equipment; and
• a standard that fills a gap for assets held for sale and discontinued operations.

The IPSASB considered an initial assessment of the comment received from stakeholders at the December 2021 meeting and will consider the comment in more detail during 2022.

What did stakeholders say?

The Accounting Standards Board (ASB) published ED 76 to ED 79 concurrently and submitted comment letters with the views of local stakeholders to the IPSASB. The IPSASB considered our comment with feedback from other constituents.

General support for the proposals

Except for COV, the IPSASB noted that respondents strongly supported the proposals across the EDs. While minor issues exist that require the IPSASB’s attention, the staff’s preliminary analysis did not identify any significant issues.

Questions about current operational value

The IPSASB noted that the substantive issues raised across the EDs relate to COV. COV is a measurement basis developed by the IPSASB to address measurement issues associated with public sector assets. The basis is unfamiliar to respondents, and some asked for clarification and further consideration.

Another group of stakeholders disagreed that COV is appropriate for application in IPSAS. These stakeholders mostly noted that instead of COV, replacement cost or fair value could be used (as is or adapted). Replacement cost reflects the operating capacity of government to provide public benefits and the cost of replacing that capital if the entity was deprived of it.

Locally stakeholders found the definition of COV unclear and noted that a better approach would be to retain replacement cost as a measurement basis instead of COV. Replacement cost would be applied as an alternative to fair value. The cost approach (which is like replacement cost) could then be removed as a technique to measure fair value.

What is next?

The IPSAS will dedicate resources to address stakeholder comments on measurement during 2022. After addressing the minor issues on proposals other than COV, they will focus their attention on resolving  COV issues.