IPSAS - Financial Instruments (2 days)

Introduction

This two-day course provides an in-depth review of the current IPSAS accounting and reporting requirements for financial instruments. IPSAS 28-30 on financial instruments provide a coherent set of requirements that enhance accountability for financial instruments in the public sector.

The International Public Sector Accounting Standards Board (IPSASB) has published three International Public Sector Accounting Standards that cover most aspects of the accounting for and disclosure of financial instruments by public sector entities: IPSAS 28, Financial Instruments: Presentation; IPSAS 29, Financial Instruments: Recognition and Measurement; and IPSAS 30, Financial Instruments: Disclosures.

The three IPSASs are primarily drawn from the International Accounting Standards Board’s (IASB) standards, but address a number of public sector-specific issues, including financial guarantee contracts provided for nil or nominal consideration and concessionary loans. This course provides an explanation of the requirements for accounting, reporting and disclosures for financial instruments in clear, simple language, illustrated with financial statements and other real-world examples.

The course considers both requirements that will be applicable to most public entities; such as identifying which assets and liabilities and off balance sheet items are in scope of the standards and their recognition and measurement, as well as considering more advanced issues; such as the use of derivatives and hedge accounting. It also examines the extensive disclosure requirements and how these can be practically implemented considering the scale and complexity of different reporting entities.

The IASB replaced IAS 39, its equivalent standard to IPSAS 39, with IFRS 9 for 2018. In line with its practice, where appropriate, of maintaining consistency with IFRSs, the IPSASB published IPSAS 41 in August 2018. This standard will replace IPSAS 29 from 1 January 2022. It is closely based on IFRS 9 but also includes public sector-specific guidance and illustrative examples.

Some transactions which are unique to the public sector are not dealt with in current Standards, such as currency in circulation, monetary gold, currency in circulation, IMF quota subscriptions and special drawing rights (SDRs). IPSASB established a separate project to provide guidance to fill this gap. In August 2019 it published ED 69 Public Sector Specific Financial Instruments. It proposes to make amendments to IPSAS 41 to deal with these issues.

This program answers questions such as:

• What are financial instruments?
• How should financial instruments in the public sector be classified and measured?
• How to measure the fair value of financial instruments?
• How to account for and disclose concessionary loans?
• What are the requirements for hedge accounting?
• What are the hedge accounting documentation requirements?
• What are the principal similarities and differences between IPSAS and IFRS in the area of financial instruments?
• What aspects of financial instruments held by public sector entities are not currently covered by the Standards?
• What will be the impact of IPSAS 41 and other possible changes in IPSAS?

Learning Objectives

• Apply the principles for presenting financial instruments as liabilities or equity
• Comply with the principles for offsetting financial assets and financial liabilities
• Determine how to recognize and measure financial assets and financial liabilities
• Analyze the principles of accounting for the buying or selling non-financial items
• Evaluate the significance of the financial instruments in the entity's financial position and performance
• Understand the uses of derivatives to manage risk
• Determine whether to use hedge accounting
• Understand the nature and extent of risks arising from financial instruments to which the entity is exposed and how those risks are managed
• Learn the changes to accounting for financial instruments required by IPSAS 41 and how to implement them

Who Should Attend

Individuals with interests in or responsibilities for accounting for financial instruments in the public sector including:

• Finance and accounting managers
• Government officials and project managers responsible for IPSAS transition
• Accountants and finance staff of entities in the process of adopting IPSAS
• Auditors of entities that have adopted IPSAS or are in the process of doing so
• Accounting academics
• Staff with treasury responsibilities who wish to enhance their understanding of accounting

Topics

• What is a financial instrument?
• Measurement bases in the Conceptual Framework, measurement of fair value and application to financial instruments
• IPSAS 28 Financial Instruments: Presentation
  • Scope of the standard; defining and identifying financial instruments
  • Distinguishing between financial liabilities and equity instruments
  • Offsetting financial assets and financial liabilities
  • Summary of areas covered by IPSAS 28 rarely encountered by public entities
• IPSAS 29 Financial Instruments: Recognition and Measurement
  • Classification of financial instruments and scope for subsequent reclassification
  • Initial recognition of financial assets and liabilities
  • Initial and subsequent measurement of financial assets and liabilities
    • Amortised cost method and impairment
    • Fair value methods
  • Transfers of financial assets and the evaluation of the risks and rewards of ownership of the financial asset
  • Derecognition of financial assets and liabilities
  • Accounting for financial guarantees granted
  • Accounting for concessionary loans and waivers by the grantor and grantee
  • Use of derivatives
  • Hedging accounting; types of hedge accounting, whether or not to use the optional hedge accounting techniques, overview of accounting methods
  • Understanding the organizational and accounting concepts connected with hedging activities
• IPSAS 30 Financial Instruments: Disclosures
  • Scope of disclosure
  • Significance of financial instruments
  • Risks of financial instruments
  • Derivatives
• IPSAS 41 Financial Instruments (replaces IPSAS 29 from 2022)
  • Simplified classification and measurement of financial assets
  • Forward looking impairment model - expected credit losses
  • Flexible hedge accounting requirements
  • Public sector-specific guidance
• ED 69 Public Sector Specific Financial Instruments
  • Types of instrument
  • Guidance on classification, recognition and measurement

Teaching Method

• Group live instruction, cases, examples, group work, open discussions
• Descriptions and explanations of accounting principles
• Analysis and mechanics of common financial instruments
• Practical illustrations using model journal entries, model financial statement disclosures, case studies, and real-world examples
• Interactive participation is encouraged
• All participants receive a comprehensive binder containing copies of the presentation slides, handouts and other course materials

Instructors

Venue

CPE/CPD Accreditation

IASeminars is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

 

Field of study: Accounting

Prerequisites

A basic understanding of IPSAS or IFRS accounting and reporting principles. No advance preparation is required for this course.