IFAC Board

The Conceptual Framework

for General Purpose Financial

Reporting by Public Sector

Entities

Exposure Draft

October 2011

Comments due: February 29, 2012

Final Pronouncement

October 2014

This document was developed and approved by the International Public Sector Accounting Standards

Board (IPSASB).

The objective of the IPSASB is to serve the public interest by setting high-quality public sector accounting

standards and by facilitating the adoption and implementation of these, thereby enhancing the quality and

consistency of practice throughout the world and strengthening the transparency and accountability of

public sector finances.

In meeting this objective, the IPSASB sets International Public Sector Accounting Standards (IPSASs)

and Recommended Practice Guidelines (RPGs) for use by public sector entities, including national,

regional, and local governments, and related governmental agencies.

IPSASs relate to the general purpose financial statements (financial statements) and are authoritative.

RPGs are pronouncements that provide guidance on good practice in preparing general purpose financial

reports (GPFRs) that are not financial statements. Unlike IPSAS, RPGs do not establish requirements.

Currently all pronouncements relating to GPFRs that are not financial statements are RPGs. RPGs do not

provide guidance on the level of assurance (if any) to which information should be subjected.

The structures and processes that support the operations of the IPSASB are facilitated by the International

Federation of Accountants (IFAC).

Copyright October 2014 by the International Federation of Accountants (IFAC). For copyright,

trademark, and permissions information, please see page 120.

3

THE CONCEPTUAL FRAMEWORK FOR GENERAL PURPOSE

FINANCIAL REPORTING BY PUBLIC SECTOR ENTITIES

CONTENTS

Page

Introduction................................................................................................................................... 45

Preface ......................................................................................................................................... 69

Chapter 1: Role and Authority of the Conceptual Framework ................................................. 1013

Chapter 2: Objectives and Users of General Purpose Financial Reporting ............................ 1428

Chapter 3: Qualitative Characteristics ..................................................................................... 2944

Chapter 4: Reporting Entity ...................................................................................................... 4550

Chapter 5: Elements in Financial Statements ........................................................................... 5173

Chapter 6: Recognition in Financial Statements ...................................................................... 7478

Chapter 7: Measurement of Assets and Liabilities in Financial Statements ............................. 79103

Chapter 8: Presentation in General Purpose Financial Reports .............................................. 104119

4

Introduction

This Introduction provides background on the development of the Conceptual Framework for General

Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework) and includes details of

the IPSASBs due process. The Conceptual Framework establishes and makes explicit the concepts that

are to be applied in developing International Public Sector Accounting Standards (IPSASs) and

Recommended Practice Guidelines.

IPSASs are developed to apply across countries and jurisdictions with different political systems, different

forms of government and different institutional and administrative arrangements for the delivery of services

to constituents. The International Public Sector Accounting Standards Board (IPSASB) recognizes the

diversity of forms of government, social and cultural traditions, and service delivery mechanisms that exist

in the many jurisdictions that may adopt IPSASs. In developing the Conceptual Framework, the IPSASB

has attempted to respond to and embrace that diversity.

The IPSASB initiated the Conceptual Framework project in 2006. It was developed in four phases as

follows:

Phase 1

Chapter 1, Role and Authority of the Conceptual Framework (issued January 2013)

Chapter 2, Objectives and Users of General Purpose Financial Reporting (issued January

2013)

Chapter 3, Qualitative Characteristics (issued January 2013)

Chapter 4, Reporting Entity (issued January 2013)

Phase 2

Chapter 5, Elements in Financial Statements

Chapter 6, Recognition in Financial Statements

Phase 3

Chapter 7, Measurement of Assets and Liabilities in Financial Statements

Phase 4

Chapter 8, The Presentation of Information in General Purpose Financial Reports

The Conceptual Framework acknowledges that, to respond to users information needs, GPFRs may

include financial statements and information that enhances, complements, and supplements the financial

statements. Chapters 1, 2, 3, 4 and 8 deal with concepts that are applicable to all matters that may be

encompassed within the scope of GPFRs. Chapters 5, 6 and 7 deal with concepts applicable to the financial

statements and do not apply to the more comprehensive areas of financial reporting outside the financial

statements.

During the development of the Conceptual Framework, the IPSASB issued the following due process

documentsConsultation Papers and Exposure Drafts:

5

Title Date Issued Consultation Period Ended

Consultation Paper, The

Objectives of Financial

Reporting; The Scope of

Financial Reporting; The

Qualitative Characteristics of

Information Included in General

Purpose Financial Reports; The

Reporting Entity

September 30, 2008 March 30, 2009

Consultation Paper, Elements

and Recognition in Financial

Statements

December 15, 2010 June 14, 2011

Consultation Paper,

Measurement of Assets and

Liabilities in Financial Statements

December 15, 2010 June 14, 2011

Exposure Draft 1, Role, Authority

and Scope; Objectives and

Users; Qualitative

Characteristics; and Reporting

Entity

December 15, 2010 June 14, 2011

Exposure Draft, Key

Characteristics of the Public

Sector with Potential Implications

for Financial Reporting

April 29, 2011 August 31, 2011

Consultation Paper, Presentation

in General Purpose Financial

Reports

January 29, 2012 May 31, 2012

Exposure Draft 2, Elements and

Recognition in Financial

Statements

November 7, 2012 April 30, 2013

Exposure Draft 3, Measurement

of Assets and Liabilities in

Financial Statements

November 7, 2012 April 30, 2013

Exposure Draft 4, Presentation in

General Purpose Financial

Reports

April 17, 2013 August 15, 2013

6

The Preface to the Conceptual Framework for General Purpose Reporting by

Public Sector Entities

Introduction

1. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (the

Conceptual Framework) establishes the concepts that are to be applied in developing International

Public Sector Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs)

applicable to the preparation and presentation of general purpose financial reports (GPFRs) of public

sector entities1.

2. The primary objective of most public sector entities is to deliver services to the public, rather than to

make profits and generate a return on equity to investors. Consequently the performance of such

entities can be only partially evaluated by examination of financial position, financial performance and

cash flows. GPFRs provide information to users for accountability and decision-making purposes.

Therefore, users of the GPFRs of public sector entities need information to support assessments of

such matters as:

Whether the entity provided its services to constituents in an efficient and effective manner;

The resources currently available for future expenditures, and to what extent there are

restrictions or conditions attached to their use;

To what extent the burden on future-year taxpayers of paying for current services has changed;

and

Whether the entitys ability to provide services has improved or deteriorated compared with the

previous year.

3. Governments generally have broad powers, including the ability to establish and enforce legal

requirements, and to change those requirements. Globally the public sector varies considerably in

both its constitutional arrangements and its methods of operation. However, governance in the public

sector generally involves the holding to account of the executive by a legislative body (or equivalent).

4. The following sections highlight characteri