IPSASB Launches Project on Long-Term Fiscal Sustainability

For many governments and public sector entities, social benefit programs - such as Social Security, the provision of healthcare and unemployment benefits - comprise a highly significant part of their operations. Following the lead of the United States Federal Accounting Standards Advisory Board (FASAB), the International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board within the International Federation of Accountants (IFAC), has launched a project on the long-term fiscal sustainability of these programs. The IPSASB is also seeking comments on proposed new requirements designed to improve consistency and transparency in the reporting of certain government social benefits and has issued a consultation paper on related issues, particularly liability recognition.

In developing its project on social benefits, the IPSASB has concluded that financial statements alone may not provide users with enough information to assess the long-term viability of social benefit programs. It has, therefore, undertaken this new project to develop a framework for reporting on the long-term fiscal sustainability of governmental programs and finances.

To improve the consistency and transparency of reporting on social benefits by public sector entities and to bridge the gap between accrual based financial statements and the possibility of long-term fiscal sustainability reporting, the IPSASB has released Exposure Draft (ED) 34, Social Benefits: Disclosure of Cash Transfers to Individuals or Households. The ED proposes disclosure requirements for amounts to be paid to beneficiaries as part of social programs, as well as information about those programs. The ED also includes requirements for determining the amounts to be disclosed. While this is an initial step in developing accounting for social benefits, the IPSASB believes the requirements in the ED will provide useful information on social benefit programs for users of public sector financial reports.

The IPSASB is also seeking comments on a consultation paper, entitled Social Benefits: Issues in Recognition and Measurement. The consultation paper sets out the IPSASB’s strategy for developing approaches to address the issues involved in accounting for social benefits, including recognition and measurement. These issues include when liabilities for cash transfers and goods and services arise and, if so, whether these liabilities arise at an earlier point for contributory programs than for programs financed primarily through general taxation.

Comments on both the ED and the consultation paper are requested by July 15, 2008. Both documents may be viewed by going to www.ifac.org/EDs. Comments may be submitted by e-mail to EDComments@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director at +1 (416) 977-8585, or mailed to the IPSASB Technical Director at 277 Wellington Street West, 6th Floor, Toronto, Ontario M5V 3H2, Canada.

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