IPSAS: A Moving Goalpost with Implementation Challenges

IPSAS: A Moving Goalpost with Implementation Challenges

There have been important updates to the International Public Sector Accounting Standards (IPSAS) since 2025. As IPSAS Standards continue to evolve to reflect modern financial realities, they often come with technical complexities around measurement and adoption. 

The changes below are applicable from 2025 and 2026. As you will see, these changes relate to major areas such as leases, property, plant and equipment, measurement, revenue and transfer expenses, which have an impact on most government and other public sector entities. 

New IPSAS Accounting Standards effective for periods beginning on or after 1 January 2025

Standards effective for periods beginning on or after 1 January 2025

·      IPSAS 43 Leases (replaced IPSAS 13)

·      IPSAS 44 Non-current Assets Held for Sale and Discontinued Operations (New Standard)

·      IPSAS 45 Property, Plant and Equipment (replaced IPSAS 17)

·      IPSAS 46 Measurement (New Standard)

Standards effective for periods beginning on or after 1 January 2026

·      IPSAS 47 Revenue (replaces IPSAS 9, 11 and 23)

·      IPSAS 48 Transfer Expenses (New Standard)

·      IPSAS 49 Retirement Benefit Plans (New Standard)

The IPSAS Board has also published IPSAS 50 Exploration for and Evaluation of Mineral Resources (effective 1 January 2027) and IPSAS 51 Tangible Natural Resources Held for Conservation (effective 1 January 2028). There are also amendments to existing accounting standards, including IPSAS 33 First-time Adoption of Accruals Basis IPSAS (effective 1 January 2028) and guidance on materiality. 

In addition to the accounting standards, IPSASB SRS 1 Climate-related Disclosures - the first ever sustainability reporting standard for the public sector, has been published. This standard is effective from 1 January 2028.

Key considerations in application of the new IPSAS Standards

The application of new IPSAS Standards comes not just with technical accounting and disclosure challenges, but also requires changes to systems, processes and controls. The key considerations for the project team include the following:

·      Requirements of new standards and changes from previous requirements for replacement standards

·      Gap analysis including new/changes to accounting policies, and impact on financial statement line items

·      Changes to systems, processes (e.g., update chart of accounts, systems to capture new data) and controls

·      New financial statements disclosures

·      Parallel run and post-implementation review

The staff in finance and audit must clearly understand the recognition and measurement principles in the new standards. The areas involving use of significant judgements and estimates must be clearly identified, documented and explained to avoid audit issues at a later stage. 

For example, areas of significant judgements in IPSAS 43 Leases may include:

·      Identifying a lease (e.g., determining whether there is a right to control an identified asset), including embedded leases

·      Separation of non-lease components

·      Determination of discount rate

·      Lease term (this is dependent on whether the extension, termination option is likely to be exercised or not)

·      Determining whether there is a lease modification

·      Impairment of right-of-use asset   

Another example is the measurement of assets as per IPSAS 46 Measurement. This often requires use of judgement and estimation when applying either the current operational value or fair value model.

Public Sector Sustainability Reporting

The adoption of IPSASB SRS 1 requires new sustainability reporting system to capture and process the non-financial data and provide output that complies with the disclosure requirements of the standard. The finance and non-finance professionals (e.g., engineers, climate/energy, IT experts) need to work together to ensure a smooth implementation. Since SRS 1 is based on the IFRS Sustainability Disclosure Standards (IFRS S1 and S2), we could take some of the learnings from implementation of those standards to public sector sustainability reporting.

Conclusion  

With the number of changes applicable from 2025 and after, IPSAS Standards are clearly a moving goalpost. Government and other public sector entities who follow IPSAS or plan to adopt IPSAS in the future, need to get buy in from senior management as resources need to be allocated to the project for smooth implementation. A key learning from experience is not to underestimate the work involved.