IPSAS 3 Flashcards
what is control
5.2.1 Control, in accordance with IPSAS 6, is defined as “the power to govern the financial and operating policies of another entity so as to benefit from its activities”.
5.2.2 Consolidated financial statements shall include all controlled entities of the controlling entity (foreign or domestic), except when there is evidence that
(a) Control is intended to be temporary because the controlled entity is acquired and held exclusively with a view to its disposal within 12 months of acquisition; and
(b) Management is actively seeking a buyer
Revenue from non exchange transactions
n entity will receive resources and provide no or nominal consideration directly in return.
Recognition and measurement of an asset, An asset is a resource when:
- 2.5 An asset is a resource when:
(a) It is controlled by the United Nations as a result of a past event;
(b) It can be reliably measured;
(c) There are future economic benefits or service potential that will flow to the United Nations; and
(d) Inflow to the United Nations is more likely than not to occur.
Where contributions are received before a binding agreement is in place
Where contributions are received before a binding agreement is in place, an advance receipt liability is recognized.
revenue is recognized
future economic benefits or service potential will flow to the UN; and (b) these benefits can be measured reliably
Expense is recognized
under the accrual basis, expenses are recognized when the transaction or event causing the expense occurs. The recognition of the expense is therefore not linked to when cash or its equivalent is received or paid. recognition of these expenses will occur once the goods and/or services are received.
If an event makes the reporting entity “worse off”, either by decreasing its assets or by increasing its liabilities, then an expense should be recognized.
Expenses such as the cost of goods or services, employee costs, transfers, travel costs and depreciation result in the consumption of assets such as cash, inventory and property, plant and equipment, or the increase in a liability such as an accrual or accounts payable
the increase in a liability such as an accrual or accounts payable.
If the criteria for the capitalization of an asset , are not met, an expense is recognized for the full amount once delivery has occurred.
The application of the delivery principle means that the receipt of an invoice or payment in cash is not the point at which expenses for goods or services will be recognized. The recognition of these expenses will occur once the goods and/or services are received.
Cost recoveries will be recorded as a reduction of expenses; however, if the cost recovery is for indirect costs, revenue may be recorded.
identifying whether a liability exists
Once goods or services have been received, the reporting entity has an obligation to pay for them.
1.2.1 A payable should be recognized:
(a) When goods or services are received or supplied and invoiced or formally agreed upon with the vendor; and
(b) In respect of payments received from other organizations, at the time of the signing of formal agreements for specified amounts.
In the United Nations, for goods, the date received will be based on the Incoterms and the shipping documents.
1.2.2 A provision should be recognized when:
(a) An entity has a present obligation (legal or constructive) as a result of a past event;
(b) It is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and
(c) A reliable estimate can be made of the amount of the obligation
For the purpose of the policy framework document, the IPSAS standards are categorized into six sections
(a) Presentation and consolidation;
(b) Revenue: exchange and non exchange transactions;
(c) Expenses and liabilities;
(d) Assets and valuation;
(e) Financing, financial instruments and foreign exchange;
(f) Disclosure.
Examples of changes in accounting policies include the following:
(a) Change from expense recognition at the time of commitment to the receipt of the good or service;
(b) Change from expensing of property plant and equipment to capitalization and depreciation; and
(c) Change from expensing inventory when purchased to capitalizing and expensing only when distribute
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the United Nations.
In terms of materiality, the largest impact of IPSAS 19 is
In terms of materiality, the largest impact of IPSAS 19 is the removal of “purchase orders” from the face of the financial statements, since they do not qualify as liabilities until delivery occurs
13.2.1 Property, plant and equipment are tangible items that:
(a) Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
(b) Are expected to be used during more than one reporting period.
