INTERNATIONAL FEDERATION OF ACCOUNTANTS Agenda …

1 IFAC IPSASB Meeting Agenda Paper March 2008 Toronto, Canada Page 1 of 5 INTERNATIONAL FEDERATION OF ACCOUNTANTS 545 Fifth Avenue, 14th Floor Tel: (212) 286-9344 New York, New York 10017 Fax: (212) 286-9570 Internet: Agenda Item2 DATE: February 23, 2008 MEMO TO: Members of the IPSASB FROM: Paul Sutcliffe SUBJECT: Public Sector Conceptual Framework OBJECTIVE OF THIS SESSION To review the first draft of the Consultation Paper dealing with the Scope of General Purpose Financial Reporting, the Objectives of General Purpose Financial Reporting, Qualitative Characteristics of Information included in General Purpose Financial Reports and The Reporting Entity. Agenda MATERIAL Agenda Papers Conceptual Framework subcommittee meeting notes - fourth subcommittee meeting in Beijing in November 2007; Overview of changes to papers considered in Beijing in November 2007; Draft Consultation Paper Chapters 1 - 5; Bibliography and other material for inclusion on the IPSASB web page; Report on Group 2 papers; The Conceptual Framework Project Brief; and Project History Sheet.

2 ACTION REQUIRED Review and provide directions to staff for further development of the Consultation Paper; Note the Bibliography and reference material prepared as a separate web document, and confirm and update jurisdictional coverage therein; Note the report of the fourth meeting of the Conceptual Framework subcommittee; and Note progress on development of Group 2 papers. BACKGROUND In mid 2006, the IPSASB agreed to lead a collaborative project with national standards setters and similar bodies (NSS) to establish a public sector conceptual framework. The IPSASB Conceptual Framework Project Brief was issued in December 2006 and the subcommittee and PS February 2008 IFAC IPSASB Meeting Agenda Paper March 2008 Toronto, Canada Page 2 of 5 monitoring group membership, and responsibility for preparation of Group 1 issue papers, was confirmed by end January 2006.

3 During 2007, the IPSASB reviewed issues papers prepared by authors from NSS in the UK and Australia and IPSASB staff on: The Objectives of General Purpose Financial Reporting ; The Scope of Financial Reporting ; The Qualitative Characteristics of Information Included in General Purpose Financial Reports ; and The Reporting Entity . The papers had been prepared with input from other NSS members participating in the framework project, the IPSASB subcommittee and IPSASB staff. At its November 2007 meeting, the IPSASB directed staff to update the four papers and prepare a composite Consultation Paper (CP) for review at this meeting. The Conceptual Framework Subcommittee - meetings and activities Subcommittee meeting in Beijing (November 2007) The subcommittee held its fourth meeting in Beijing on November 26, 2007 - immediately prior to the IPSASB meeting.

4 At that meeting the subcommittee reviewed the four Group 1 papers and provided input on each paper. A verbal report on that meeting, including the recommendations of the subcommittee, was considered by the IPSASB at its meeting in Beijing on 27 November 2007. The meeting notes from the subcommittee meeting are included at Agenda item A subcommittee meeting will not be held prior to the forthcoming (March 2008) IPSASB meeting. However, the draft CP included in the Agenda materials for this IPSASB meeting is also being provided to subcommittee members. Comments received from subcommittee members will be made available to IPSASB members at the meeting. GROUP 1 CONSULTATION PAPER (CP) It is proposed that following this meeting, and subject to the directions of the Board, staff will revise the CP for review and approval at the next IPSASB meeting in July 2008.

5 It is intended that an executive summary, contents page, listing of the specific issues for comment and other introductory material will be included in the document when published. This material will be prepared when the contents and substance of each chapter has been agreed by the IPSASB. The first draft of the CP is included at Agenda item It has been developed to reflect the decisions of the IPSASB at its November 2007 meeting, but is still subject to further development to apply a consistent style to all chapters. An extract of the draft minutes from the IPSASB meeting in Beijing in November, 2007 identifying directions of the IPSASB and actions taken is included at Agenda item The decisions made by the IPSASB at the November 2007 meeting that have had the most significant effect on the style and content of individual chapters and the structure of the CP are: PS February 2008 IFAC IPSASB Meeting Agenda Paper March 2008 Toronto, Canada Page 3 of 5 an introductory chapter was to be prepared to explain the role of the IPSASB Framework and the process being adopted for its development.

6 It was also to explain that differential reporting was a matter for consideration in application of the Framework once approved, consequently differential reporting issues were not to be raised in each chapter; the chapter on scope of financial reporting was to precede the chapter on objectives of financial reporting; the objectives chapter was to be restructured to commence with a consideration of users and user needs; the detailed appendices in each chapter were to be deleted, merged or reconstituted as a web document that members would then update; and the identification of individual standards-setters and quotations from their document was to be removed from the text as far as possible, but their views may be retained in a generalized form.

7 Staff has attempted to retain the content, flavor and style of the issues papers reviewed at the November 2007 meeting, subject to specific directions of the Board for revision. However, this has not always been possible. This is perhaps most noticeable in Chapter 3 where the restructuring of the chapter to initially focus on users and their information needs has resulted in significant change. Issues In addition to other matters that arise during review of the CP, a number of specific issues that members are requested to consider are identified below. Preliminary Views Objectives of Financial Reporting In mid 2007 the IPSASB directed that the papers under development were not to include IPSASB or staff preliminary views, rather they were to identify possible approaches and related issues, and seek input from constituents on those approaches and issues.

8 However, the IPSASB also agreed that it would revisit this decision as it finalized the papers to determine whether it should identify its preliminary view on any matter. While this approach works well in most cases, the lack of a preliminary view on the objectives of financial reporting makes drafting of sections of the scope and reporting entity chapters awkward - because both the scope of financial reporting and the characteristics of a reporting entity will be responsive to the objectives of financial reporting. Agreement on the IPSASB s preliminary view on the objectives of financial reporting could sharpen the focus of discussion in these chapters (and is likely to assist in the development of papers for the next phase of the framework project).

9 In addition, and more importantly, it is likely that readers response to a number of the specific matters for comment in the CP will be influenced by, or conditional on, the objectives the IPSASB is likely to establish for financial reporting. Staff therefore encourages the IPSASB to explore the potential for including in the CP, the IPASB s preliminary view on the objectives of financial reporting. Staff is of the view that Chapter 2 builds a strong case for identifying the objectives of financial reporting as being for PS February 2008 IFAC IPSASB Meeting Agenda Paper March 2008 Toronto, Canada Page 4 of 5 accountability and decision making purposes such an objective responds to users information needs as considered in the CP and reflects the position of many national standards-setters and commentators.

10 Contents of Chapter 1 Chapter 1 outlines the purpose of the Framework and its authority and explains such matters as: the relationship of this project to the Framework of the IASB; the nature of general purpose financial reports (GPFRs); and the due process being adopted by the IPSASB for development of this project. It also refers to the survey of Frameworks in place or under development in IPSASB member jurisdictions. That survey is included in Attachment 1 to the Conceptual Framework Project Brief (included as Agenda Item ). Members are requested to advise of any additional matters to be dealt with in Chapter 1 and to review Attachment 1 to the Project Brief and provide staff with updates as necessary. Sequence of Chapters dealing with the Scope and the Objectives of Financial Reporting At its November 2007 meeting, the papers reviewed by the IPSASB had been structured such that the paper dealing with the objectives of financial reporting preceded the paper dealing with the scope of financial reporting.