Request for Comments - Commissie BBV

fishglugSoftware and s/w Development

Dec 13, 2013 (3 years and 7 months ago)

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1

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5

Stephe
nie

Fox

Technical Director

International Public Sector Accounting Standards Board

International Federation of Accountants

277 Wellington Street, 4th Floor

Toronto
,
Ontario M5V 3H2

CANADA


By email to: edcomments@ifac.org



25 M
arch

2009




Dear
Step
h
e
nie

Fox
,


We

are pleased to be able

to
present
the
comment
s from
the
Dutch Local Go
v
ernment
Accounti
ng Standards Board (Commissie BB
V)
on
the

IPSASB Consultation Paper

r
e-
garding the

Conceptual Framework
.



Introduction


In the Netherlands most governments

and non
-
profit
-
entities
prepare and issue their
financial budgets as a public document.
The financial statements legally will
be
pr
e-
pared
in accordance with those
public financial
budgets.

So
in the Netherlands
the
I
P-
SASB Conceptual Fram
e
work

will also
ha
ve to
apply to these public financial budgets.


Most of the

information
for making resource allocation, political and social decisions

are disclosed in these financial budgets and most of these decisions are
primarily
made
by changing and/or approving the

financial budgets.

For
democratic
decision
-
making
regarding resource allocation considering

political and social
aspe
cts the financial
budget is just
as important as

the financial statements

or the GPFRs
.
In our opinion a
public financial budget is a typi
cal characteristic of the financial reporting by public
se
c
tor entities.


In the Netherlands t
he formal decision
-
making on the financial budget and the fina
n-
cial statements is
reserved to the elected representatives of
the citizens

or
constit
u-
ents
,

in
cludi
ng recipients of services,
providers of resources
and other special interest
groups
.

The information need
s

of

these elected representatives are

leading like the i
n-
formation that is decision
-
useful to the capital providers (IASB
-
framework).



Relationship

with the IASB Conceptual Framework project


We

welcome the work which the
IPSASB

is carrying out on developing a conceptual
framework. This
will
provide a more complete context for the conceptual work which
the Board has already progressed on issues such
as Non
-
Exchange Transactions and
Social Policy Obligations.
W
e
agree
with IPSASB
that the

public sector

Framework
should not simply interpret the IASB framework.

It is very important to broaden the
IPSASB’s research to cover matters characteristic for the
financial
budgeting

and

r
e-
porting
by public sector entities.

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Focus and scope of the public sector framework


We agree that
the primary focus of the IPSASB Conceptual Framework should be on
public sector entities which operate, at least in part, for the b
enefit of the public. Those
government bodies which operate purely for profit can use private sector focussed
conceptual frameworks with little or no adaptation
.


We also agree that it is very important to broaden the framework to cover matters
which go be
yond the current focus on financial statements.
The Board has already
made proposals on financial reporting on social benefits, and has proposed a project
on long
-
term fiscal sustainability reporting. While it remains to be seen whether sta
n
d-
ards or other
internationally applicable guidance can be developed in these areas,
these are important
issues
which should be properly explored.



Responses to the Request for Comment


Hereby we give our r
esponses to the
request for

c
omment

on the IPSASB Preliminary
Vi
ews:


IPSASB Preliminary View 1
-

The Authority of the IPSASB Framework

The IPSASB Framework will not establish new authoritative requirements for financial
reporting by public sector entities that adopt IPSASs, nor will it override the R
e-
quirements of e
xisting IPSASs.


In selecting accounting policies to deal with circumstances not dealt with in IPSASs
or other guidance issued by the IPSASB, public sector entities will refer to, and
consider the applicability of, the definitions, recognition criteria, m
easurement
princ
i
ples, and other concepts identified in the IPSASB Framework.

We agree. The IPSASB Framework
will be
the starting point

for developing

all new

standards, and for the interpretation of standards

in circumstance not dealt with in
IPSASs
. How
ever, it should not override the requirements of standards

which have
already been issued
. This is particularly clear for standards developed after the
framework has been established, but should also apply

to those developed befor
e-
hand.
The appropriate way

to change financial reporting standards
is by following
due process.


IPSASB Preliminary View

2
-

General Purpose Financial Reports (GPFRs)

GPFRs are financial reports intended to meet the common information needs of a p
o-
tentially wide range of users wh
o are unable to demand the preparation of financial
reports tailored to meet their specific information needs.

We agree with this proposal,
but we note

that considering cost and
materiality o
f

f
i-
nancial reporting
(
Preliminary View 7
) will limit t
he inform
ation reported in GPFR
s.









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IPSASB Preliminary View

3
-

The Users of GPFRs

As a mechanism for focusing on their common information needs, the potential users
of GPFRs of public sector entities are identified as:

• recipients of services or the
ir⁲epresent慴i癥s;

• providers of resources or their representatives; and

• other parties, including special interest groups and their representatives.


周e legisl慴ure i猠愠浡jor user o映d偆m献 ft a捴猠in the intere獴so映me浢er猠o映the
捯浭unit礬 睨eth
er 慳 re捩pient猠o映獥r癩捥猬 pro癩der猠o映re獯ur捥猬 or 捩tizen猠with
慮⁩ntere獴⁩nⰠor ed⁦orI⁰慲ti捵c慲⁳er癩捥sr⁡ ti癩tie献

坥 慧ree th慴 the獥 慲e help晵l
慮d 慰propri慴e
groupings
I

but the reported in景

浡tion
pri浡ril礠
睩ll ha癥 to be 慰pro
pri慴e under獴慮d慢le

to the 慤vi獯r猠o映the獥
group猠(par⸠4⸲〠慮d 4⸲ㄩ⸠
卯pt
he in景r浡tion need猠o映the獥 (ele捴cd) represent

ti癥猠of⁴ e⁧roups⁷楬l⁢ e慤ing.


f
t i猠慬獯 i浰ort慮t to con獩der the role o映the legi獬慴ure
Ⱐin捬uding the ele捴cd 捯u

捩c
(猩
I

慣瑩ng in the inter
e獴s o映慬l

u獥r献

f
n represent慴i癥 de浯捲a捩e猠there 慲e
浡n礠睨o 捯n獩der th慴 the pri浡r礠u獥r group i猠the ele捴cr慴e

and the ele捴cd
repre獥nt慴i癥s
Ⱐ慮d th慴 the ele捴c癥 pro捥獳 should in gener慬 per獵sde the legisl

ture
(
coun捩l) to

慣琠in their intere獴⸠坥 recognize th慴 the f偓m卂 fr慭ing 浡礠be
help晵l in⁣o癥ringther⁦or浳f⁧ 癥r
n
浥湴.


IPSASB Preliminary View

4

-

The Objectives of Financial Reporting

The objectives of financial reporting by public sector entit
ies are to provide info
r-
m
a
tion about the reporting entity useful to users of GPFRs for:



accountability purposes; and



for making resource allocation, political and social decisions.

We strongly agree with the inclusion of
accountability and decision usefu
lness obje
c-
tives.
But

it is important to recognize the limitations of financial reporting, and we
agree that financial reporting cannot be expected to provide all the information which
users might require for accountability purposes.


In particular, w
hile

we consider that economic,
efficient
and
effective

use of r
e-
sources is a key concern of public sector managers and accountants, it is less clear
that this lends itself to a s
tandardised reporting treatment.

We

note that
in the Net
h-
erlands
many jurisdictio
ns approach these issues through assessment
,

oversight
bo
d
ies
and audit courts
rather than
by
standardized

reporting.


IPSASB Preliminary View

5
-

The Scope of Financial Reporting

The scope of financial reporting encompasses the provision of financial a
nd non
-
financial information about:



economic resources of the reporting entity at the reporting date and claims to
those resources;



the effect of transactions, other events, and activities that change the economic
resources of the reporting entity and cla
ims to those resources during the repor
t-
ing period, including cash inflows and outflows and financial performance;



the reporting entity’s compliance with relevant legislation or regulation and l
e


l礠慤opted or 慰proved budget猠used to ju獴s晹 the r慩獩n
g o映浯mies 晲o洠ta

p慹ar猠慮d r慴epa祥r猻s



the reporting entity’s achievement of its service delivery objectives; and



prospective financial and other information about the reporting entity’s future
獥r癩捥 deli癥r礠慣瑩癩tie猠慮d obje捴c癥sⰠ慮d the reso
ur捥猠nece獳慲y to 獵sport
tho獥⁡ ti癩tie献

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It also encompasses explanatory material about: (a) the major factors underlying
the financial performance of the entity, the achievement of its service delivery and
other objectives and the factors which are l
ikely to influence its performance in the
future; and (b) the assumptions underlying and major uncertainties affecting the i
n-
formation included in GPFRs.

We agree with the proposed scope. Many of these matters are already part of the
public sector
financi
al reporting landscape.


We
also
agree that information presented in financial statements and their notes
should remain at the c
ore of financial reporting
. In our opinion

this includes the pu
b-
lic financial budgets and

we ask
for
more attention in consider
ing matters relating
t
hose

government budgets. In the Netherlands the governmental decision
-
making
mostly concerns the all
o
cation of budgets.


There
are
also

implications for the types of audit and assurance regimes that can be
applied to
non
-
financial rep
orting.


IPSASB Preliminary View

6
-

Evolution of the Scope of Financial Reporting

The scope of financial reporting should evolve in response to users’ information
needsⰠcon獩獴snt⁷ th⁴ ebje捴c癥猠of⁦in慮捩al⁲eporting⸠

坥 慧ree th慴 the 獣ope o
映晩n慮捩al reporting 獨潵ld e癯l癥 in respon獥 to

in景

m
a
tion

need
猠o映the⁳歩kled⁡摶 獯r猠or⁲epresent
a
ti癥猠o映the⁵ er
groups
.


IPSASB Preliminary View

7
-

The Qualitative Characteristics of Information
Included in GPFRs

The qualitative characteris
tics of information included in GPFRs of public sector ent
i-
ties are:



relevance, which encompasses confirmatory value, predictive value, or both;



faithful representation, which is attained when depiction of economic or other
phenomena is complete, neutral
, and free from material error;



understandability;



timeliness;



comparability; and



verifiability (including supportability).


Constraints on financial reporting are materiality, cost, and the balance between the
qualitative characteristics.

We agree
with the proposed qualitative characteristics and constraints on financial
reporting.



But we note that because of the freedom of

(local)

political decision
-
making altern
a-
tive accounting methods for the same
phenomenon should be permi
t
ted and are
more imp
ortant than comparability
between
(local)
governments
(par. 4.27).



IPSASB Preliminary View

8


Characteristics of a Reporting Entity

The key characteristic of a reporting entity is the existence of users who are depen
d-
ant on GPFRs of the entity for i
nformation for accountability purposes, and for ma
k-
ing resource allocation, political, and social decisions.


A public sector reporting entity may be an entity with a separate legal identity or
other
organizational

structure or arrangement.


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We agree wi
th the above analysis. It provides sufficient flexibility to accommodate
the many approaches which governments may use to organize their activities, which
also often reflects a view that they often define functional or organizational bound
a-
ries specificall
y to support accountability to government and other stakeholders, and
to inform funding and other decisions.



But considering the costs of separated information will limit the non
-
legal reporting
to some user groups.


IPSASB Preliminary View

9


The Com
position of a Group Reporting Entity

A group reporting entity will comprise the government (or other public sector entity)
and other entities when the government (or other public sector entity):



has the power to govern the strategic financing and operat
ing policies of the ot
h-
er entities (a “power criterion”); and



can benefit from the activities of the other entities, or is exposed to a financial
burden that can arise as a result of the operations or actions of those entities;
and can use its power to in
crease, maintain, or protect the amount of those
ben
e
fits, or maintain, reduce, or otherwise influence the financial burden that
may arise as a result of the operations or actions of those entities (a “benefit or
financial burden/loss” criterion).

坥 慧r
ee th慴 thi猠i猠愠獥n獩ble 慰proa捨con the ba獩猠of 睨i捨cto develop guid慮捥
景r group entitie猬 慬though in pr慣瑩捥 睥 睯uld note th慴 獯浥mjuri獤s捴con猠睩ll r

quire 晩nan捩al report猠to be produced for group entitie猠on 愠b慳a猠浯me a歩n to th慴
獥t o
ut⁩n

偲elimin慲礠噩e眠㠬⁴ 獵sport⁡ 捯
unt慢ilit礠慮d⁤ 捩獩on慫 ng.


䍯n獩dering the 獰s捩晩挠浡tter o映睨ole o映government entitie猬 睥 ac捥pt th慴 the
捯ntrol b慳ad 慰proa捨 i猠浯me 慰pli捡扬eⰠalthough 慧ainⰠin pr慣瑩ce so浥m晬e硩bi

it礠浡礠be req
uired in pr慣瑩捥.

fn the 乥therl慮d猠the leg慬 捯ntrol o映the 獴慴e 慮d
the lo捡c go癥rn浥湴 i猠laid do睮 in the
捯n獴stution 慮d thi猠睩ll al獯 influen捥 the
捯ntrol⁢慳 d⁡灰roa捨c


䉥捡cse o映required

burope慮
e捯no浩挠獴慴isti捡l
in景r浡tion (e浵) the

晩n慮cial
(budget) in景r浡tion o映獯浥m䑵t捨cgovernment慬 entitie猠i猠慣au浵l慴ed⸠
eo睥癥r
I

t
hi猠
legall礠required
獴sti獴i捡l u獥 o映晩n慮cial in景r浡tion 睩ll not be
捯n獩dered 慳

indi捡cion映愠杲oup⁲eporting⁥ntit礮



坥⁨ope⁴ i猠捯浭ent⁩猠愠a
elp晵f⁣ontribution to⁴ e⁤evelop浥湴映the
f偓m卂
䍯nceptu慬⁆ 慭e睯rk.


卩n捥rely

Dutch Local Government Accounti
ng Standards Board (Commissie BB
V
)



Willem G.J. Wijntjes

Chairman