1. INTERNATIONAL PUBLIC SECTORACCOUNTING STANDARDSPart III Key SummariesIPSASBy: Sako Mayrickwww.elsamconsult.comSako Mayrick 1

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IPSAS 18Segment Reporting Scope Explain principles for reporting Financial information by segments to betterunderstand the entitys past performance and to identify the resources allocatedto support the major activities of the entity and enhance transparency of financialreporting Applicable mostly to Listed Companies, Companies in the process of listing theirequity or debt securities, Banks including Co-operative banks, FinancialInstitutions, Insurance companies If both the consolidated FS of a government or other economic entity andthe separate financial statements of the controlling entity are presentedtogether, the segment information need to be presented only on basis of theconsolidated financial statements IPSAS 18 requires entities to report on a basis appropriate for assessingthe entitys past performance in achieving its objectives and for makingdecisions about the future allocation of resources Gvt departments and agencies are usually managed and report internallyalong service lines because this reflects the way in which major output areidentified, their achievements monitored and their resources need identifiedSako Mayrick 3. IPSAS 18Segment Reporting Segments will usually be based on the major goodsand services the entity provides, the programs itoperates and activities it undertakes Assets that are jointly used by two or more segmentsmust be allocated to segment if, and only if, theirrelated revenues and expenses are also allocated tothose segments. If segment is identified as a segment for the first time ,prior period segment data that is presented forcomparative purposes shall be restated to reflect the newlyreported segment as a separate segment.Sako Mayrick 4. IPSAS 18Segment ReportingComprehensive worked example- see appendix 2Sako Mayrick 5. IPSAS 19PROVISIONS, CONTIGENT LIABILITIES ANDCONTIGENT ASSETS Scope Explain appropriate recognition criteria and measurementbases for provisions, contingent liabilities and contingentassets and to ensure that sufficient information isdisclosed in notes to the FS Recognition is only when A past event has created a present legal or constructiveobligation An outflow of resources embodying economic benefits orservices potential required to settle the obligation isprobable The amount of the obligation can be estimated reliablySako Mayrick 6. IPSAS 19PROVISIONS, CONTIGENT LIABILITIES ANDCONTIGENT ASSETS Provision is the best estimate of settlement amount of expenditure required to settle theobligation at reporting date It requires review of provisions at each reporting date to adjust for changes to reflectthe current best estimate The provision shall be reversed if it is no longer probable that the outflow of resourcesembodying economic benefits or service potential is required to settle the obligation Examples include; onerous contracts, restructuring provisions, warranties, refunds andsite restoration Contingent liability arises when: There is a possible obligation to be confirmed by a future event that is outside the control of theentity A present obligation may, but probably will not, require an outflow of resources embodyingeconomic benefit or service potential A sufficiently reliable estimate of the amount of a present obligation cannot be made Contingent liabilities require disclosure only ( not recognition) if the possibility of outflowis remote then no disclosure. Contingent assets arises when the inflow of economic benefits or service potential isprobable, but not virtually certain, and occurrence depends on an event outside thecontrol of the entity. Contingent assets requires disclosure only (not recognition). If the realization of revenueis virtually certain, the related asset is not contingent asset and recognition of assetsand related revenue is appropriateSako Mayrick 7. IPSAS 20RELATED PARTY DISCLOSURE Scope To ensure that the FS disclose the existence of related party relationships and transactions between the entityand its related parties. It is required for accountability purposes Related parties are parties that control or have significant influence over the reporting entity(including controlling entities, owners and their families, major investors, and key managementpersonnel) and parties that are controlled or significantly influenced by the reporting entity (includingcontrolled entities, joint ventures, associates, and postemployment benefit plans). If the reportingentity and another entity are subject to common control, these entities are also considered relatedparties IPSAS require disclosure of Relationship involving control, even when there have been no transaction between; Related party transactions; and Management compensation (include analysis by type of compensation) For related party transactions; the disclosure of nature of relationship, types of transactions that haveoccurred and elements of transactions to clarify the significance of the transactions to its operations Examples of related party transactions that may require disclosure by reporting entity Purchase or transfers /sales of goods (finished and unfinished); Purchases or transfers/sales of property andother assets Rendering or receiving of services; Agency arrangements; Leases; Transfers of research and development Transfers under license agreement; Provision of guarantees and collateralSako Mayrick 8. IPSAS 21IMPAIRMENT OF NON CASH GENERATING ASSETS Scope To ensure that non-cash generating assets arecarried at no more than their recoverable serviceamount Applies to all NCGA except assets arising fromconstruction contracts, inventories and financialassets, investment properties, Non cashgenerating property, Plant and equipment andthose covered by other IPSASSako Mayrick 9. IPSAS 21IMPAIRMENT OF NON CASH GENERATING ASSETS Public sector entities that hold cash generating assets shall apply IPSAS 26for such assets Impairment loss of a NCGA is the amount by which the carrying amount ofan assets exceeds its recoverable service amount If an impaired asset is recognized the depreciation or amortization chargeof the asset shall be adjusted in future periods to allocate the assetscarrying amount less residual (value if any) in a systematic basis Recoverable service amount is the higher of non-cash generating assetsfair value less costs to sell and its value in use Value in use of NCGA is the PV of the assets remaining potential use. The PV of remaining service potential is determined using three mainapproaches ( down here) The entity must test for indication of assets impairment at each reportingperiod. If impairment is indicated, the entity shall estimate recoverableservice amount. Reversal of prior years impairment losses allowed incertain instancesSako Mayrick 10. IPSAS 22DISCLOSURE OF INFORMATION ABOUT THE GENERALGOVERNMENT SECTOR It prescribe the disclosure requirements for government which elect topresent information about GGS in their consolidated FS The disclosure of information about general government sector of thegovernment can provide a better understanding of the relationshipbetween the market and non market activities of the government andbetween FS and statistical bases of financial reporting The financial information about the GGS shall be disclosed in conformitywith the accounting policies adopted for preparing and presentingconsolidated financial statements of the government. Exceptions GGS shall not apply the requirements of IPSA 6, consolidated and separate FS inrespect of entities in the public financial corporations and public non financialcorporations sectors. The GGS shall recognize its investment in the public financial corporations and public nonfinancial corporation sectors as an asset a and shall account for that asset at carryingamount of the net asset of its investeesSako Mayrick 11. IPSAS 22DISCLOSURE OF INFORMATION ABOUT THE GENERALGOVERNMENT SECTOR The required disclosures of the general governmentsector includes Assets by major class, showing separately the investmentin other sectors; liabilities by major class; net asset/equity;total revaluation increments and decrements and otheritems of revenue or expense recognized in net asset orequity, revenue by major class, expenses by major class,surplus or deficit, cash flows from operating activities bymajor class, cash flows from investing activities and cashflows from financing activitiesSako Mayrick 12. IPSAS 22DISCLOSURE OF INFORMATION ABOUT THE GENERALGOVERNMENT SECTOR The manner of presentation of GGS shall be no moreprominent than the governments FS prepared inaccordance with IPSAS Disclosure of significant controlled entities that areincluded in the general government sector and anychanges in those entities from prior period must bemade, together with explanations of the reasons whysuch entity that was included is no longer includes The general government sector disclosures shall bereconciled to the consolidated FS of the governmentshowing separately the amount of adjustment requiredto each equivalent item in those FSSako Mayrick 13. IPSAS 23REVENUE FROM NON EXCHANGE TRANSACTIONS(TAXES AND TRANSFERS) Exchange transactions are transaction in which one entity receivesassets or services, or has liabilities extinguished, and directly givesapproximately equal value ( primary in the form of cash, goodsservices or use of assets) to another entity in exchange. NET are transactions that are not exchange transaction. An entityeither receives value from another entity without directly givingapproximately equal value in exchange, or gives value to anotherentity without directly receiving approximately equal value inexchange Transfers are inflows of future economic benefits or servicepotential from non-exchange transactions, other than taxes. Stipulations on transferred assets are terms in laws or regulation, ora binding arrangement, imposed upon the use of a transferredasset by entities external to the reporting entitySako Mayrick 14. IPSAS 23REVENUE FROM NON EXCHANGE TRANSACTIONS(TAXES AND TRANSFERS) Conditions on transferred assets are stipulations that specify that the futureeconomic benefits or service potential embodied in the asset is required to beconsumed by the recipient as specified or future economic benefits or servicepotential must be returned to the transferor. Restrictions on transferred assets are stipulations that limit or direct the purposesfor which a transferred asset may be used, but do not specify that futureeconomic benefits or service potential is required to be returned to the transferorif not deployed as specified An inflow of resources from a non-exchange transaction, other than services in-kind, that meets the definition of an asset shall be recognized as an asset when,and only when the following recognition criteria are met: It is probable that the future economic benefits or service potentialassociated with the asset will flow to the entity; and The fair value of the asset can be measured reliably.Sako Mayrick 15. IPSAS 23REVENUE FROM NON EXCHANGE TRANSACTIONS(TAXES AND TRANSFERS) Conditions on a transferred asset give rise to a present obligationon initial recognition that will be recognized when the recognitioncriteria of a liability are met. The amount recognized as a liability shall be the best estimate ofthe amount required to settle the present obligation at thereporting date. An entity shall recognize an asset in respect of taxes when thetaxable event occurs and the asset recognition criteria are met. Taxation revenue shall be determined at a gross amount. It shall notbe reduced for expenses paid through the tax system (e.g. amountsthat are available to beneficiaries regardless of whether or not theypay taxes). Taxation revenue shall not be grossed up for the amount of taxexpenditures (e.g. preferential provisions of the tax law that providecertain taxpayers with concessions that are not available to others).Sako Mayrick 16. IPSAS 23REVENUE FROM NON EXCHANGE TRANSACTIONS(TAXES AND TRANSFERS) An entity recognizes an asset in respect of transfers when the transferredresources meet the definition of an asset and satisfy the criteria forrecognition as an asset. However, an entity may, but is not required to,recognize services in-kind as revenue and as an asset. An entity shall disclose either on the face of, or in the notes to, the generalpurpose financial statements: The amount of revenue from non-exchange transactions recognized duringthe period by major classes showing separately taxes and transfers. The amount of receivables recognized in respect of non-exchange revenue. The amount of liabilities recognized in respect of transferred assets subject toconditions. The amount of assets recognized that are subject to restrictions and thenature of those restrictions. The existence and amounts of any advance receipts in respect of non-exchange transactions. The amount of any liabilities forgiven.Sako Mayrick 17. IPSAS 23REVENUE FROM NON EXCHANGE TRANSACTIONS(TAXES AND TRANSFERS) An entity shall disclose in the notes to the general purpose financialstatements: The accounting policies adopted for the recognition of revenuefrom non-exchange transactions. For major classes of revenue from non-exchange transactions,the basis on which the fair value of inflowing resources wasmeasured. For major classes of taxation revenue which the entity cannotmeasure reliably during the period in which the taxable eventoccurs, information about the nature of the tax. The nature and type of major classes of bequests, gifts,donations showing separately major classes of goods in-kindreceived.Sako Mayrick 18. IPSAS 24PRESENTATION OF BUDGET INFORMATION IN FS The information is important for accountability purposes to demonstratecompliance with the approved budget for which they are held publicly accountable IPSAS 24 applies to public sector entities, other than Government BusinessEnterprises, that are required or elect to make publicly available their approvedbudget. Original budget is the initial approved budget for the budget period. Approvedbudget means the expenditure authority derived from laws, appropriation bills,government ordinances, and other decisions related to the anticipated revenue orreceipts for the budgetary period. Final budget is the original budget adjusted for all reserves, carry over amounts,transfers, allocations, supplemental appropriations, and other authorizedlegislative, or similar authority, changes applicable to the budget period. An entity shall present a comparison of budget and actual amounts as additionalbudget columns in the primary financial statements only where the financialstatements and the budget are prepared on a comparable basis.Sako Mayrick 19. IPSAS 24PRESENTATION OF BUDGET INFORMATION IN FS An entity shall present a comparison of the budget amounts either as aseparate additional financial statement or as additional budget columns inthe financial statements currently presented in accordance with IPSAS.The comparison of budget and actual amounts shall present separately foreach level of legislative oversight: The original and final budget amounts; The actual amounts on a comparable basis; and By way of note disclosure, an explanation of material differences between the budgetand actual amounts, unless such explanation is included in other public documentsissued in conjunction with the financial statements and a cross reference to thosedocuments is made in the notes. An entity shall present an explanation of whether changes between theoriginal and final budget are a consequence of reallocations within thebudget, or of other factors: By way of note disclosure in the financial statements; or In a report issued before, at the same time as, or in conjunction with the financialstatements, and shall include a cross reference to the report in the notes to the financialstatements. Sako Mayrick 20. IPSAS 24PRESENTATION OF BUDGET INFORMATION IN FS All comparisons of budget and actual amounts shall be presented on acomparable basis to the budget. An entity shall explain in notes to the financial statements the budgetary basisand classification basis adopted in the approved budget, the period of theapproved budget, and the entities included in the approved budget. An entity shall identify in notes to the financial statements the entitiesincluded in the approved budget The actual amounts presented on a comparable basis to the budget shall,where the financial statements and the budget are not prepared on acomparable basis, be reconciled to the following actual amounts presented inthe financial statements, identifying separately any basis, timing and entitydifferences: If the accrual basis is adopted for the budget, total revenues, total expenses and net cashflows from operating activities, investing activities and financing activities; or If a basis other than the accrual basis is adopted for the budget, net cash flows from operatingactivities, investing activities and financing activities.The reconciliation shall be disclosed on the face of the statement of comparison of budget andactual amounts or in the notes to the financial statements.Sako Mayrick 21. IPSAS 24PRESENTATION OF BUDGET INFORMATION IN FSSee a detailed worked example appendix IISako Mayrick 22. IPSAS 25EMPLOYEES BENEFITS It prescribes the accounting and disclosure for employee benefits,including short-term benefits (wages, annual leave, sick leave,bonuses, profit-sharing and non-monetary benefits); pensions;post-employment life insurance and medical benefits; terminationbenefits and other long- term employee benefits (long-service leave, disability, deferredcompensation, and bonuses and long-term profit-sharing), exceptfor share based transactions and employee retirement benefit plans The standard requires an entity to recognize: A liability when an employee has provided service in exchange foremployee benefits to be paid in the future; and An expense when the entity consumes the economic benefits orservice potential arising from service provided by an employee inexchange for employee benefits. Underlying principle: the cost of providing employee benefits shallbe recognized in the period in which the benefit is earned by theemployee, rather than when it is paid or payable.Sako Mayrick 23. IPSAS 25EMPLOYEES BENEFITS Current service cost is the increase in the present value of the definedbenefit obligation resulting from employee service in the current period. Defined benefit plans are post-employment benefit plans other thandefined contribution plans. Defined contribution plans are post-employment benefit plans underwhich an entity pays fixed contributions into a separate entity (a fund) andwill have no legal or constructive obligation to pay further contributions ifthe fund does not hold sufficient assets to pay all employee benefitsrelating to employee service in the current and prior periods. Short-term employee benefits (payable within 12 months) shall berecognized as an expense in the period in which the employee renders theservice. An entity shall measure the expected cost of accumulating compensatedabsences as the additional amount that the entity expects to pay as aresult of the unused entitlement that has accumulated at the reportingdate. Bonus payments and profit-sharing payments are to be recognized onlywhen the entity has a legal or constructive obligation to pay them and theobligation can be reliably estimated.Sako Mayrick 24. IPSAS 25EMPLOYEES BENEFITS Post-employment benefit plans (such as pensions and post-employmentmedical care) are categorized as either defined contribution plans ordefined benefit plans. Under defined contribution plans, expenses are recognized in the periodthe contribution is payable. Accrued expenses, after deducting anycontribution already paid, are recognized as a liability Under defined benefit plans, a liability is recognized in the statement offinancial position equal to the net total of: the present value of the defined benefit obligation (the present value ofexpected future payments required to settle the obligation resulting fromemployee service in the current and prior periods); plus any deferred actuarial gains minus any deferred actuarial losses minusany deferred past service costs; and minus the fair value of any plan assets at the reporting date. Actuarial gains and losses may be (a) recognized immediately in surplus ordeficit, (b) deferred up to recognized immediately directly in netassets/equity (in the statement of changes in net assets/equity).Sako Mayrick 25. IPSAS 25EMPLOYEES BENEFITS An entity shall recognize gains or losses on the curtailment or settlementof a defined benefit plan when the curtailment or settlement occurs.Before determining the effect of a curtailment or settlement, an entityshall remeasure the obligation using current actuarial assumptions. Plan assets include assets held by a long-term employee benefit fund andqualifying insurance policies. For group plans, the net cost is recognized in the separate financialstatements of the entity that is legally the sponsoring employer unless acontractual agreement or stated policy for allocating the cost exists. Long-term employee benefits shall be recognized and measured the sameway as post-employment benefits under a defined benefit plan. However,unlike defined benefit plans, actuarial gains or losses and past servicecosts must always be recognized immediately in earnings. Termination benefits shall be recognized as a liability and an expensewhen the entity is demonstrably committed to terminate the employmentof one or more employees before the normal retirement date or toprovide termination benefits as a result of an offer made to encouragevoluntary redundancy.Sako Mayrick 26. IPSAS 25EMPLOYEES BENEFITS An entity may pay insurance premiums to fund a post-employment benefitplan. The entity shall treat such a plan as a defined contribution planunless the entity will have (either directly or indirectly through the plan) alegal or constructive obligation to either: Pay the employee benefits directly when they fall due; or Pay further amounts if the insurer does not pay all future employee benefitsrelating to employee service in the current and prior periods.If the entity retains such a legal or constructive obligation, the entity shall treatthe plan as a defined benefit plan. On first adopting this IPSAS, an entity shall determine its initial liability fordefined benefit plans at that date as: The present value of the obligations at the date of adoption. Minus the fair value, at the date of adoption, of plan assets out of which theobligations are to be settled directly. Minus any past service cost that shall be recognized in later periods. The entity shall not split the cumulative actuarial gains and losses Some exemptions are applicable regarding the disclosures when applyingthis IPSAS for the first time.Sako Mayrick 27. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS It prescribe the procedures that an entity applies to determine whether acash-generating asset is impaired and to ensure that impairment lossesare recognized IPSAS 26 applies to the accounting for the impairment of all cash-generating assets except inventories (see IPSAS 12), assets arising fromconstruction contracts (see IPSAS 11), financial assets that are within thescope of IPSAS 29, investment property measured at fair value (see IPSAS16), cash-generating property, plant and equipment that is measured atrevalued amounts (see IPSAS 17), deferred tax assets, assets arising fromemployee benefits (see IPSAS 25), intangible assets that are regularlyrevalued to fair value, goodwill, biological assets related to agriculturalactivity measured at fair value less estimated point-of-sale costs, deferredacquisition costs and intangible assets, arising from an insurerscontractual rights under insurance contracts, non-current assets classifiedas held for sale and discontinued operations, and other cash-generatingassets in respect of which accounting requirements for impairment areincluded in another IPSAS.Sako Mayrick 28. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS An impairment is a loss in future economic benefits orservices potential of an asset, over and above thesystematic recognition of the loss of the assets futureeconomic benefits or service potential throughdepreciation The recoverable amount of an asset is the higher of itsfair value less costs to sell and its value in use. An impairment loss of a cash-generating asset is theamount by which the carrying amount of an assetexceeds its recoverable amount. An entity shall assess at each reporting date whetherthere is any indication that an asset may be impaired. Ifany such indication exists, the entity shall estimate therecoverable amount of the asset.Sako Mayrick 29. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS An entity shall test an intangible asset with an indefinite useful life or an intangibleasset not yet available for use for impairment annually by comparing its carryingamount with its recoverable amount. This impairment test may be performed atany time during the reporting period, provided it is performed at the same timeevery year. If, and only if, the recoverable amount of an asset is less than its carrying amount,the carrying amount of the asset shall be reduced to its recoverable amount. Thatreduction is an impairment loss. An impairment loss shall be recognized immediately in surplus or deficit. When theamount estimated for an impairment loss exceeds the carrying amount of theasset to which it relates an entity shall recognize a liability if, and only if, that isrequired by another IPSAS. After the recognition of an impairment loss, the depreciation (amortization)charge for the asset shall be adjusted in future periods to allocate the assetsrevised carrying amount, less its residual value (if any), on a systematic basis overits remaining useful life Value in use of a cash-generating asset is the present value of estimated futurecash flows expected to be derived from the continuing use of an asset, and fromits disposal at the end of its useful life.Sako Mayrick 30. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS Discount rate is the pre-tax rate that reflectscurrent market assessments of the time value ofmoney and the risks specific to the asset. Thediscount rate shall not reflect risks for whichfuture cash flows have been adjusted and shallequal the rate of return that investors wouldrequire if they were to choose an investment thatwould generate cash flows equivalent to thoseexpected from the asset. If it is not possible to determine the recoverableamount for the individual cash-generating asset,then determine recoverable amount for theassets cash-generating unitSako Mayrick 31. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS If an active market exists for the output produced by anasset or group of assets, that asset or group of assetsshall be identified as a cash-generating unit, even ifsome or all of the output is used internally. If the cashinflows generated by an asset or cash-generating unitare affected by internal transfer pricing, an entity shalluse management best estimate of future prices thatcould be achieve in arms length transaction inestimating the future cash inflow to determine the assets or cashgenerating unit;s value in use The future cash flow used to determine the assets or cash-generating units that are affected by the internal transferpricingSako Mayrick 32. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS In allocating an impairment loss, an entity shall not reducethe carrying amount of an asset below the highest of: Its fair value less costs to sell (if determinable); Its fair value in use (if determinable); and Zero. Where a non-cash-generating asset contributes to a cashgenerating unit a proportion of the carrying amount of thatnon-cash generating asset shall be allocated to the carryingamount of the cash generating unit prior to estimation ofthe recoverable amount of the cash-generating unit. Thecarrying amount of the non-cash-generating asset shallreflect any impairment losses at the reporting date whichhave been determined under the requirements of IPSAS 21.Sako Mayrick 33. IPSAS 26IMPAIRMENT OF CASH GENERATING ASSETS An impairment loss recognized in prior periods for an asset shall bereversed if, and only if, there has been a change in the estimateused to determine the assets recoverable amount since the lastimpairment loss was recognized. If this is the case, the carryingamount of the asset shall be increased to its recoverable amount.That increase is a reversal of an impairment loss. The redesignation of an asset from a cash-generating asset to anon-cash-generating asset or from a non-cash-generating asset to acash-generating asset shall only occur when there is clear evidencethat such a redesignation is appropriate. A redesignation, by itself,does not necessarily trigger an impairment test or a reversal of animpairment loss. Instead, the indication for an impairment test or areversal of an impairment loss arises from, as a minimum, the listedindications applicable to the asset after redesignation. An entity shall disclose the criteria developed by the entity todistinguish cash-generating assets from non-cash-generating assets.Other disclosure requirements are applicable.Sako Mayrick 34. IPSAS 27AGRICULTURE It prescribes the accounting treatment anddisclosures for agricultural activitySako Mayrick 35. IPSAS 28FINANCIAL INSTRUMENTS PRESENTATION It prescribe principles for classifying andpresenting financial instruments as liabilitiesor net assets/equity, and for offsettingfinancial assets and liabilities.Sako Mayrick 36. IPSAS 29FINANCIAL INSTRUMENTSRECOGNITION AND MEASUREMENT It establish principles for recognizing,derecognizing and measuring financial assetsand financial liabilitiesSako Mayrick 37. IPSAS 30FINANCIAL INSTRUMENTS DISCLOSURES It prescribe disclosures that enable financialstatement users to evaluate the significance offinancial instruments to an entity, the natureand extent of their risks, and how the entitymanages those risk.Sako Mayrick 38. IPSAS 31INTANGIBLE ASSETS It prescribe the accounting treatment for intangible assets that arenot dealt with specifically in another IPSAS. IPSAS 31 does not apply to intangible assets acquired in an entitycombination from a non-exchange transaction, and to powers andrights conferred by legislation, a constitution or by equivalentmeans, such as the power to tax. An intangible asset, whether purchased or self-created, isrecognized if: it is probable that the future economic benefits or service potentialthat are attributable to the asset will flow to the entity; and the cost or fair value of the asset can be measured reliably. Additional recognition criteria for internally generated intangibleassets. Internally generated goodwill shall not be recognized as anasset All research costs are charged to expense when incurredSako Mayrick 39. IPSAS 31INTANGIBLE ASSETS Development costs are capitalized only after technical andcommercial feasibility of the resulting product or servicehave been established. Internally-generated brands, mastheads, publishing titles,lists of customers or users of services and items similar insubstance shall not be recognized as intangible assets. If an intangible item does not meet both the definition andthe recognition criteria for an intangible asset, expenditureon the item is recognized as an expense when it is incurred,except if the cost is incurred as part of an entitycombination, in which case it forms part of the amountrecognized as purchase premium/goodwill at theacquisition date.Sako Mayrick 40. IPSAS 31INTANGIBLE ASSETS For the purpose of accounting subsequent to initialacquisition, intangible assets are classified as: indefinite life: no foreseeable limit to the period overwhich the asset is expected to generate net cash inflowsfor the entity. (Note- indefinite does not mean infinite) finite life: a limited period of benefit to the entity Intangible assets may be accounted for using a costmodel or a revaluation model (permitted only inlimited circumstances see below). Under the costmodel, assets are carried at cost less any accumulatedamortization and any accumulated impairment lossesSako Mayrick 41. IPSAS 31INTANGIBLE ASSETS If an intangible asset has a quoted market price in an active market(which is uncommon), an accounting policy choice of a revaluationmodel is permitted. Under the revaluation model, the asset iscarried at a revalued amount, which is fair value at revaluation dateless any subsequent depreciation and any subsequent impairmentlosses. To determine whether an intangible asset is impaired, an entityapplies IPSAS 21 or IPSAS 26, as appropriate. An impairment loss of a cash generating asset is the amount bywhich the carrying amount of an asset exceeds its recoverableamount, which is the higher of a cash-costs to sell and its value inuse. An impairment loss of a non- cash generating asset is the amountby which the carrying amount of an asset exceeds its recoverableservice amount, which is the higher of a non-cash-fair value lesscosts to sell and its value in use.Sako Mayrick 42. IPSAS 31INTANGIBLE ASSETS Intangible assets with indefinite useful lives are not amortized but are testedfor impairment on an annual basis. If recoverable amount of a cash-generating asset or recoverable service amount of a non-cash generatingasset is lower than the carrying amount, an impairment loss is recognized.The entity also considers whether the intangible continues to have anindefinite life. Under the revaluation model, revaluations are carried out regularly. All itemsof a given class are revalued (unless there is no active market for a particularasset). Revaluation increases are credited directly to revaluation surplus.Revaluation decreases are charged first against the revaluation surplusrelated to the specific asset, and any excess against surplus or deficit. Whenthe revalued asset is disposed of, the revaluation surplus is transferreddirectly to accumulated surpluses or deficit and is not reclassified to surplusor deficit. Normally, subsequent expenditure on an intangible asset after its purchase orcompletion is recognized as an expense. Only rarely are the asset recognitioncriteria met. Sako Mayrick 43. IPSAS 31INTANGIBLE ASSETSSee a detailed worked example appendix IISako Mayrick 44. IPSAS 32Service Concession Arrangement: Grantor It prescribe the accounting for serviceconcession arrangements by the grantor, apublic sector entity It is applicable w.e.f 1/1/2014Sako Mayrick 45. Directors Report See attached sample ( request fromwww.elsamconsult.com) 46. DETAILED IPSAS FSSee appendix II (request fromwww.elsamconsult.com) 47. Further reading materials www.ifac.org www.iasb.org Delloite website NBAA Website