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Overview

IPSAS 23 has no equivalent counterpart under IAS/IFRS.


IPSAS 23 prescribes requirements for the financial reporting of revenue arising from non-exchange transactions, other than non-exchange transactions that give rise to an entity combination. This Standard deals with issues that need to be considered in recognizing and measuring revenue from non-exchange transactions, including the identification of contributions from owners.


IPSAS 23 was issued in December 2006 and applies to annual periods beginning on or after 30 June 2008.


History of IPSAS 23











Effective date

Annual periods beginning on or after 30 June 2008.


Full text

Refer to IFAC website here


Summary of IPSAS 23 Revenue from Non-Exchange Transactions

Objective


The objective of IPSAS 23 is to prescribe requirements for the financial reporting of revenue arising from non-exchange transactions, other than non-exchange transactions that give rise to an entity combination. This Standard deals with issues that need to be considered in recognizing and measuring revenue from non-exchange transactions, including the identification of contributions from owners.


Scope

This standard applies to entities that prepare and present financial statements under the accrual basis of accounting [IPSAS 23.2]. Entity combinations that are non-exchange transactions are not in the scope of the standard [IPSAS 23.2 and 23.6]. IPSAS 23 applies to all public sector entities other than GBEs [IPSAS 23.3].


The standard is applicable for non-exchange types of revenue which represent the majority of the public sector revenue [IPSAS 23.5], for example:

• taxes

• transfers (cash or non-cash)



Key definitions

Taxes: economic benefits or service potential compulsorily paid or payable to public sector entities, in accordance with laws and/or regulations, established to provide revenue to the government. Taxes do not include fines or other penalties imposed for breaches of the law [IPSAS 23.7]

Transfers: inflows of future economic benefits or service potential from non-exchange transactions, other than taxes [IPSAS 23.7]

Non-exchange transactions: transactions that are not exchange transactions. Transactions in which an entity either gives or receives value from another entity without directly receiving or giving approximately equal value in exchange [IPSAS 9.11]

Revenue: The gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners [IPSAS 1.7].Conditions on transferred assets: stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor [IPSAS 23.7]

Restrictions on transferred assets: stipulations that limit or direct the purposes for which a transferred asset may be used, but do not specify that future economic benefits or service potential is required to be returned to the transferor if not deployed as specified [IPSAS 23.7]

Stipulations on transferred assets: terms in laws or regulation, or a binding arrangement, imposed upon the use of a transferred asset by entities external to the reporting entity [IPSAS 23.7]


Analysis of the Initial Inflow of Resources from Non-Exchange Transactions

An entity will as result of a non-exchange transaction have inflows from resources that could lead to [IPSAS 23.29]:

a) an increase in asset

b) a decrease of liability (e.g. debt forgiveness)

c) increase of an asset and increase of related liability


Recognition of revenue


An inflow of resources from a non-exchange transaction recognized as an asset shall be recognized as revenue, except to the extent that a liability is also recognized in respect of the same inflow [IPSAS 23.44].


As an entity satisfies a present obligation recognized as a liability in respect of an inflow of resources from a non-exchange transaction recognized as an asset, it shall reduce the carrying amount of the liability recognized and recognize an amount of revenue equal to that reduction [IPSAS 23.45].


Revenue from non-exchange transactions shall be measured at the amount of the increase in net assets recognized by the entity [IPSAS 23.48].


Recognition of Assets

An inflow of resources from a non-exchange transaction, other than services in-kind, that meets the definition of an asset should be recognized as an asset when the following recognition criteria are met [IPSAS 23.31]:

• It is probable that the future economic benefits or service potential associated with the asset will flow to the entity

• The fair value of the asset can be measured reliably


An inflow is probably when it is more likely than not to occur [IPSAS 23.35].


An asset acquired through a non-exchange transaction should initially be measured at its fair value as at the date of acquisition [IPSAS 23.42 & 23.83].


Recognition of Asset - Taxes

An entity shall recognize an asset in respect of taxes when the taxable event occurs and the asset recognition criteria are met [IPSAS 23.59].


Taxation revenue shall be determined at a gross amount. It shall not be reduced for expenses paid through the tax system [IPSAS 23.71]. This concerns, for example, amounts that are available/paid regardless irrespective of whether the individual pays taxes (e.g. health care insurance) [IPSAS 23.72].


Taxation revenue shall not be grossed up for the amount of tax expenditures [IPSAS 23.73]. This concerns, for example, certain tax deductible items that are not available to all taxpayers, depending on their taxable situation (e.g. tax deductible mortgage expenses) [IPSAS 23.74].


Recognition of Asset (or Decrease of a Liability) - Transfers


An entity should recognize an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset [IPSAS 23.76]. When the transfer concerns services in-kind the entity may, but is not required to, recognize these services in- kind as revenue and as an asset [IPSAS 23.98].


Transfers may include grants, debt forgiveness, fines bequests, gifts, donations, goods and services in-kind and the off-market portion of concessionary loans received [IPSAS 23.77].


In specific cases, as a result of a transfer, a decrease in previously recognized liability may recognized instead of the increase of an asset [IPSAS 23.78]. This is the case when a creditor forgives a liability [IPSAS 23.84-87].


With regard to services in-kind these services may be consumed immediately (e.g. volunteer teacher’s services, volunteer fire fighters,…) or can also lead to the construction of an asset. In the first case a recognition of revenue and asset will lead to the immediate recognition in a decrease of the asset and a related expense, in the second case the services in-kind will be included in the cost of the asset constructed [IPSAS 23.99].


Recognition of Liabilities

A present obligation arising from a non-exchange transaction that meets the definition of a liability shall be recognized as a liability when following recognition criteria are met [IPSAS 23.50]:

• It is probable that an outflow of resources embodying future economic benefits or service potential will be required to settle the obligation

• A reliable estimate can be made of the amount of the obligation


Conditions on a transferred asset give rise to a present obligation on initial recognition that will be recognized when the recognition criteria of a liability are met [IPSAS 23.55].


The amount recognized as a liability should be the best estimate of the amount required to settle the present obligation at the reporting date [IPSAS 23.57].


Disclosures

Following disclosures are required either on the face of, or in the notes to, the general purpose financial statements [IPSAS 23.106]:

• amount of revenue from non-exchange transactions recognized during the period by showing separately following classes:

o taxes

o transfers

• amount of receivables recognized in respect of non-exchange revenue

• amount of liabilities recognized in respect of transferred assets subject to conditions

• amount of liabilities recognized in respect concessionary loans, subject to conditions on transferred assets

• amount of assets recognized that are subject to restrictions and the nature of those restrictions

• existence and amounts of any advance receipts in respect of non-exchange transactions

• amount of any liabilities forgiven


An entity shall disclose in the notes [IPSAS 23.107]:

• the accounting policies adopted for relating to revenue from non-exchange transactions

• for major classes of revenue: the measurement basis on which fair value of inflowing resources was measured

• for major classes of taxation revenue: if the entity cannot measure reliably the taxation revenue during the period in which the taxable event occurs, 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-kind received.


December 2006

Issuance of IPSAS 23: Revenu from Non-Exchange Transactions(Taxes and Transfers)

30 June 2008

Effective date of IPSAS 23

1 January 2013

Amendment from IPSAS 28 (issued January 2010)

1 January 2013

Amendment from IPSAS 29 (issued January 2010)

IPSAS 23 Revenue from Non-Exchange Transactions  (Taxes and Transfers)