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Major Differences in IPSAS and IFRS

IFRS are developed for profit-oriented entities while the IPSAS are geared towards public sector entities and those that
provide public services.
IPSAS 24, requires a public sector entity to present the comparison between budgeted amounts and the actual amounts
that arise from executing the said budget, in the public entity’s financial statements, as long as the said entity makes
public its approved budget. Additional disclosures are also required to explain the reasons behind the significant
differences between these two amounts. In showing such a comparison and making the required disclosures, the public
entity can demonstrate how well it manages public funds and provides services, for which it is publicly accountable.
There is no equivalent standard under IFRS.
Another major difference is in the area of income taxes. Public sector entities are assumed to be generally exempt from
income taxes; thus, International Accounting Standards (IAS) 12, Income Taxes, has no equivalent in IPSAS. However,
the latter provides that if the public sector entity is liable for tax (which is considered an unlikely event), the entity can
refer to the guidance in IAS 12 in accounting for the tax.
The third major difference is in determining control. IFRS 10, Consolidated Financial Statements; IFRS 11, Joint
Arrangements; and IFRS 12, Disclosures of Interests in Other Entities, took effect in 2013. However, IPSAS is still
based on the previous standards of IAS 27, Consolidated and Separate Financial Statements; IAS 28, Investments in
Associates; and IAS 31, Interest in Joint Ventures. The definition of control under IFRS 10 is very different from the
one in IAS 27; thus, the manner of determining control may be different for a profit-oriented entity applying IFRS from
that of a public sector entity applying IPSAS. It is worth noting that such a difference has been recognized and, as a
result, the IPSAS Board (IPSASB) issued four Exposure Drafts in October 2013 with the aim of eliminating this
significant difference.
The concept of “service potential” as a recognition criterion is another point of difference between IFRS and IPSAS.
This concept is not referred to in the IFRS, which considers “economic benefit” as a major recognition criterion. The
service potential concept is incorporated in the definition of the public sector entity’s assets, liabilities, income and
expenses and is an indicator of an asset’s capacity to provide goods and services to the public, in accordance with the
entity’s mandate. With this concept, a public sector entity may recognize assets, liabilities, income and expenses
differently from that of a private entity.

Corollary to the above difference, another difference also arises from the accounting for the impairment of non-cash
generating assets. Since the IPSAS consider the service potential of an asset, these standards recognize that a major part
of the public sector entity’s assets may actually be non-cash generating; thus, the IPSAS also provide guidance on how
to impair such assets. On the other hand, the impairment provisions under IFRS consider that assets subject to
impairment testing are cash-generating ones.

Lastly, IPSAS eliminated the concepts that are considered peculiar in the private sector, such as accounting for share-
based payments and the requirement to disclose earnings per share. In cases that such concepts are applicable to the
public sector entities, these entities should refer to the relevant IFRS.

Other differences also arise due to the difference in the timing of the adoption of the two standards. To illustrate,
IPSAS have yet to introduce the equivalent standards to the new IFRS 10, 11 and 12 and to the revised IAS 19,
Employee Benefits.
Chua, L. (2019) IPSAS vs. IFRS: How do they differ? Business World Online. Manila Philippines. Retrieved from