The International Public Sector Accounting Standards Board (IPSASB) has issued International Public Sector Accounting Standard (IPSAS) 40, Public Sector Combinations, which establishes international requirements for accounting for combinations of entities and operations.
Public sector combinations, including, for example, reorganisations of government departments or restructurings of municipalities, raise different accounting issues than private sector combinations. In public sector combinations, amalgamations or mergers in which none of the combining entities obtains control of the other are more common than in the private sector.
The IPSASB At-a-Glance summary issued with IPSAS 40 notes that because such equal amalgamations are uncommon in the private sector, International Financial Reporting Standard (IFRS) 3, Business Combinations, treats all private sector combinations as acquisitions, which require fair value information to be obtained. In contrast IPSAS 40 provides for two types of public sector combinations: (a) amalgamations; and (b) acquisitions. The IPSAS accounting requirements for amalgamations are based on existing information, which enables public sector entities to avoid unnecessary valuation costs, while still meeting users’ needs.
IPSAS 40 is effective from 1 January 2019, with earlier adoption encouraged.
In addition to IPSAS 40, the IPSASB staff have developed an At-a-Glance summary and an introductory webinar, Introduction to IPSAS 40, Public Sector Combinations.
IPSAS 40 and the accompanying At-a-Glance document are available on this link.
The webinar is available on this link.
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