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IPSASB issues new standard on accounting for public sector amalgamations

By: Emma Rumney
Source: publicfinanceinternational.org/news

International accounting requirements addressing how to account for the combination of entities or operations in the public sector have been developed for the first time.

The International Public Sector Accounting Standards Board published the new accounting standard – IPSAS 40 – earlier this week, which covers public sector combinations, including reorganisations of government departments or restructurings of municipalities.

Ian Carruthers, chair of the board, explained that in the past governments have had to develop their own approach in such situations or fall back on private sector accounting standards, despite these being ill-suited.

“IPSAS 40 responds to our stakeholders’ concerns, and fills an important gap in the IPSASB’s literature. Governments now have appropriate, public sector-specific requirements they can apply,” he said.

“This ensures they can provide users of financial statements with relevant information about combinations.”

Unlike private sector accounting standards, which treat all combinations as acquisitions, IPSAS 40 is also able to recognise amalgamations, which are much more common in the public sector.

Accounting for acquisitions also requires information on fair value, whereas accounting for amalgamations does not.

IPSAS 40 instead relies on existing information, meaning public sector entities are able to avoid unnecessary valuation costs while still meeting the needs of users’ of their financial reports.

The standard will apply from 1 January, 2019, although earlier adoption is encouraged.

Guidance on the standard can be found in IPSASB’s at-a-glance summary and its introductory webinar.

Read Ian Carruthers’ reflections on IPSASB’s recent work here


  • Emma Rumney
  • Emma is a reporter at Public Finance International. She also writes for Public Finance in the UK.
  • Read her tweets: @emma_pfi