INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARDSTM

IPSAS 33, FIRST-TIME ADOPTION OF ACCRUAL BASIS INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARDS (IPSAS)
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 IPSAS 33, FIRST-TIME ADOPTION OF ACCRUAL BASIS INTERNATIONAL PUBLIC
SECTOR ACCOUNTING STANDARDS (IPSAS)
History of IPSAS
This version includes amendments resulting from IPSAS Standards issued up to January 31, 2025.

IPSAS 33, First-time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSAS) was issued
in January 2015.
Since then, IPSAS 33 has been amended by the following IPSAS Standards:

• Stripping Costs in the Production Phase of a Surface Mine (issued November 2024)

• IPSAS 50, Exploration for and Evaluation of Mineral Resources (issued November 2024)
• IPSAS 48, Transfer Expenses (issued May 2023)

• IPSAS 47, Revenue (issued May 2023)

• IPSAS 46, Measurement (issued May 2023)

• IPSAS 45, Property, Plant, and Equipment (issued May 2023)

• IPSAS 44, Non-current Assets Held for Sale and Discontinued Operations (issued May 2022)

• IPSAS 43, Leases (issued January 2022)

• Improvements to IPSAS 2021 (issued January 2022)

• COVID-19: Deferral of Effective Dates (issued November 2020)

• Improvements to IPSAS 2019 (issued January 2020)

• IPSAS 42, Social Benefits (issued January 2019)

• Improvements to IPSAS 2018 (issued October 2018)

• IPSAS 41, Financial Instruments (issued August 2018)

• IPSAS 40, Public Sector Combinations (issued January 2017)

• IPSAS 39, Employee Benefits (issued July 2016)

• The Applicability of IPSAS (issued April 2016)

• Improvements to IPSAS 2015 (issued April 2016)

Table of Amended Paragraphs in IPSAS 33

Paragraph Affected How Affected Affected By

7 Deleted The Applicability of IPSAS April 2016

8 Deleted The Applicability of IPSAS April 2016

9 Amended IPSAS 46 May 2023

32 Amended IPSAS 47 May 2023

36 Amended IPSAS 39 July 2016

IPSAS 41 August 2018
IPSAS 42 January 2019

1085 IPSAS 33
 Paragraph Affected How Affected Affected By
IPSAS 43 January 2022
IPSAS 45 May 2023

39 Amended Improvements to IPSAS April 2016

41 Amended IPSAS 47 May 2023

41A New IPSAS 46 May 2023

41B New IPSAS 48 May 2023

Heading above paragraph 42 Amended IPSAS 47 May 2023

42 Amended IPSAS 47 May 2023

43 Amended IPSAS 47 May 2023

Heading above paragraph 43A New IPSAS 48 May 2023

43A New IPSAS 48 May 2023

43B New IPSAS 48 May 2023

Heading above paragraph 46 Amended IPSAS 43 January 2022

46 Amended IPSAS 43 January 2022

47 Amended IPSAS 43 January 2022

48 Amended IPSAS 45 May 2023

49 Amended IPSAS 45 May 2023

62A New IPSAS 40 January 2017

62B New IPSAS 40 January 2017

62C New IPSAS 40 January 2017

62D New IPSAS 50 November 2024

62E New IPSAS 50 November 2024

62F New Stripping Costs in the Production Phase of a Surface

Mine November 2024

62G New Stripping Costs in the Production Phase of a Surface

Mine November 2024

64 Amended IPSAS 41 August 2018

IPSAS 43 January 2022
IPSAS 45 May 2023
IPSAS 46 May 2023

64A New IPSAS 46 May 2023

IPSAS 33 1086
 Paragraph Affected How Affected Affected By

65 Amended IPSAS 46 May 2023

66 Amended IPSAS 45 May 2023

IPSAS 46 May 2023

67 Amended IPSAS 45 May 2023

IPSAS 46 May 2023

68 Amended IPSAS 45 May 2023

IPSAS 46 May 2023

69 Amended
IPSAS 46 May 2023

70 Amended IPSAS 46 May 2023

71 Amended IPSAS 46 May 2023

72 Amended IPSAS 41 August 2018

IPSAS 46 May 2023

78 Amended Improvements to IPSAS October 2018

79 Amended Improvements to IPSAS October 2018

85A New Improvements to IPSAS October 2018

85B New Improvements to IPSAS January 2022

86 Amended IPSAS 40 January 2017

Heading above paragraph 95 Amended IPSAS 43 January 2022

95 Amended IPSAS 43 January 2022

96 Deleted IPSAS 43 January 2022

96A New IPSAS 43 January 2022

96B New IPSAS 43 January 2022

IPSAS 46 May 2023

96C New IPSAS 43 January 2022

96D New IPSAS 43 January 2022

102 Amended IPSAS 39 July 2016

104 Amended IPSAS 39 July 2016

105 Amended IPSAS 39 July 2016

106 Deleted IPSAS 39 July 2016

107 Deleted IPSAS 39 July 2016

1087 IPSAS 33
 Paragraph Affected How Affected Affected By

Heading above paragraph 113 Amended IPSAS 41 August 2018

113 Amended Improvements to IPSAS January 2020

IPSAS 41 August 2018

113A New Improvements to IPSAS January 2020

114 Deleted Improvements to IPSAS January 2020

114A New IPSAS 41 August 2018

115 Amended IPSAS 41 August 2018

116 Amended IPSAS 41 August 2018

117 Amended IPSAS 41 August 2018

118 Amended IPSAS 41 August 2018

119 Amended IPSAS 41 August 2018

119A New IPSAS 41 August 2018

119B New IPSAS 41 August 2018

119C New IPSAS 41 August 2018

119D New IPSAS 41 August 2018

120 Amended IPSAS 41 August 2018

122 Amended IPSAS 41 August 2018

122A New IPSAS 41 August 2018

122B New IPSAS 41 August 2018

122C New IPSAS 41 August 2018

Heading above paragraph 122D New IPSAS 41 August 2018

122D New IPSAS 41 August 2018

123 Amended Improvements to IPSAS October 2018

124 Amended IPSAS 41 August 2018

129 Amended IPSAS 40 January 2017

IPSAS 45 May 2023

130 Amended IPSAS 40 January 2017

Heading above paragraph 131A New IPSAS 44 May 2022

131A New IPSAS 44 May 2022

132 Amended IPSAS 40 January 2017

IPSAS 33 1088
 Paragraph Affected How Affected Affected By

Heading above paragraph 134A New IPSAS 42 January 2019

134A New IPSAS 42 January 2019

134B New IPSAS 42 January 2019

142 Amended Improvements to IPSAS October 2018

Heading above paragraph 148 Amended IPSAS 43 January 2022

148 Amended IPSAS 43 January 2022

IPSAS 46 May 2023

152A New IPSAS 46 May 2023

152B New IPSAS 46 May 2023

152C New IPSAS 46 May 2023

152D New IPSAS 46 May 2023

152E New IPSAS 46 May 2023

152F New IPSAS 46 May 2023

154A New The Applicability of IPSAS April 2016

154B New IPSAS 39 July 2016

154C New IPSAS 40 January 2017

154D Amended COVID-19: Deferral of Effective Dates November 2020

154E New Improvements to IPSAS October 2018

154F New Improvements to IPSAS October 2018

154G Amended COVID-19: Deferral of Effective Dates November 2020

154H Amended COVID-19: Deferral of Effective Dates November 2020

154I New Improvements to IPSAS January 2022

154J New IPSAS 43 January 2022

154K New IPSAS 44 May 2022

154L New IPSAS 45 May 2023

154M New IPSAS 46 May 2023

154N New IPSAS 47 May 2023

154O New IPSAS 48 May 2023

154P New IPSAS 50 November 2024

1089 IPSAS 33
 Paragraph Affected How Affected Affected By

154Q New Stripping Costs in the Production Phase of a Surface

Mine November 2024

IG14 Amended IPSAS 45 May 2023

IG20 Amended IPSAS 43 January 2022

IG21 Amended IPSAS 43 January 2022

IG22 Amended IPSAS 45 May 2023

IG23 Amended IPSAS 45 May 2023

IG29 Amended Improvements to IPSAS October 2018

IG35 Amended Improvements to IPSAS October 2018

IG39 Amended Improvements to IPSAS January 2020

IG42 Amended IPSAS 46 May 2023

Heading above paragraph IG45 Amended IPSAS 47 May 2023

IG45 Amended IPSAS 47 May 2023

IG51 Amended IPSAS 43 January 2022

Heading above paragraph IG52 Amended IPSAS 43 January 2022

IG52 Amended IPSAS 43 January 2022

Heading above paragraph IG53 Amended IPSAS 45 May 2023

IG53 Amended IPSAS 45 May 2023

IG54 Amended IPSAS 45 May 2023

IG55 Amended IPSAS 45 May 2023

IG56 Amended IPSAS 45 May 2023

IG57 Amended IPSAS 45 May 2023

IG58 Amended IPSAS 45 May 2023

Heading above paragraph IG67 Amended IPSAS 41 August 2018

IG67 Amended IPSAS 41 August 2018

IG68 Amended IPSAS 41 August 2018

IG69 Amended IPSAS 41 August 2018

IG70 Amended IPSAS 41 August 2018

IG71 Amended IPSAS 41 August 2018

IG74 Amended IPSAS 41 August 2018

IPSAS 33 1090
 Paragraph Affected How Affected Affected By

Heading above paragraph IG89A New IPSAS 48 May 2023

IG89A New IPSAS 48 May 2023

IG91 Amended IPSAS 41 August 2018

Improvements to IPSAS October 2018
IPSAS 42 January 2019
IPSAS 43 January 2022
IPSAS 45 May 2023
IPSAS 47 May 2023
IPSAS 48 May 2023

Appendix Amended IPSAS 41 August 2018

IPSAS 45 May 2023
IPSAS 47 May 2023

1091 IPSAS 33
 January 2015

IPSAS 33, FIRST-TIME ADOPTION OF ACCRUAL BASIS INTERNATIONAL PUBLIC

SECTOR ACCOUNTING STANDARDS (IPSAS)
CONTENTS
Paragraph

Objective ................................................................................................................................................... 1
Scope ........................................................................................................................................................ 2–8
Definitions.................................................................................................................................................. 9–14
Date of Adoption of IPSAS ................................................................................................................. 10
First IPSAS Financial Statements ...................................................................................................... 11
Previous Basis of Accounting ............................................................................................................. 12
Transitional IPSAS Financial Statements ........................................................................................... 13–14
Recognition and Measurement ................................................................................................................. 15–22
Opening Statement of Financial Position on Adoption of IPSAS ....................................................... 15

Accounting Policies............................................................................................................................. 16–22

Exceptions to the Retrospective Application of IPSAS ............................................................................. 23–26
Fair Presentation and Compliance with IPSAS......................................................................................... 27–32
Exemptions that Affect Fair Presentation and Compliance with Accrual Basis IPSAS
During the Period of Transition ........................................................................................................... 33–62G
Three-Year Transitional Relief Period for the Recognition and/or Measurement of Assets and/or
Liabilities....................................................................................................................................... 36–62G
Exemptions that Do Not Affect Fair Presentation and Compliance with Accrual Basis IPSAS During
the Period of Adoption ........................................................................................................................ 63–134
Using Deemed Cost to Measure Assets and/or Liabilities ................................................................. 64–70
Using Deemed Cost to Measure Assets Acquired Through a Non-Exchange Transaction ............... 71
Using Deemed Cost for Investments in Controlled Entities, Joint Ventures and Associates
(IPSAS 34) ................................................................................................................................... 72–73
Date at which Deemed Cost can be Determined ............................................................................... 74–76
IPSAS 1, Presentation of Financial Statements ................................................................................. 77–84
IPSAS 4, The Effects of Changes in Foreign Exchange Rates .......................................................... 85–87

IPSAS 5, Borrowing Costs .................................................................................................................. 88–90

IPSAS 10, Financial Reporting in Hyperinflationary Economies ........................................................ 91–94
IPSAS 43, Leases............................................................................................................................... 95–96

IPSAS 18, Segment Reporting ........................................................................................................... 97

IPSAS 21, Impairment of Non-Cash-Generating Assets .................................................................... 98–100
IPSAS 39, Employee Benefits ............................................................................................................ 101–107

IPSAS 33 1092
 IPSAS 26, Impairment of Cash-Generating Assets ........................................................................... 108–110
IPSAS 28, Financial Instruments: Presentation ................................................................................. 111–112

IPSAS 41, Financial Instruments ....................................................................................................... 113–122

IPSAS 30, Financial Instruments: Disclosures................................................................................... 123–124

IPSAS 31, Intangible Assets .............................................................................................................. 125–126

IPSAS 32, Service Concession Arrangements .................................................................................. 127–128

IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial Statements and
IPSAS 36, Investments in Associates and Joint Ventures .......................................................... 129–130
IPSAS 35, Consolidated Financial Statements .................................................................................. 131

IPSAS 37, Joint Arrangements .......................................................................................................... 132–134

IPSAS 42, Social Benefits .................................................................................................................. 134A–134B

Disclosures ............................................................................................................................................... 135–152

Explanation of Transition to IPSAS .................................................................................................... 141

Reconciliations ................................................................................................................................... 142–147

Disclosures where Deemed Cost is Used for Inventory, Investment Property, Property, Plant and
Equipment, Intangible Assets, Financial Instruments or Service Concession Assets................. 148
Disclosures Where Deemed Cost is Used for Investments in Controlled Entities, Joint Ventures
or Associates ............................................................................................................................... 149–150
Exemptions from Disclosure Requirements in IPSAS During the Period of Transition ..................... 151–152

Transitional Provisions.............................................................................................................................. 153

Effective Date and Transition ................................................................................................................... 154–154Q

Appendix A: Amendments to Other IPSAS

Basis for Conclusions

Implementation Guidance

1093 IPSAS 33
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

International Public Sector Accounting Standard 33, First-time Adoption of Accrual Basis International Public Sector
Accounting Standards (IPSAS) is set out in paragraphs 1–154. All the paragraphs have equal authority. IPSAS 33
should be read in the context of its objective, the Basis for Conclusions, the Preface to International Public Sector
Accounting Standards, and The Conceptual Framework for General Purpose Financial Reporting by Public Sector
Entities. IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting
and applying accounting policies in the absence of explicit guidance.

IPSAS 33 1094
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Objective
1. The objective of this Standard is to provide guidance to a first-time adopter that prepares and presents
financial statements following the adoption of accrual basis IPSAS, in order to present high quality
information:
(a) That provides transparent reporting about a first-time adopter’s transition to accrual basis IPSAS;
(b) That provides a suitable starting point for accounting in accordance with accrual basis IPSAS
irrespective of the basis of accounting the first-time adopter has used prior to the date of adoption; and
(c) Where the benefits are expected to exceed the costs.
Scope
2. An entity shall apply this IPSAS when it prepares and presents its annual financial statements on the
adoption of, and during the transition to, accrual basis IPSAS.
3. This IPSAS applies when an entity first adopts accrual basis IPSAS and during the transitional period allowed
in this IPSAS. It does not apply when, for example, a first-time adopter:
(a) Stops presenting financial statements in accordance with prescribed requirements, having previously
presented them as well as another set of financial statements that contained an explicit and unreserved
statement of compliance with accrual basis IPSAS;
(b) Presented financial statements in the previous reporting period in accordance with prescribed
requirements and those financial statements contained an explicit and unreserved statement of
compliance with accrual basis IPSAS; or
(c) Presented financial statements in the previous reporting period that contained an explicit and
unreserved statement of compliance with accrual basis IPSAS, even if the auditors modified their audit
report on those financial statements.
4. This Standard shall be applied from the date on which a first-time adopter adopts accrual basis IPSAS and
during the period of transition. This Standard permits a first-time adopter to apply transitional exemptions and
provisions that may impact fair presentation. Where these transitional exemptions and provisions are applied,
a first-time adopter is required to disclose information about the transitional exemptions and provisions
adopted, and progress towards fair presentation and compliance with accrual basis IPSAS.
5. At the end of the transitional period a first-time adopter must comply with the recognition, measurement,
presentation and disclosure requirements in the other accrual basis IPSAS in order to assert compliance with
accrual basis IPSAS as required in IPSAS 1, Presentation of Financial Statements.
6. This IPSAS does not apply to changes in accounting policies made by an entity that already applies IPSAS.
Such changes are the subject of:
(a) Requirements on changes in accounting policies in IPSAS 3, Accounting Policies, Changes in
Accounting Estimates and Errors; and
(b) Specific transitional requirements in other IPSAS. The transitional provisions in other IPSAS apply only
to changes in accounting policies made by an entity that already applies accrual basis IPSAS; they do
not apply to a first-time adopter’s transition to IPSAS, except as specified in this IPSAS.
7. [Deleted]

8. [Deleted]

1095 IPSAS 33
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Definitions
9. The following terms are used in this Standard with the meanings specified:

Date of adoption of IPSAS is the date an entity adopts accrual basis IPSAS for the first time, and is
the start of the reporting period in which the first-time adopter adopts accrual basis IPSAS and for
which the entity presents its first transitional IPSAS financial statements or its first IPSAS financial
statements.

First IPSAS financial statements are the first annual financial statements in which an entity complies
with the accrual basis IPSAS and can make an explicit and unreserved statement of compliance with
those IPSAS because it adopted one or more of the transitional exemptions in this IPSAS that do not
affect the fair presentation of the financial statements and its ability to assert compliance with accrual
basis IPSAS.

First-time adopter is an entity that adopts accrual basis IPSAS for the first time and presents its first
transitional IPSAS financial statements or its first IPSAS financial statements.
Opening statement of financial position is a first-time adopter’s statement of financial position at the
date of adoption of IPSAS.

Period of transition is the period during which a first-time adopter applies one or more of the
exemptions in this IPSAS before it complies with the accrual basis IPSAS, and before it is able to
make an explicit and unreserved statement of such compliance with IPSAS.

Previous basis of accounting is the basis of accounting that a first-time adopter used immediately
before adopting accrual basis IPSAS.

Transitional IPSAS financial statements are the financial statements prepared in accordance with this
IPSAS where a first-time adopter cannot make an explicit and unreserved statement of compliance
with other IPSAS because it adopted one or more of the transitional exemptions in this IPSAS that
affect the fair presentation of the financial statements and its ability to assert compliance with accrual
basis IPSAS.

Terms defined in other IPSAS are used in this Standard with the same meaning as in those Standards,
and are reproduced in the Glossary of Defined Terms published separately.

Date of Adoption of IPSAS

10. The date of adoption of IPSAS is the date that an entity adopts accrual basis IPSAS for the first time. It is the
start of the reporting period in which the first-time adopter adopts accrual basis IPSAS and for which it
presents its first transitional IPSAS financial statements or its first IPSAS financial statements. If a first-time
adopter takes advantage of the exemptions in this IPSAS that affect fair presentation and compliance with
accrual basis IPSAS (see paragraphs 36–62) in producing its first transitional IPSAS financial statements, it
can only make an explicit and unreserved statement of compliance with accrual basis IPSAS when the
exemptions that provided the relief have expired, and/or when the relevant items are recognized, measured
and/or the relevant information is presented and/or disclosed in the financial statements in accordance with
the applicable IPSAS (whichever is earlier). Financial statements shall not be described as complying with
IPSAS unless they comply with all the requirements of all the applicable IPSAS.

First IPSAS Financial Statements

11. An entity’s first IPSAS financial statements are the first annual financial statements in which the first-time
adopter can make an explicit and unreserved statement in those financial statements of compliance with
accrual basis IPSAS. If a first-time adopter does not adopt the exemptions in this IPSAS that affect fair

IPSAS 33 1096
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

presentation and compliance with accrual basis IPSAS (see paragraphs 36–62), its first financial statements
following the adoption of accrual basis IPSAS will also be its first IPSAS financial statements.

Previous Basis of Accounting

12. The previous basis of accounting is the basis of accounting that a first-time adopter used immediately before
adopting accrual basis IPSAS. This might be a cash basis of accounting, an accrual basis of accounting, a
modified version of either a cash basis or an accrual basis of accounting, or another prescribed basis.

Transitional IPSAS Financial Statements

13. An entity’s transitional IPSAS financial statements are the annual financial statements in which an entity
transitions to accrual basis IPSAS and adopts certain exemptions in this IPSAS that affect the fair
presentation of the financial statements and its ability to assert compliance with accrual basis IPSAS. If a
first-time adopter adopts the exemptions in this IPSAS that affect fair presentation and compliance with
accrual basis IPSAS (see paragraphs 36–62), it will not be able to make an explicit and unreserved statement
of compliance with other accrual basis IPSAS until the exemptions that provided the relief in this IPSAS have
expired and/or when the relevant items are recognized, measured and/or the relevant information has been
presented and/or disclosed in accordance with the applicable IPSAS (whichever is earlier). Financial
statements shall not be described as complying with IPSAS unless they comply with all the requirements of
all the applicable IPSAS.

14. An entity’s transitional IPSAS financial statements are those financial statements, where the entity transitions
from another accounting basis such as when it:

(a) Prepared its most recent previous financial statements in accordance with the IPSAS, Financial
Reporting Under the Cash Basis of Accounting;

(b) Presented its most recent previous financial statements:

(i) In accordance with prescribed requirements that are not consistent with IPSAS in all respects;

(ii) In conformity with IPSAS in all respects, except that the financial statements did not contain an
explicit and unreserved statement that they complied with IPSAS;

(iii) Containing an explicit statement of compliance with some, but not all, IPSAS, including the
adoption of the exemptions provided in this IPSAS that affect fair presentation and compliance
with accrual basis IPSAS (see paragraphs 36–62);

(iv) In accordance with prescribed requirements inconsistent with IPSAS, using some individual
IPSAS to account for items for which prescribed requirements did not exist; or

(v) In accordance with prescribed requirements, with a reconciliation of some amounts to the
amounts determined in accordance with IPSAS;

(c) Prepared financial statements in accordance with IPSAS for internal use only, without making them
available to external users;
(d) Prepared a reporting package in accordance with IPSAS for consolidation purposes without preparing
a complete set of financial statements as defined in IPSAS 1; or

(e) Did not present financial statements for previous periods.

1097 IPSAS 33
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Recognition and Measurement

Opening Statement of Financial Position on Adoption of IPSAS

15. A first-time adopter shall prepare and present an opening statement of financial position at the date
of adoption of IPSAS. This is the starting point for its accounting in accordance with accrual basis
IPSAS.

Accounting Policies

16. On the date of adoption of accrual basis IPSAS, a first-time adopter shall apply the requirements of
the IPSAS retrospectively except if required, or otherwise permitted, in this IPSAS.

17. A first-time adopter shall use the same accounting policies in its opening statement of financial
position and throughout all periods presented, except as specified in paragraphs 36–134. The
accounting policies shall comply with each IPSAS effective at the date of adoption of IPSAS, except
as specified in paragraphs 36–134.

18. A first-time adopter that takes advantage of the exemptions in paragraph 36–134 will be required to amend
its accounting policies after the exemptions that provided the relief have expired and/or when the relevant
items are recognized, measured and/or the relevant information is presented and/or disclosed in the financial
statements in accordance with the applicable IPSAS (whichever is earlier).

19. A first-time adopter shall apply the versions of accrual basis IPSAS effective at the date of adoption of IPSAS.
A first-time adopter may apply a new IPSAS that is not yet mandatory if that IPSAS permits early application.
Any new IPSAS that become effective during the period of transition shall be applied by the first-time adopter
from the date it becomes effective.

20. Except as described in paragraphs 36–134, a first-time adopter shall, in its opening statement of financial
position:

(a) Recognize all assets and liabilities whose recognition is required by IPSAS;

(b) Not recognize items as assets or liabilities if IPSAS do not permit such recognition;

(c) Reclassify items that it recognized in accordance with the previous basis of accounting as one type of
asset, liability or component of net assets/equity, but are a different type of asset, liability or component
of net assets/equity in accordance with IPSAS; and

(d) Apply IPSAS in measuring all recognized assets and liabilities.

21. The accounting policies that a first-time adopter uses in financial statements may differ from those that it
used at the end of its comparative period under its previous basis of accounting. The resulting adjustments
arise from transactions, other events or conditions before the date of adoption of IPSAS. Therefore, a first-
time adopter shall recognize those adjustments to the opening balance of accumulated surplus or deficit in
the period in which the items are recognized and/or measured (or, if appropriate, another category of net
assets/equity). The first-time adopter shall recognize these adjustments in the earliest period presented.
22. The transitional exemptions and provisions in other IPSAS apply to changes in accounting policies made by
an entity that already applies accrual basis IPSAS. The transitional exemptions and provisions in this IPSAS
applies to a first-time adopter that prepares and presents its annual financial statements on the adoption of,
and during the transition to accrual basis IPSAS.

Exceptions to the Retrospective Application of IPSAS

23. A first-time adopter’s estimates in accordance with IPSAS at the date of adoption of IPSAS, shall be
consistent with estimates made in accordance with the previous basis of accounting (after

IPSAS 33 1098
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

adjustments to reflect any difference in accounting policies), unless there is objective evidence that
those estimates were inconsistent with the requirements in IPSAS.

24. This IPSAS prohibits retrospective application of some aspects of accrual basis IPSAS. A first-time adopter
may receive information after the date of adoption of IPSAS about estimates that it had made under its
previous basis of accounting. In accordance with paragraph 23, a first-time adopter shall treat the receipt of
that information in the same way as non-adjusting events after the reporting period in accordance with IPSAS
14, Events after the Reporting Period.

25. A first-time adopter may need to make estimates in accordance with IPSAS at the date of adoption of IPSAS
or during the period of transition that were not required at that date under the previous basis of accounting.
To achieve consistency with IPSAS 14, those estimates in accordance with IPSAS shall reflect conditions
that existed at the date of adoption of IPSAS or at the date during the period of transition. In particular,
estimates determined at the date of adoption of IPSAS or during the period of transition of market prices,
interest rates or foreign exchange rates shall reflect market conditions at that date. For non-financial assets,
such as property, plant and equipment, estimates about the asset’s useful life, residual value or condition
reflect management’s expectations and judgment at the date of adoption of IPSAS or the date during the
period of transition.

26. Paragraphs 23–25 apply to the opening statement of financial position. They also apply to a comparative
period where an entity elects to present comparative information in accordance with paragraph 78, in which
case the references to the date of adoption of IPSAS are replaced by references to the end of that compar-
ative period.

Fair Presentation and Compliance with IPSAS

27. A first-time adopter’s first IPSAS financial statements shall fairly present the financial position,
financial performance, and cash flows of the entity. Fair presentation requires the faithful
representation of the effects of transactions, other events, and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, revenue, and expenses set out in IPSAS. If
a first-time adopter takes advantage of the exemptions in paragraphs 36–62, these exemptions will
affect the fair presentation of the financial statements and the first-time adopter’s ability to assert
compliance with accrual basis IPSAS, until the exemptions that provided the relief have expired
and/or when the relevant items are recognized and/or measured in accordance with the applicable
IPSAS (whichever is earlier).

28. A first-time adopter shall claim full compliance with IPSAS only when it has complied with all the
requirements of the applicable IPSAS effective at that date, subject to paragraph 11. If a first-time adopter
adopts one or more of the exemptions in paragraph 36–62, the fair presentation of the financial statements
and its ability to assert compliance with accrual basis IPSAS will be affected. An entity’s whose financial
statements comply with IPSAS shall make an explicit and unreserved statement of such compliance in
the notes. Financial statements shall not be described as complying with IPSAS unless they comply with
all the requirements of IPSAS, and shall be qualified as accrual basis IPSAS complaint financial
statements.

29. In accordance with paragraph 29 of IPSAS 1 fair presentation is achieved in virtually all circumstances by
compliance with applicable IPSAS. For a first-time adopter to claim full compliance with IPSAS, all the
requirements of the applicable IPSAS needs to be complied with to ensure that information is presented in a
manner that meets the qualitative characteristics, subject to paragraph 11.

30. The exemptions in paragraphs 36–62 provide relief from the recognition, measurement, presentation and/or
disclosure requirements in IPSAS on the date of adoption of IPSAS and during the period of transition. A first-time
adopter may elect to adopt these exemptions, but shall consider that applying these exemptions will affect the fair

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presentation of its financial statements and its ability to assert compliance with accrual basis IPSAS in accordance
with paragraphs 27 and 28 until the exemptions that provided the relief have expired and/or when the relevant
items are recognized, measured, and/or the relevant information is presented and/or disclosed in the financial
statements in accordance with the applicable IPSAS (whichever is earlier). Before making use of such exemptions,
a first-time adopter shall consider all the relevant facts and circumstances and the potential effect on its financial
statements.

31. A first-time adopter shall assess whether the transitional exemptions adopted affect the fair presentation
of the financial statements and the first-time adopter’s ability to assert compliance with accrual basis
IPSAS.

32. For example, a first-time adopter adopts the three-year transitional relief period for the recognition and
measurement of traffic fines because insufficient data is available about the value of fines issued, fines written
off, the compromises reached with offenders etc. The relief period is not applied to any other class of revenue.
The revenue received from fines is not material in relation to the financial statements as a whole. The entity
concludes that, by adopting the transitional exemption and provisions, fair presentation and compliance with
IPSAS will not be affected. As a result, the first-time adopter will still be able to achieve fair presentation and
assert compliance with accrual basis IPSAS at the date of adoption of accrual basis IPSAS or during the
period of transition.

Exemptions that Affect Fair Presentation and Compliance with Accrual Basis IPSAS during
the Period of Transition
33. A first-time adopter may adopt the exemptions in paragraphs 36–62. These exemptions will affect the
fair presentation of a first-time adopter’s financial statements and its ability to assert compliance with
accrual basis IPSAS during the period of transition in accordance with paragraphs 27 and 28 while
they are applied. A first-time adopter shall not apply these exemptions by analogy to other items.

34. Notwithstanding the exemptions provided in paragraphs 36–62 a first-time adopter is encouraged to
comply in full with all the requirements of the applicable IPSAS as soon as possible.

35. To the extent that a first-time adopter applies the exemptions in paragraph 36–62, it is not required
to apply any associated presentation and/or disclosure requirements in the applicable IPSAS until
the exemptions that provided the relief have expired or the relevant items are recognized and/or
measured in the financial statements in accordance with the applicable IPSAS (whichever is earlier).

Three Year Transitional Relief Period for the Recognition and/or Measurement of Assets and/or Liabilities

Recognition and/or Measurement of Assets and/or Liabilities

36. Where a first-time adopter has not recognized assets and/or liabilities under its previous basis of
accounting, it is not required to recognize and/or measure the following assets and/or liabilities for
reporting periods beginning on a date within three years following the date of adoption of IPSAS:

(a) Inventories (see IPSAS 12, Inventories);

(b) Investment property (see IPSAS 16, Investment Property);

(c) Property, plant, and equipment (see IPSAS 45, Property, Plant, and Equipment);
(d) Defined benefit plans and other long-term employee benefits (see IPSAS 39, Employee
Benefits);

(e) Biological assets and agricultural produce (see IPSAS 27, Agriculture);

(f) Intangible assets (see IPSAS 31, Intangible Assets);

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(fa) Right-of-use assets and the related lease liabilities (see IPSAS 43, Leases);
(g) Service concession assets and the related liabilities, either under the financial liability model or the
grant of a right to the operator model (see IPSAS 32, Service Concession Arrangements: Grantor);

(h) Financial instruments (see IPSAS 41, Financial Instruments); and

(i) Social benefits (see IPSAS 42, Social Benefits).

37. Where a first-time adopter applies the exemption in paragraph 36(d), it shall recognize the obligation and
any related plan assets at the same time.
38. Where a first-time adopter has recognized the assets and/or liabilities included in paragraph 36 under its
previous basis of accounting, it is not required to change its accounting policy(ies) in respect of the
measurement of these assets and/or liabilities for reporting periods beginning on a date within three years
following the date of adoption of IPSAS.

39. Subject to paragraphs 36 and 38, a first-time adopter is not required to change its accounting policy(ies) in
respect of the recognition and/or measurement of assets and/or liabilities for reporting periods beginning on
a date within three years following the date of adoption of IPSAS. The transitional exemptions in paragraphs
36 and 38 are intended to allow a first-time adopter a period to develop reliable 1 models for recognizing
and/or measuring its assets and/or liabilities during the period of transition. The first-time adopter may apply
accounting policies for the recognition and/or measurement of such assets and/or liabilities that do not comply
with the provisions of other IPSAS.

40. Subject to the provisions of paragraphs 36 and 38, a first-time adopter shall only change its accounting
policies during the period of transition to better conform to the accounting policies in accrual basis
IPSAS, and may retain its existing accounting policies until the exemptions that provided the relief have
expired or when the relevant items are recognized and/or measured in the financial statements in
accordance with the applicable IPSAS (whichever is earlier). A first-time adopter may change its
accounting policy in respect of the recognition and/or measurement of assets and/or liabilities on a class-
by-class or category-by-category basis where the use of classes or categories is permitted in the
applicable IPSAS.

41. To the extent that a first-time adopter applies the exemptions in paragraphs 36 and 38 which allows a
three-year transitional relief period to not recognize and/or measure financial assets, it is not required
to recognize and/or measure any related revenue, or other receivables settled in cash or another
financial asset in terms of IPSAS 47, Revenue.

41A. A first-time adopter shall apply the guidance in IPSAS 46 when measuring assets and/or liabilities.
41B. To the extent that a first-time adopter applies the exemptions in paragraphs 36 and 38 which allow a
three-year transitional relief period to not recognize and/or measure financial liabilities, it is not required
to recognize and/or measure any related expenses in terms of IPSAS 48, Transfer Expenses.

Recognition and/or Measurement of Revenue

42. A first-time adopter is not required to change its accounting policy in respect of the recognition and
measurement of revenue for reporting periods beginning on a date within three years following the
date of adoption of IPSAS. A first-time adopter may change its accounting policy in respect of
revenue on a class-by-class basis.

1
Information that is reliable is free from material error and bias, and can be depended on by users to faithfully represent that which it purports to
represent or could reasonably be expected to represent. Paragraph BC16 of IPSAS 1 discusses the transitional approach to the explanation of
reliability

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43. The transitional provision in paragraph 42 is intended to allow a first-time adopter a period to develop reliable
models for recognizing and measuring revenue in accordance with IPSAS 47 during the period of transition. The
first-time adopter may apply accounting policies for the recognition and/or measurement of revenue that do not
comply with the provisions of IPSAS 47. The transitional provision in paragraph 42 allows a first-time adopter to
apply IPSAS 47 incrementally to different classes of revenue. For example, a first-time adopter may be able to
recognize and measure property taxes and some other classes of revenue from transactions without binding
arrangements in accordance with IPSAS 47 from the date of adoption of IPSAS, but may require three years to
fully develop a reliable model for recognizing and measuring revenue from income tax and revenue from
transactions with binding arrangements.

Recognition and/or Measurement of Transfer Expenses

43A. A first-time adopter is not required to change its accounting policy in respect of the recognition and
measurement of transfer expenses for reporting periods beginning on a date within three years
following the date of adoption of IPSAS. A first-time adopter may change its accounting policy in
respect of transfer expenses on a class-by-class basis.

43B. The transitional provision in paragraph 43A is intended to allow a first-time adopter a period to develop reliable
models for recognizing and measuring transfer expenses in accordance with IPSAS 48, Transfer Expenses,
during the period of transition. The first-time adopter may apply accounting policies for the recognition and/or
measurement of transfer expenses that do not comply with the provisions of IPSAS 48. The transitional provision
in paragraph 43A allows a first-time adopter to apply IPSAS 48 incrementally to different classes of transfer
expenses. For example, a first-time adopter may be able to recognize and measure transfer expenses without
binding arrangements in accordance with IPSAS 48 from the date of adoption of IPSAS, but may require three
years to fully develop a reliable model for recognizing and measuring transfer expenses with binding
arrangements.

Other Exemptions

IPSAS 5, Borrowing Costs

44. Where a first-time adopter applies the exemption in paragraph 36 which allows a three year
transitional relief period to not recognize and/or measure assets, and elects to account for borrowing
costs in terms of the allowed alternative treatment, it is not required to capitalize any borrowing costs
on qualifying assets for which the commencement date for capitalization is prior to the date of
adoption of accrual basis IPSAS, until the exemption that provided the relief has expired and/or when
the relevant assets are recognized and/or measured in accordance with the applicable IPSAS
(whichever is earlier).

45. Paragraph 36 allows a first-time adopter to not, recognize and/or measure assets in accordance with IPSAS
16, 17, 27, 31 and 32 for a period of up to three years from the date of adoption of IPSAS. During this period,
a first-time adopter may need to consider the requirements of those IPSAS at the same time as the capitali-
zation of borrowing costs where it applies the allowed alternative method. Where a first-time adopter takes
advantage of the transitional exemption period for the recognition and/or measurement of assets in accord-
ance with IPSAS 16, 17, 27, 31 and 32 it is not required to capitalize borrowing costs incurred on qualifying
assets prior, or during the period of transition. Only when the exemptions that provided the relief have expired,
and/or when the relevant assets are recognized and/or measured in accordance with the applicable IPSAS
(whichever is earlier) will a first-time adopter be allowed to capitalize borrowing costs incurred on the quali-
fying assets in accordance with the allowed alternative treatment.

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IPSAS 43, Leases

46. Where a first-time adopter takes advantage of the exemption in paragraph 36 which allows a three-
year transitional relief period to not recognize assets, it is not required to apply the requirements
related to leases until the exemption that provided the relief has expired, and/or when the relevant
assets are recognized in accordance with the applicable IPSAS (whichever is earlier).

47. This IPSAS allows a first-time adopter a period of up to three years from the date of adoption of IPSAS to not
recognize assets in accordance with IPSAS 16, 17, 27, 31 and 32. During this period, a first-time adopter
may need to consider the recognition requirements of those IPSAS at the same time as considering the
recognition of leases in this IPSAS. Where a first-time adopter takes advantage of the exemption in
accordance with IPSAS 16, 17, 27, 31 and 32 it is not required to recognize lease assets and/or liabilities
until the exemptions that provided the relief have expired, and/or when the relevant assets are recognized in
accordance with the applicable IPSAS (whichever is earlier).

IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets

48. Where a first-time adopter takes advantage of the exemption in paragraph 36 which allows a three year
transitional relief period to not recognize and/or measure property, plant and equipment, it is not required
to recognize and/or measure the liability relating to the initial estimate of costs of dismantling and
removing the item and restoring the site on which it is located until the exemption for IPSAS 45 has
expired, and/or the relevant asset is recognized and/or measured in accordance with IPSAS 45 (whichever
is earlier).

49. This IPSAS allows a first-time adopter a period of up to three years from the date of adoption of IPSAS to not
recognize and/or measure property, plant and equipment. IPSAS 45 requires an entity to include as part of
the cost of an item of property, plant and equipment, the initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is located. Where a first-time adopter takes advantage
of the exemption that allows a three year transitional relief period for the recognition and/or measurement of
property, plant and equipment, a first-time adopter is not required to apply the requirements related to the
initial estimate of costs of dismantling and removing the item and restoring the site on which it is located until
the exemption that provided the relief has expired, and/or when the relevant asset is recognized and/or
measured in accordance with IPSAS 45 (whichever is earlier). The liability shall be measured as at the date
of adoption of IPSAS, or where a first-time adopter has taken advantage of the exemption that allows a three
year transitional relief period for the recognition and/or measurement of an asset, the date on which the
exemption that provides the relief has expired and/or the asset has been recognized and/or measured in
accordance with the applicable IPSAS.

50. Where a first-time adopter takes advantage of the exemption in paragraph 48, it shall recognize and/or
measure the obligation and any related asset at the same time.

IPSAS 20, Related Party Disclosures

51. A first-time adopter is not required to disclose related party relationships, related party transactions
and information about key management personnel for reporting periods beginning on a date within
three years following the date of adoption of IPSAS.

52. Notwithstanding the transitional provision in paragraph 51, a first-time adopter is encouraged to
disclose information about related party relationships, related party transactions and information
about key management personnel that is known at the date of adoption of IPSAS.

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IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial Statements and IPSAS 36, Investments
in Associates and Joint Ventures

53. Where a first-time adopter has not recognized its interests in controlled entities, associates or joint
ventures under its previous basis of accounting, it is not required to recognize and/or measure its
interests in other entities as a controlled entity, associate or joint venture for reporting periods
beginning on a date within three years following the date of adoption of accrual basis IPSAS.

54. Subject to paragraph 53, a first-time adopter is not required to change its accounting policy in respect of the
recognition and/or measurement of its interests in controlled entities, associates or joint ventures for reporting
periods beginning on a date within three years following the date of adoption of IPSAS. The transitional exemption
in paragraph 53 is intended to allow a first-time adopter a period to identify and appropriately classify its interests
in other entities as either controlled entities, associates or joint ventures during the period of transition. The first-
time adopter may apply accounting policies for the recognition and/or measurement of its interests in controlled
entities, associates or joint ventures that do not comply with the provisions of other IPSAS.

IPSAS 35, Consolidated Financial Statements

55. Subject to paragraph 53, a first-time adopter shall present consolidated financial statements following the
adoption of accrual basis IPSAS. A first-time adopter presenting consolidated financial statements is,
however, not required to eliminate all balances, transactions, revenue and expenses between entities
within the economic entity for reporting periods beginning on a date within three years following the date
of adoption of IPSAS.

56. On adoption of IPSAS, an entity may have controlled entities with a significant number of transactions
between controlled entities. Accordingly, it may be difficult to identify some transactions and balances that
need to be eliminated for the purpose of preparing the consolidated financial statements of the economic
entity. For this reason, paragraph 55 provides relief for a period of up to three years to fully eliminate
balances, transactions, revenue and expenses between entities within the economic entity.

57. Notwithstanding the transitional exemption in paragraph 55, a first-time adopter is encouraged to
eliminate those balances, transactions, revenue and expenses that are known on the date of adoption
of IPSAS to comply in full with the provisions of IPSAS 35 as soon as possible.

58. Where a first-time adopter has taken advantage of the transitional exemption in paragraph 53 and/or
paragraph 55, it shall not present financial statements as consolidated financial statements until:

(a) The exemptions that provided the relief have expired; and

(b) Its interests in other entities have been appropriately recognized and/or measured as controlled
entities, associates or joint ventures; or

(c) Inter-entity balances, transactions, revenue and expenses between entities within the economic
entity are eliminated (whichever is earlier).

IPSAS 36, Investments in Associates and Joint Ventures

59. When a first-time adopter applies the equity method on adoption of IPSAS 36, the investor is not required
to eliminate its share in the surplus and deficit resulting from upstream and downstream transactions
between the investor and its associate or joint venture for reporting periods beginning on a date within three
years following the date of adoption of IPSAS.

60. On adoption of IPSAS, a first-time adopter may be an investor in one or more associates or joint ventures
with a significant number of upstream and downstream transactions between the investor and the investee.
Accordingly, it may be difficult to identify some upstream and/or downstream transactions in which the

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investor’s share in the associate’s or joint venture’s surplus or deficit needs to be eliminated in applying the
equity method. For this reason, paragraph 59 provides the investor relief with a period of up to three years
to fully eliminate its share in the associate’s or joint venture’s surplus or deficit resulting from upstream and/or
downstream transactions.
61. Notwithstanding the transitional exemption in paragraph 59, a first-time adopter is encouraged to
eliminate its share in the associate’s and joint venture’s surplus and deficit resulting from upstream
and downstream transactions that are known on the date of adoption of IPSAS, to comply in full with
the provisions of IPSAS 36 as soon as possible.

62. Where a first-time adopter has taken advantage of the transitional exemption in paragraph 53 and/or
paragraph 59, it shall not present financial statements in which investments in associates or joint
ventures are accounted for using the equity method until:

(a) The exemptions that provided the relief have expired; and

(b) The interest in other entities have been appropriately recognized and/or measured as an
associate or joint venture; or

(c) Its share in the associate’s surplus and deficit resulting from upstream and downstream
transactions between the investor and the investee are eliminated (whichever is earlier).

IPSAS 40, Public Sector Combinations

62A. Where a first-time adopter applies the exemption in paragraph 36 which allows a three-year transitional
relief period to not recognize and/or measure assets and/or liabilities, the first-time adopter may be a party
to a public sector combination during that three year transitional relief period. The first-time adopter is
not required to recognize and/or measure the assets and/or liabilities associated with the public sector
combination, until the exemption that provided the relief has expired and/or when the relevant assets
and/or liabilities are recognized and/or measured in accordance with the applicable IPSAS (whichever is
earlier).

62B. Where a first-time adopter applies the exemption in paragraph 62A it shall not recognize goodwill in
respect of an acquisition. The first-time adopter shall recognize the difference between (a) and (b)
below in net assets/equity:

(a) The aggregate of:

(i) Any consideration transferred;

(ii) Any non-controlling interests in an acquired operation; and

(iii) Any previously held equity interests in an acquired operation.

(b) The net amounts of any identifiable assets acquired and the liabilities assumed.

62C. IPSAS 40 is applied prospectively. Consequently, a first-time adopter does not adjust any amounts of good-
will recognized as a result of a public sector combination that occurred prior to the application of IPSAS 40.

IPSAS 50, Exploration for and Evaluation of Mineral Resources

62D. Where a first-time adopter takes advantage of the exemption in paragraph 36 which allows a three-
year transitional relief period to not recognize assets, it is not required to apply the requirements
related to exploration and evaluation assets until the exemption that provided the relief has expired,
and/or when the relevant assets are recognized in accordance with the applicable IPSAS (whichever
is earlier).

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62E. This IPSAS allows a first-time adopter a period of up to three years from the date of adoption of IPSAS to
recognize assets in accordance with IPSAS 45. During this period, a first-time adopter may need to consider
the recognition requirements of this IPSAS at the same time as considering the recognition of exploration
and evaluation assets in this IPSAS. Where a first-time adopter takes advantage of the exemption in accord-
ance with IPSAS 45, it is not required to recognize exploration and evaluation assets until the exemptions
that provided relief have expired, and/or when the relevant assets are recognized in accordance with the
applicable IPSAS (whichever is earlier).

Stripping Costs in the Production Phase of a Surface Mine (Amendments to IPSAS 12)

62F. Where a first-time adopter takes advantage of the exemption in paragraph 36 which allows a three-
year transitional relief period to not recognize assets, it is not required to apply the requirements
related to stripping activity assets until the exemption that provided the relief has expired, and/or
when the relevant assets are recognized in accordance with the applicable IPSAS (whichever is ear-
lier).
62G. This IPSAS allows a first-time adopter a period of up to three years from the date of adoption of IPSAS to
recognize assets in accordance with IPSAS 45 or IPSAS 31, whichever applies. During this period, a first-
time adopter may need to consider the recognition requirements of this IPSAS at the same time as consid-
ering the recognition of exploration and evaluation assets in this IPSAS. Where a first-time adopter takes
advantage of the exemption in accordance with IPSAS 45 or IPSAS 31, whichever applies, it is not required
to recognize stripping activity assets until the exemptions that provided relief have expired, and/or when the
relevant assets are recognized in accordance with the applicable IPSAS (whichever is earlier).

Exemptions that Do Not Affect Fair Presentation and Compliance with Accrual Basis IPSAS
During the Period of Adoption
63. A first-time adopter is required, or may elect, to adopt the exemptions in paragraphs 64–134. These
exemptions will not affect the fair presentation of a first-time adopter’s financial statements and its
ability to assert compliance with accrual basis IPSAS during the period of transition in accordance
with paragraphs 27 and 28 while they are applied. A first-time adopter shall not apply these
exemptions by analogy to other items.

Using Deemed Cost to Measure Assets and/or Liabilities

64. A first-time adopter may elect to measure the following assets and/or liabilities at their fair value
when reliable cost information about the assets and liabilities is not available, and use that fair value
as the deemed cost for:

(a) Inventory (see IPSAS 12);

(b) Investment property, if the first-time adopter elects to use the historical cost model in IPSAS 16;

(ba) Right-of-use assets (see IPSAS 43);

(c) [Deleted];

(d) Intangible assets, other than internally generated intangible assets (see IPSAS 31) that meets:

(i) The recognition criteria in IPSAS 31 (excluding the reliable measurement criterion); and

(ii) The criteria in IPSAS 31 for revaluation (including the existence of an active market);

(e) Financial Instruments (see IPSAS 41); or

(f) Service concession assets (see IPSAS 32).

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64A. A first-time adopter may elect to measure property, plant, and equipment, at deemed cost, being current
operational value or fair value, in accordance with IPSAS 46, when reliable cost information about the assets
and liabilities is not available. In accordance with IPSAS 45, the primary objective for which an entity holds
property, plant, and equipment determines the current value measurement basis. Property, plant, and
equipment held for its operational capacity is measured at current operational value. Property, plant, and
equipment held for its financial capacity is measured at fair value.

65. Deemed cost can only be determined where the acquisition cost of the asset and/or the liability is not
available. Deemed cost assumes that the entity had initially recognized the asset and/ or the liability at the
given date. Subsequent depreciation or amortization is based on that deemed cost on the premise that the
acquisition cost is equal to the deemed cost. For example, a first-time adopter may elect to measure property,
plant and equipment at deemed cost at the date of adoption of IPSAS because cost information about the
item of property, plant and equipment was not available on that date, and use current operational value, or
fair value as its deemed cost at that date. Any subsequent depreciation is based on the value measured at
that date and starts from the date that the deemed cost has been determined.

66. The use of deemed cost is not considered a revaluation or the application of the current value model for
subsequent measurement in accordance with other IPSAS.

67. A first-time adopter may elect to use the revaluation amount of property, plant, and equipment under its
previous basis of accounting as deemed cost if the revaluation was, at the date of the revaluation, broadly
comparable to:

(a) Fair value, when the property, plant, and equipment is held for its financial capacity; or

(ab) Current operational value, when the property, plant, and equipment is held for its operational
capacity.
(b) [Deleted]

68. A first-time adopter may have established a deemed cost in accordance with its previous basis of accounting
for property, plant, and equipment by measuring it at fair value, or current operational value, at one particular
date because of a specific event:

(a) If the measurement date is at or before the date of adoption of IPSAS, a first-time adopter may use
such event-driven fair value, or current operational value, measurements as deemed cost for IPSAS
at the date of that measurement.

(b) If the measurement date is after the date of adoption of IPSAS, but during the period of transition where
the first-time adopter takes advantage of the exemption that provides a three-year transitional relief
period to not recognize and/or measure certain assets, the event-driven fair value, or current
operational value, measurements may be used as deemed cost when the event occurs. A first-time
adopter shall recognize the resulting adjustments directly in accumulated surplus or deficit when the
asset is recognized and/or measured.

69. In measuring the current value in accordance with paragraph 67, the first-time adopter shall apply the defini-
tion of current operational value, or fair value, and guidance in IPSAS 46.
70. If observable inputs of current value are not available for inventory, investment property that is of a
specialized nature, or property, plant, and equipment, a first-time adopter may consider other
measurement techniques in determining a deemed cost in accordance with IPSAS 46.

Using Deemed Cost to Measure Assets Acquired Through a Non-Exchange Transaction

71. A first-time adopter may elect to measure an asset acquired through a non-exchange transaction at
its fair value, or for property, plant, and equipment at its current operational value or fair value, when
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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

reliable cost information about the asset is not available, and use that fair value as its deemed cost.
In accordance with IPSAS 45, the primary objective for which an entity holds property, plant, and
equipment determines the current value measurement basis. Property, plant, and equipment held for
its operational capacity is measured at current operational value. Property, plant, and equipment held
for its financial capacity is measured at fair value.

Using Deemed Cost for Investments in Controlled Entities, Joint Ventures and Associates (IPSAS 34)

72. Where a first-time adopter measures an investment in a controlled entity, joint venture or associate
at cost in its separate financial statements, it may, on the date of adoption of IPSAS, elect to measure
that investment at one of the following amounts in its separate opening statement of financial
position:
(a) Cost; or

(b) Deemed cost. The deemed cost of such an investment shall be its fair value at the first-time
adopter’s date of adoption of IPSAS in its separate financial statements.

73. A first-time adopter may have established a deemed cost in accordance with its previous basis of accounting
for an investment in a controlled entity, joint venture or associate by measuring it at its fair value at one
particular date because of a specific event. In such instances, a first-time adopter applies paragraph 72(a)
and (b).

Date at which Deemed Cost can be Determined

74. The date at which deemed cost is determined may vary depending on whether the first-time adopter
takes advantage of the exemptions that provides a three-year transitional relief period to not recognize
and/or measure certain assets and/or liabilities. When the first-time adopter takes advantage of the
exemption, deemed cost can be determined at any date during this period, or on the date that the
exemption expires (whichever is earlier), and shall be recognized in accordance with paragraph 76. If
a first-time adopter does not adopt the exemption, deemed cost shall be determined at the beginning
of the earliest period for which the first-time adopter presents IPSAS financial statements.

75. Where a first-time adopter takes advantage of the exemption that provides a three-year transitional relief
period to not recognize and/or measure certain assets and/or liabilities, it may determine a deemed cost for
that asset and/or liability at any point of time within the three year transitional relief period.
76. When a deemed cost is determined during the period in which a first-time adopter takes advantage
of the exemption that provides a three year transitional exemption not to recognize and/or measure
an asset and/or liability, a first-time adopter shall recognize the adjustment against the opening
accumulated surplus or deficit in the year in which the deemed cost of the asset and/or liability is
recognized and/or measured.

IPSAS 1, Presentation of Financial Statements

Comparative Information

77. A first-time adopter is encouraged, but not required, to present comparative information in its first
transitional IPSAS financial statements or its first IPSAS financial statements presented in
accordance with this IPSAS. When a first-time adopter presents comparative information, it shall be
presented in accordance with the requirements of IPSAS 1.

78. Where a first-time adopter elects to present comparative information, the first transitional IPSAS
financial statements or the first IPSAS financial statements presented in accordance with this IPSAS
shall include:

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(a) One statement of financial position with comparative information for the preceding period, and
an opening statement of financial position as at the beginning of the reporting period prior to
the date of adoption of accrual basis IPSAS;

(b) One statement of financial performance with comparative information for the preceding period;
(c) One statement of changes in net assets/equity with comparative information for the preceding
period;

(d) One cash flow statement with comparative information for the preceding period;
(e) A comparison of budget and actual amounts for the current year as a separate additional
financial statement or as a budget column in the financial statements if the first-time adopter
makes its approved budget publicly available; and
(f) Related notes including comparative information, and the disclosure of narrative information
about material adjustments as required by paragraph 142.

79. Where a first-time adopter elects to not present comparative information, its first transitional IPSAS
financial statements following the adoption of accrual basis IPSAS or its first IPSAS financial
statements presented in accordance with this IPSAS shall include:

(a) One statement of financial position, and an opening statement of financial position at the date
of adoption of accrual basis IPSAS;

(b) One statement of financial performance;

(c) One statement of changes in net assets/equity;

(d) One cash flow statement;

(e) A comparison of budget and actual amounts for the current year as a separate additional
financial statement or as a budget column in the financial statements if the first-time adopter
makes its approved budget publicly available; and

(f) Related notes and the disclosure of narrative information about material adjustments as
required by paragraph 142.

80. Where a first-time adopter takes advantage of the exemptions in paragraphs 36–62 which allow a
three-year transitional relief period to not recognize and/or measure an item, comparative information
for the year following the date of adoption of IPSAS shall be adjusted only when information is
available about the items following their recognition and/or measurement during the relief period.

81. IPSAS 1 requires an entity to present comparative information in respect of the previous period for all
amounts reported in the financial statements. Where a first-time adopter takes advantage of the exemption
that provides a three-year transitional exemption to not recognize and/or measure an item, it shall, during the
period of transition present comparative information for an item recognized and/or measured during that
period only, if information is available about the item for the comparative period. The first-time adopter shall
apply the requirements in IPSAS 1 after it has adjusted its first IPSAS financial statements.

Non-IPSAS Comparative Information

82. A first-time adopter may present comparative information in accordance with its previous basis of accounting.
In any financial statements containing comparative information in accordance with the previous basis of
accounting, the first-time adopter shall label the information prepared using the previous basis of accounting
information as not being prepared in accordance with IPSAS, and disclose the nature of the main adjustments
that would be required to comply with IPSAS.

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83. Where a first-time adopter presents non-IPSAS comparative information in its first IPSAS or first transitional
IPSAS financial statements following its adoption of accrual basis IPSAS, the transitional exemptions and
provisions provided in this Standard shall not be applied to the non-IPSAS comparative information presented
in the first IPSAS financial statements or first transitional IPSAS financial statements.

Non-IPSAS Historical Summaries

84. A first-time adopter may elect to present historical summaries of selected data for periods before the first
period for which it presents financial statements in accordance with IPSAS. This IPSAS does not require
such summaries to comply with the recognition and measurement requirements of IPSAS. In any financial
statements containing historical summaries in accordance with the previous basis of accounting, the first-
time adopter shall label the previous basis of accounting information prominently as not being prepared in
accordance with IPSAS, and disclose the nature of the main adjustments that would be required to comply
with IPSAS. The first-time adopter need not quantify those adjustments.

IPSAS 4, The Effects of Changes in Foreign Exchange Rates

85. On the date of adoption of IPSAS a first-time adopter need not comply with the requirements for
cumulative translation differences that exist at that date. If a first-time adopter uses this exemption:

(a) The cumulative translation differences for all foreign operations are deemed to be zero at the
date of adoption of IPSAS; and

(b) The gain or loss on a subsequent disposal of any foreign operation shall exclude translation
differences that arose before the date of adoption of IPSAS and shall include later translation
differences.

85A. A first-time adopter need not apply Appendix A of IPSAS 4 to assets, expenses and revenue in the
scope of Appendix A initially recognized before the date of adoption of IPSAS.

85B. Instead of applying paragraph 85, a controlled entity that uses the exemption in paragraph 129(a)
may elect, in its financial statements, to measure cumulative translation differences for all foreign
operations at the carrying amount that would be included in the controlling entity’s consolidated
financial statements, based on the controlling entity’s date of adoption of IPSAS, if no adjustments
were made for consolidation procedures and for the effects of the public sector combination in which
the controlling entity acquired the controlled entity. A similar election is available to an associate or
joint venture that uses the exemption in paragraph 129(a).

86. A first-time adopter shall apply the requirement to treat any goodwill (see IPSAS 40) arising on the
acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition of that foreign operation, as assets and liabilities of the
foreign operation, prospectively on the date of adoption of IPSAS.

87. In applying the transitional exemption in paragraph 85, a first-time adopter shall not restate prior years for
the acquisition of a foreign operation acquired prior to the date of adoption of IPSAS, and accordingly shall,
where appropriate, treat goodwill and fair value adjustments arising on acquisition as assets and liabilities of
the entity rather than as assets and liabilities of the foreign operation. Therefore, those goodwill and fair value
adjustments either are already expressed in the entity’s functional currency or are non-monetary foreign
currency items, which are reported using the exchange rate at the date of the acquisition.

IPSAS 5, Borrowing Costs

88. A first-time adopter is encouraged, but not required, to apply the requirements of IPSAS 5
retrospectively where it adopts or changes its accounting policy to the benchmark treatment.

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89. Where a first-time adopter adopts or changes its accounting policy to the benchmark treatment it is
allowed to designate any date before the date of adoption of IPSAS and apply IPSAS 5 prospectively
on or after that designated date.

90. Where a first-time adopter changes its accounting policy to the allowed alternative treatment, any
borrowing costs incurred both before and after date of adoption of IPSAS on qualifying assets for
which the commencement date for the capitalization is prior to the date of adoption of IPSAS, shall
be recognized retrospectively in accordance with the allowed alternative treatment.

IPSAS 10, Financial Reporting in Hyperinflationary Economies

Severe Hyperinflation

91. If a first-time adopter has a functional currency that was, or is, the currency of a hyperinflationary
economy, it shall determine whether it was subject to severe hyperinflation before the date of
adoption of IPSAS.

92. The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both of the following
characteristics:

(a) A reliable general price index is not available to all entities with transactions and balances in the
currency; and
(b) Exchangeability between the currency and a relatively stable foreign currency does not exist.

93. The functional currency of a first-time adopter ceases to be subject to severe hyperinflation on the functional
currency normalization date. That is the date when the functional currency no longer has either, or both, of
the characteristics in paragraph 92 or when there is a change in the first-time adopter’s functional currency
to a currency that is not subject to severe hyperinflation.

94. When a first-time adopter’s date of adoption of IPSAS is on, or after, the functional currency
normalization date, the first-time adopter may elect to measure all assets and liabilities held before
the functional currency normalization date at fair value on the date of adoption to IPSAS. The first-
time adopter may use that fair value as the deemed cost of those assets and liabilities in the opening
statement of financial position.

IPSAS 43, Leases

95. A first-time adopter shall on the date of adoption of IPSAS, classify all existing leases as operating
or finance leases on the basis of circumstances existing at the inception of the lease, to the extent
that these are known on the date of adoption of IPSAS. A first-time adopter may assess whether a
contract existing at the date of adoption of IPSAS contains a lease by applying paragraphs 10–12 of
IPSAS 43 to those contracts on the basis of facts and circumstances existing at that date.

96. [Deleted]

96A. When a fist-time adopter that is a lessee recognizes lease liabilities and right-of-use assets, it may apply the
following approach to all of its leases (subject to the practical expedients described in paragraph 96C):

(a) Measure a lease liability at the date of adoption of IPSAS. A lessee following this approach shall
measure that lease liability at the present value of the remaining lease payments (see paragraph 96D),
discounted using the lessee’s incremental borrowing rate (see paragraph 96D) at the date of adoption
of IPSAS.

(b) Measure a right-of-use asset at the date of adoption of IPSAS. The lessee shall choose, on a lease-
by-lease basis, to measure that right-of-use asset at either:

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(i) Its carrying amount as if IPSAS 43 had been applied since the commencement date of the lease
(see paragraph 96D), but discounted using the lessee’s incremental borrowing rate at the date
of adoption of IPSAS; or

(ii) An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognized in the statement of financial position immediately
before the date of adoption of IPSAS;

(c) Apply IPSAS 21 or IPSAS 26 to right-of-use assets at the date of adoption of IPSAS.
96B. Notwithstanding the requirements in paragraph 96A, a first-time adopter that is a lessee shall measure the
right-of-use asset at fair value at the date of adoption of IPSAS for leases that meet the definition of
investment property in IPSAS 16 and are measured using the current value model in IPSAS 16 from the date
of adoption of IPSAS.

96C. A first-time adopter that is a lessee may do one or more of the following at the date of adoption of IPSAS,
applied on a lease-by-lease basis:
(a) Apply a single discount rate to a portfolio of leases with reasonably similar characteristics (for example,
a similar remaining lease term for a similar class of underlying asset in a similar economic environ-
ment).
(b) Elect not to apply the requirements in paragraph 96A to leases for which the lease term (see paragraph
96D) ends within 12 months of the date of adoption of IPSAS. Instead, the entity shall account for
(including disclosure of information about) these leases as if they were short-term leases accounted
for in accordance with paragraph 7 of IPSAS 43.

(c) Elect not to apply the requirements in paragraph 96A to leases for which the underlying asset is of low
value (as described in paragraphs AG4–AG9 of IPSAS 43). Instead, the entity shall account for
(including disclosure of information about) these leases in accordance with paragraph 7 of IPSAS 43.

(d) Exclude initial direct costs (see paragraph 96D) from the measurement of the right-of-use asset at the
date of adoption of IPSAS.

(e) Use hindsight, such as in determining the lease term if the contract contains options to extend or ter-
minate the lease.

96D. Lease payments, lessor, lessee, lessee’s incremental borrowing rate, commencement date of the lease,
initial direct costs and lease term are defined terms in IPSAS 43 and are used in this Standard with the same
meaning.

IPSAS 18, Segment Reporting

97. A first-time adopter is not required to present segment information for reporting periods beginning
on a date within three years following the date of adoption of IPSAS.

IPSAS 21, Impairment of Non-Cash-Generating Assets

98. A first-time adopter shall apply the requirements in IPSAS 21 prospectively from the date of adoption
of IPSAS, except in relation to those assets where a first-time adopter takes advantage of the
exemption in paragraph 36 which allows a three-year transitional relief period to not recognize and/or
measure assets. When a first-time adopter takes advantage of the exemption that provides a three-
year transitional relief period in IPSAS 16, 17, 27, 31 and 32, it applies IPSAS 21 when the exemption
that provided the relief has expired, and/or the relevant assets are recognized and/or measured in
accordance with the applicable IPSAS (whichever is earlier).

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99. On the date that the transitional exemption that provided the relief has expired, and/or when the relevant
assets are recognized and/or measured in the financial statements (whichever is earlier), a first-time
adopter shall assess whether there is any indication that the non-cash-generating assets recognized
and/or measured are impaired. Any impairment loss shall be recognized in opening accumulated surplus
or deficit on the date of adoption of IPSAS, or in opening accumulated surplus or deficit in the reporting
period in which the transitional exemption expires, and/or the relevant assets are recognized and/or
measured (whichever is earlier).
100. A first-time adopter shall apply the requirements of IPSAS 21 prospectively. This means that on the date of
adoption of accrual basis IPSAS, or if the first-time adopter has adopted transitional relief relating to the
recognition and/or measurement of assets, only when the three year transitional exemption expires, and/or
when the relevant assets are recognized and/or measured in the financial statements (whichever is earlier),
will a first-time adopter be required to assess whether there is an indication that any non-cash-generating
assets included in the opening statement of financial position, are impaired.

IPSAS 39, Employee Benefits

101. A first-time adopter shall recognize and/or measure all employee benefits on the date of adoption of
IPSAS, except for defined benefit plans and other long-term employee benefits where it takes
advantage of the exemption in paragraph 36.

Defined Benefit Plans and Other Long-Term Employee Benefits

102. On the date of adoption of IPSAS, or where a first-time adopter takes advantage of the three-year
transitional exemption, the date on which the exemption expires, or when the relevant liabilities are
recognized and/or measured in the financial statements (whichever is earlier), a first-time adopter
shall determine its initial liability for defined benefit plans and other long-term employee benefits at
that date as:

(a) The present value of the obligation at the date of adoption of IPSAS, or where a first-time
adopter takes advantage of the three-year transitional relief period, the date on which the
exemption expires, or when the relevant liabilities are recognized and/or measured in the
financial statements (whichever is earlier), by using the Projected Unit Credit Method; and

(b) Minus the fair value, at the date of adoption of IPSAS, or where a first-time adopter takes
advantage of the three-year transitional relief period, the date on which the exemption expires,
or when the relevant liabilities are recognized and/or measured in the financial statements
(whichever is earlier) of plan assets (if any) out of which the obligations are to be settled
directly.

(c) [Deleted]

103. If the initial liability in accordance with paragraph 102 is more or less than the liability that was
recognized and/or measured at the end of the comparative period under the first-time adopter’s
previous basis of accounting, the first-time adopter shall recognize that increase/decrease in opening
accumulated surplus or deficit in the period in which the items are recognized and/or measured.
104. The effect of the change in the accounting policy to IPSAS 39 includes any remeasurements that arose, if
any, in earlier periods. Under its previous basis of accounting, a first-time adopter may not have recognized
and/or measured any liability, in which case the increase in the liability will represent the full amount of the
liability minus the fair value, at the date of adoption of IPSAS or where a first-time adopter takes advantage
of the three year transitional relief period, the date on which the exemption expires, or when the relevant
liabilities are recognized and/or measured in the financial statements (whichever is earlier), of any plan assets

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in accordance with paragraph 102(b). This increased liability is recognized in opening accumulated surplus
or deficit in the period in which the items are recognized and/or measured.

105. A first-time adopter shall recognize all cumulative remeasurements in opening accumulated surplus
or deficit in the period in which the items are recognized and/or measured.
106. [Deleted]

107. [Deleted]

IPSAS 26, Impairment of Cash-Generating Assets

108. A first-time adopter shall apply the requirements in IPSAS 26 prospectively from the date of adoption
of IPSAS, except in relation to those assets where a first-time adopter takes advantage of the
exemption in paragraph 36 which allows a three-year transitional relief period to not recognize and/or
measure assets. When a first-time adopter takes advantage of the exemption that provides a three-
year transitional relief period in IPSAS 16, 17, 27, 31 and 32, it applies IPSAS 26 when the exemption
that provided the relief has expired, and/or the relevant assets are recognized and/or measured in
accordance with the applicable IPSAS (whichever is earlier).

109. On the date that the transitional exemption that provided the relief has expired, and/or when the relevant
assets are recognized and/or measured in the financial statements (whichever is earlier), a first-time
adopter shall assess whether there is any indication that the cash-generating assets recognized and/or
measured are impaired. Any impairment loss shall be recognized in opening accumulated surplus or
deficit on the date of adoption of IPSAS, or in opening accumulated surplus or deficit in the reporting
period in which the transitional exemption expires, and/or the relevant assets are recognized and/or
measured (whichever is earlier).

110. A first-time adopter shall apply the requirements of IPSAS 26 prospectively. This means that on the date of
adoption of accrual basis IPSAS, or if the first-time adopter has adopted the transitional relief relating to the
recognition and/or measurement of assets, only when the three year transitional exemption expires, and/or
when the relevant assets are recognized and/or measured in the financial statements (whichever is earlier),
will a first-time adopter be required to assess whether there is an indication that any cash-generating assets
included in the opening statement of financial position, are impaired.

IPSAS 28, Financial Instruments: Presentation

111. On the date of adoption of IPSAS, a first-time adopter shall evaluate the terms of the financial
instrument to determine whether it contains both a liability component and a net asset/equity
component. If the liability component is no longer outstanding on the date of adoption of IPSAS, the
first-time adopter need not separate the compound financial instrument into a liability component
and a net asset/equity component.

112. IPSAS 28 requires an entity to split a compound financial instrument at inception into separate liability and
net asset/equity components. If the liability component is no longer outstanding, retrospective application of
IPSAS 28 involves separating two portions of net assets/equity. The first portion is in accumulated surplus
and deficit and represents the cumulative interest accreted on the liability component. The other portion
represents the original net asset/equity component. However, this IPSAS allows a first-time adopter to not
separate these two portions if the liability component is no longer outstanding at the date of adoption of
IPSAS.
IPSAS 41, Financial Instruments

Designation of Financial Instruments on the Date of Adoption of IPSAS or During the Period of Transition

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113. A first-time adopter may designate a financial asset or financial liability as a financial asset or
financial liability at fair value through surplus or deficit that meet the criteria for designation in IPSAS
41, in accordance with paragraph 113A. A first-time adopter shall disclose the fair value of financial
assets and financial liabilities designated into each category at the date of designation, their
classification and carrying amount.

113A. IPSAS 41 permits a financial asset or financial liability to be designated on initial recognition
(provided it meets certain criteria) as a financial asset or financial liability as at fair value though
surplus or deficit. Despite this requirement, an exception applies when a first-time adopter is
permitted to designate, at the date of adoption of IPSAS, any financial asset or financial liability as
at fair value through surplus or deficit provided the asset meets the criteria in paragraph 44 of
IPSAS 41 or liability meets the criteria in paragraph 46 of IPSAS 41 at that date.

114. [Deleted]

114A. An entity may designate an investment in an equity instrument as at fair value through net assets/equity in
accordance with paragraph 106 of IPSAS 41 on the basis of the facts and circumstances that exist at the
date of adoption of IPSAS.

Derecognition of Financial Assets and Financial Liabilities

115. Except as permitted by paragraph 116 a first-time adopter shall apply the derecognition requirements
in IPSAS 41 prospectively for transactions occurring on or after the date of adoption of IPSAS, or
where a first-time adopter takes advantage of the exemptions not to recognize financial instruments,
the date on which the exemptions that provided the relief have expired and/or the financial instruments
are recognized (whichever is earlier). For example, if a first-time adopter derecognized non-derivative
financial assets or non-derivative financial liabilities in accordance with its previous basis of
accounting as a result of a transaction that occurred before the date of adoption of IPSAS, it shall not
recognize those assets and liabilities in accordance with IPSAS 41, unless they qualify for recognition
as a result of a later transaction or event.

116. Notwithstanding the provision in paragraph 115, a first-time adopter may apply the derecognition
requirements in IPSAS 41 retrospectively from a date of the first-time adopter choosing, provided
that the information needed to apply IPSAS 41 to financial assets and financial liabilities
derecognized as a result of past transactions was obtained at the time of initially accounting for these
transactions.

Hedge Accounting
117. As required by IPSAS 41, a first-time adopter shall at the date of adoption of IPSAS, or where a first-
time adopter takes advantage of the exemption that provides a three year transitional relief period to
not recognize and/or measure financial instruments, the date when the exemption that provided the
relief has expired and/or the relevant financial instruments are recognized and/or measured in ac-
cordance with the applicable IPSAS (whichever is earlier):

(a) Measure all derivatives at fair value; and

(b) Eliminate all deferred losses and gains arising on derivatives that were reported in accordance
with its previous basis of accounting as if they were assets or liabilities.

118. A first-time adopter shall not reflect in its opening statement of financial position a hedging
relationship of a type that does not qualify for hedge accounting in accordance with IPSAS 41 (for
example, many hedging relationships where the hedging instrument is a stand-alone written option;
or where the hedged item is a net position in a cash flow hedge for another risk than foreign currency
risk). However, if a first-time adopter designated a net position as a hedged item in accordance with

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its previous basis of accounting, it may designate as a hedged item in accordance with IPSAS an
individual item within that net position, or a net position if that meets the requirements in paragraph
146 of IPSAS 41, provided that it does so no later than the date of adoption of IPSAS or where it
takes advantage of the exemption that provides a three year transitional relief period to not
recognize and/or measure financial instruments, the date when the exemption that provided the
relief has expired, and/or the relevant financial instruments are recognized and/or measured in
accordance with the applicable IPSAS (whichever is earlier).
119. If, before the date of adoption of IPSAS, or where a first-time adopter takes advantage of the
exemption that provides a three year transitional relief period to not recognize and/or measure
financial instruments the date on which the exemption that provided the relief has expired, and/or the
relevant financial instruments are recognized and/or measured in accordance with the applicable
IPSAS (whichever is earlier), a first-time adopter had designated a transaction as a hedge but the
hedge does not meet the conditions for hedge accounting in IPSAS 41, the first-time adopter shall
apply paragraphs 135 and 136 of IPSAS 41 to discontinue hedge accounting. Transactions entered
into before the date of adoption of IPSAS, or where a first-time adopter takes advantage of the
exemption that provides a three year transitional relief period to not recognize and/or measure
financial instruments, the date when the transitional exemption expires and/or the relevant financial
instruments are recognized and/or measured in accordance with IPSAS 41 (whichever is earlier), shall
not be retrospectively designated as hedges.

Classification and Measurement of Financial Instruments

119A. An entity shall assess whether a financial asset meets the conditions in paragraph 40 or the conditions in
paragraph 41 of IPSAS 41 on the basis of the facts and circumstances that exist at the date of adoption of
IPSAS.

119B. If it is impracticable to assess a modified time value of money element in accordance with paragraphs AG68–
AG70 of IPSAS 41 on the basis of the facts and circumstances that exist at the date of transition to IPSAS,
an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts
and circumstances that existed at the date of adoption of IPSAS without taking into account the requirements
related to the modification of the time value of money element in paragraphs AG68–AG70 of IPSAS 41. (In
this case, the entity shall also apply paragraph 49J of IPSAS 30 but references to ‘paragraph 161 of IPSAS
41’ shall be read to mean this paragraph and references to ‘initial recognition of the financial asset’ shall be
read to mean ‘at the date of adoption of IPSAS’.)

119C. If it is impracticable to assess whether the fair value of a prepayment feature is insignificant in accordance
with paragraph AG74(c) of IPSAS 41 on the basis of the facts and circumstances that exist at the date of
adoption of IPSAS, an entity shall assess the contractual cash flow characteristics of that financial asset on
the basis of the facts and circumstances that existed at the date of adoption of IPSAS without taking into
account the exception for prepayment features in paragraph AG74 of IPSAS 41. (In this case, the entity shall
also apply paragraph 49K of IPSAS 30 but references to ‘paragraph 162 of IPSAS 41’ shall be read to mean
this paragraph and references to ‘initial recognition of the financial asset’ shall be read to mean ‘at the date
of adoption of IPSAS’.)

119D. If it is impracticable (as defined in IPSAS 3) for an entity to apply retrospectively the effective interest method
in IPSAS 41, the fair value of the financial asset or the financial liability at the date of adoption of IPSAS shall
be the new gross carrying amount of that financial asset or the new amortized cost of that financial liability at
the date of adoption of IPSAS.

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Impairment of Financial Assets

120. A first-time adopter shall apply the impairment requirements prospectively from the date of adoption of
IPSAS, except in relation to those financial assets where it takes advantage of the exemptions in
paragraphs 36, 38 and 42 which allow a three-year transitional relief period to not recognize and/or
measure financial instruments. When a first-time adopter adopts the three-year transitional relief period
provided, it applies the impairment provisions when exemption that provided the relief has expired, and/or
the relevant financial instruments are recognized and/or measured in accordance with IPSAS 41
(whichever is earlier).

121. A first-time adopter shall on the date of adoption of IPSAS, or when the exemptions that provided the
relief have expired, and/or when the relevant financial instruments are recognized and/or measured
and relevant information has been presented and/or disclosed in the financial statements in
accordance with the applicable IPSAS (whichever is earlier), assess at that date whether there is any
indication that the financial instrument recognized and/or measured in the statement of financial
position, is impaired. Any impairment loss incurred shall be recognized in opening accumulated
surplus or deficit in the period in which the financial instrument is recognized and/or measured.

122. A first-time adopter shall apply the impairment requirements prospectively. This means that on the date of
adoption of IPSAS 41, when the exemptions that provided the relief have expired, and/ or when the relevant
financial instruments are recognized and/or measured, a first-time adopter shall be required to assess
whether there is an indication that the financial instrument is impaired. Any impairment loss shall be
recognized in opening accumulated surplus or deficit on the date of adoption of IPSAS, or in the opening
accumulated surplus or deficit of the reporting period in which the exemptions that provided the relief have
expired, and/or the relevant financial instruments are recognized and/or measured (whichever is earlier).

122A. At the date of adoption of IPSAS 41, when the exemptions that provided the relief have expired, and/ or when
the relevant financial instruments are recognized and/or measured, a first-time adopter shall use reasonable
and supportable information that is available without undue cost or effort to determine the credit risk at the
date that financial instruments were initially recognized (or for loan commitments and financial guarantee
contracts the date that the entity became a party to the irrevocable commitment in accordance with paragraph
78 of IPSAS 41) and compare that to the credit risk at the date of adoption of IPSAS (also see paragraphs
AG350–AG351 of IPSAS 41).

122B. When determining whether there has been a significant increase in credit risk since initial recognition, an
entity may apply:
(a) The requirements in paragraph 82 and AG179–AG182 of IPSAS 41; and

(b) The rebuttable presumption in paragraph 83 of IPSAS 41 for contractual payments that are more than
30 days past due if an entity will apply the impairment requirements by identifying significant increases
in credit risk since initial recognition for those financial instruments on the basis of past due information.

122C. If, at the date of adoption of IPSAS, determining whether there has been a significant increase in credit risk
since the initial recognition of a financial instrument would require undue cost or effort, an entity shall
recognize a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until
that financial instrument is derecognized (unless that financial instrument is low credit risk at a reporting date,
in which case paragraph 122B(a) applies).

Embedded Derivatives

122E. A first-time adopter shall assess whether an embedded derivative is required to be separated from the host
contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date

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it first became a party to the contract and the date a reassessment is required by paragraph AG109 of IPSAS
41.

IPSAS 30, Financial Instruments: Disclosures

123. Where the first-time adopter elects to present comparative information in accordance with paragraph
78, it is not required to present information about the nature and extent of risks arising from financial
instruments for the comparative period in its first transitional IPSAS financial statements or its first
IPSAS financial statements.

124. A first-time adopter shall apply the requirements in IPSAS 30 pros­pectively from the date of adoption
of IPSAS, or when the exemptions that provided the relief have expired, and/or when the relevant
financial instrument is recognized and/or measured in accordance with IPSAS 41 (whichever is
earlier).

IPSAS 31, Intangible Assets

125. A first-time adopter shall recognize and/or measure an internally generated intangible asset if it meets the
definition of an intangible asset and the recognition criteria in IPSAS 31, even if the first-time adopter has,
under its previous basis of accounting, expensed such costs. A deemed cost may not be determined for
internally generated intangible assets.

126. As required by paragraph 20, a first-time adopter is required to recognize all assets for which recognition is
required by IPSAS. A first-time adopter shall therefore recognize any internally generated intangible asset if
it meets the definition of an intangible asset and the recognition criteria in IPSAS 31, irrespective of whether
such costs were expensed under its previous basis of accounting.

IPSAS 32, Service Concession Arrangements

Initial Measurement of Related Liability

127. Where a first-time adopter elects to measure service concession assets using deemed cost, the
related liabilities shall be measured as follows:

(a) For the liability under the financial liability model, the remaining contractual cash flows
specified in the binding arrangement and the rate prescribed in IPSAS 32; or

(b) For the liability under the grant of a right to the operator model, the fair value of the asset less
any financial liabilities, adjusted to reflect the remaining period of the service concession
arrangement.

128. A first-time adopter shall recognize and/or measure any difference between the value of the service
concession asset and the financial liability under the financial liability model in paragraph 127 in
opening accumulated surplus or deficit in the period in which the items are recognized and/or
measured.

IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial Statements and IPSAS 36,
Investments in Associates and Joint Ventures

129. If a controlled entity becomes a first-time adopter later than its controlling entity, except for the con-
trolled entity of an investment entity, the controlled entity shall, in its financial statements, measure
its assets and liabilities at either:

(a) The carrying amounts determined in accordance with this IPSAS that would be included in the
controlling entity’s consolidated financial statements, based on the controlled entity’s date of
adoption of IPSAS, if no adjustments were made for consolidation procedures and for the

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effects of the public sector combination in which the controlling entity acquired the controlled
entity; or

(b) The carrying amounts required by the rest of this IPSAS, based on the controlled entity’s date
of adoption of IPSAS. These carrying amounts could differ from those described in (a):
(i) When the exemptions in this IPSAS result in measurements that depend on the date of
adoption of IPSAS.

(ii) When the accounting policies used in the controlled entity’s financial statements differ from
those in the consolidated financial statements. For example, the controlled entity may use as
its accounting policy the historical cost model in IPSAS 45, whereas the economic entity may
use the current value model.
A similar election is available to an associate or joint venture that becomes a first-time adopter later
than an entity that has significant influence or joint control over it.

130. However, if a controlling entity becomes a first-time adopter later than its controlled entity (or associate
or joint venture) the controlling entity shall, in its consolidated financial statements, measure the assets
and liabilities of the controlled entity (or associate or joint venture) at the same carrying amounts as in
the financial statements of the controlled entity (or associate or joint venture), after adjusting for
consolidation and equity accounting adjustments and for the effects of the public sector combination in
which the controlling entity acquired the controlled entity (or associate or joint venture), subject to the
exemptions that may be adopted in terms of this IPSAS. Similarly, if a controlled entity becomes a first-
time adopter for its separate financial statements earlier or later than for its consolidated financial
statements, it shall measure its assets and liabilities at the same amounts in both financial statements,
subject to the exemptions that may be adopted in this IPSAS, except for consolidation adjustments.

IPSAS 35, Consolidated Financial Statements

131. A first-time adopter that is a controlled entity shall assess whether it is an investment entity on the
basis of the facts and circumstances that exist at the date of adoption of accrual basis IPSAS, and
measure its investment in each controlled entity at fair value through surplus or deficit at the date of
adoption of accrual basis IPSAS.

Non-controlling Interests

131A. A first-time adopter shall apply the following requirements of IPSAS 35 prospectively from the date of
transition to IPSAS:

(a) The requirement in paragraph 49 that the total amount recognized in the statement of changes in net
assets/equity is attributed to the owners of the controlling entity and to the non-controlling interests
even if this results in the non-controlling interests having a deficit balance;

(b) The requirements in paragraphs 48 and 51 for accounting for changes in the controlling entity’s interest
in a controlled entity that do not result in the loss of control; and

(c) The requirements in paragraphs 53-55 for accounting for a loss of control over a controlled entity, and
the related requirements of paragraph 13 of IPSAS 44, Non-current Assets Held for Sale and
Discontinued Operations.

IPSAS 37, Joint Arrangements

132. Where a first-time adopter accounted for its investment in a joint venture under its previous basis of
accounting basis using proportionate consolidation, the investment in the joint venture shall be
measured on the date of adoption as the aggregate of the carrying amount of the assets and liabilities

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

that the entity previously proportionately consolidated, including any purchased goodwill arising
from acquisition transactions (see IPSAS 40).

133. The opening balance of the investment determined in accordance with paragraph 132 is regarded as
the deemed cost of the investment at initial recognition. A first-time adopter shall test the investment
for impairment as at the date of adoption, regardless of whether there is any indication that the
investment may be impaired. Any impairment loss shall be adjusted to the accumulated surplus or
deficit at the date of adoption.

134. If aggregating all previously proportionately consolidated assets and liabilities results in negative
net assets, the first-time adopter shall assess whether it has legal or constructive obligations in
relation to the negative net assets and, if so, the first-time adopter shall recognize a corresponding
liability. If the first-time adopter concludes that it does not have legal or constructive obligations in
relation to the negative net assets, it shall not recognize the corresponding liability but it shall adjust
accumulated surplus or deficit at the date of adoption. The first-time adopter shall disclose this fact,
along with its cumulative unrecognized share of losses of its joint ventures as at the date of adoption
of accrual basis IPSAS.

IPSAS 42, Social Benefits

134A. On the date of adoption of IPSAS, or where a first-time adopter takes advantage of the three-year
transitional exemption, the date on which the exemption expires, or when the relevant liabilities are
recognized and/or measured in the financial statements (whichever is earlier), a first-time adopter
shall determine its initial liability for a social benefit scheme at that date in accordance with IPSAS 42.

134B. If the initial liability in accordance with paragraph 134A is more or less than the liability that was
recognized and/or measured at the end of the comparative period under the first-time adopter’s
previous basis of accounting, the first-time adopter shall recognize that increase/decrease in opening
accumulated surplus or deficit in the period in which the items are recognized and/or measured.

Disclosures
135. A first-time adopter with financial statements that comply with the requirements of this IPSAS while taking
advantage of the transitional exemptions and provisions that affect fair presentation and its ability to
assert compliance with accrual basis IPSAS, shall make an explicit and unreserved statement of compli-
ance with this IPSAS in the notes to the financial statements. This statement shall be accompanied by a
statement that the financial statements do not fully comply with accrual basis IPSAS.

136. Where a first-time adopter takes advantage of the transitional exemptions in this IPSAS, the first-time
adopter shall disclose:

(a) The extent to which it has taken advantage of the transitional exemptions that affect the fair
presentation of the financial statements and its ability to assert compliance with accrual basis
IPSAS; and/or

(b) The extent to which it has taken advantage of the transitional exemptions that do not affect the
fair presentation of the financial statements and its ability to assert compliance with accrual
basis IPSAS.

137. To the extent that a first-time adopter has taken advantage of the transitional exemptions and
provisions in this IPSAS that affect fair presentation and compliance with accrual basis IPSAS in
relation to assets, liabilities, revenue and/or expenses, it shall disclose:

(a) Progress made towards recognizing, measuring, presenting and/or disclosing assets, liabilities
revenue and/or expenses in accordance with the requirements of the applicable IPSAS;

IPSAS 33 1120
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

(b) The assets, liabilities, revenue and/or expenses that have been recognized and measured under
an accounting policy that is not consistent with the requirements of applicable IPSAS;

(c) The assets, liabilities, revenue and/or expenses that have not been measured, presented and/or
disclosed in the previous reporting period, but which are now recognized and/or measured,
and/or presented and/or disclosed;

(d) The nature and amount of any adjustments recognized during the reporting period; and

(e) An indication of how and by when it intends to comply in full with the requirements of the
applicable IPSAS.

138. Where a first-time adopter takes advantage of the transitional exemption to not eliminate some
balances, transactions, revenue and expenses, and/or where it applies the three year transitional
relief for the recognition and/or measurement of its interest in controlled entities, associates or joint
ventures in paragraph 55, it shall disclose the nature of the balances, transactions, revenue and
expenses and/or upstream or downstream transactions that have been eliminated during the
reporting period.

139. Where a first-time adopter is not able to present consolidated financial statements because of the
transitional exemptions and provisions adopted in paragraphs 58 or 62, it shall disclose:
(a) The reason why the financial statements, investments in associates or interests in joint
ventures could not be presented as consolidated financial statements; and

(b) An indication by when the first-time adopter will be able to present consolidated financial
statements.

140. The disclosure requirements of paragraphs 135 and 139 will assist users to track the progress of the
first-time adopter in conforming its accounting policies to the requirements in the applicable IPSAS
during the period of transition.

Explanation of Transition to IPSAS

141. A first-time adopter shall disclose:

(a) The date of adoption of IPSAS; and

(b) Information and explanations about how the transition from the previous basis of accounting to
IPSAS affected its reported financial position, and, where appropriate, its reported financial
performance and cash flows.

Reconciliations

142. A first-time adopter shall present in the notes to its first transitional IPSAS financial statements or its
first IPSAS financial statements:

(a) A reconciliation of its balance of net assets/equity reported in accordance with its previous
basis of accounting to its opening balance of net assets/equity at the date of adoption of IPSAS;
and

(b) A reconciliation of its accumulated surplus or deficit in accordance with its previous basis of
accounting to its accumulated surplus or deficit at the date of adoption of IPSAS.
A first-time adopter that has applied a cash basis of accounting in its previous financial statements is not
required to present such reconciliations.

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

143. The reconciliation presented in accordance with paragraph 142 shall provide sufficient detail, both
quantitative and qualitative, to enable users to understand the material adjustments to the opening statement
of financial position and, where applicable, the restated comparative statement of financial performance
presented in accordance with accrual basis IPSAS. Where narrative explanations are included in other public
documents issued in conjunction with the financial statements, a cross reference to those documents shall
be included in the notes.

144. If an entity becomes aware of errors made under its previous basis of accounting, the reconciliations required
by paragraph 142 shall distinguish the correction of those errors from changes in accounting policies.

145. If an entity did not present financial statements for previous periods, its transitional IPSAS financial
statements or its first IPSAS financial statements shall disclose that fact.

146. Where a first-time adopter takes advantage of the exemptions in paragraph 36–43 which allow a three-
year transitional relief period to not recognize and/or measure items, it shall present as part of the
notes, a reconciliation of items that have been recognized and/or measured during the reporting
period when these items were not included in the previous reported financial statements. The
reconciliation shall be presented in each period when new items are recognized and/or measured in
accordance with this IPSAS.
147. The reconciliation presented in accordance with paragraph 146 provides sufficient detail to enable users to
understand which items have been recognized and/or measured during the reporting period where the first-
time adopter adopts one or more of the exemptions that provide a three-year transitional relief period to not
recognize and/or measure an item. The reconciliation explains the adjustments to the previously reported
statement of financial position and, where applicable, the previously reported statement of financial
performance in each period when new items are recognized and/or measured in accordance with this IPSAS.

Disclosures where Deemed Cost is Used for Inventory, Investment Property, Property, Plant and Equipment,
Intangible Assets, Right-of-Use Assets, Financial Instruments or Service Concession Assets

148. If a first-time adopter uses current value measurement basis as deemed cost for inventory,
investment property, property, plant, and equipment, intangible assets, right-of-use assets, financial
instruments, or service concession assets, its financial statements shall disclose:

(a) The aggregate of those current values that were considered in determining deemed cost;

(b) The aggregate adjustment to the carrying amounts recognized under the previous basis of
accounting; and

(c) Whether the deemed cost was determined on the date of adoption of IPSAS or during the period
of transition.

Disclosures Where Deemed Cost is Used for Investments in Controlled Entities, Joint Ventures or Associates

149. If a first-time adopter uses fair value as deemed cost in its opening statement of financial position for
an investment in a controlled entity, joint venture or associate in its separate financial statements,
its separate financial statements shall disclose:

(a) The aggregate deemed cost of those investments for which deemed cost is fair value; and
(b) The aggregate adjustment to the carrying amounts reported under the previous basis of
accounting.

150. The disclosure requirements required in paragraph 148 and 149 shall be disclosed in each period
when new items are recognized and/or measured until the exemptions that provided the relief have

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

expired and/or when the relevant assets are recognized and/or measured in accordance with the
applicable IPSAS (whichever is earlier).

Exemptions from Disclosure Requirements in IPSAS During the Period of Transition

151. To the extent that a first-time adopter takes advantage of the exemption that provides a three year
relief period to not recognize and/or measure items, it is not required to apply any associated
presentation and/or disclosure requirements related to such items as required in IPSAS 1, IPSAS 18
and/or the applicable IPSAS until such time as the exemptions that provided the relief have expired
and/or when the relevant items have been recognized and/or measured in accordance with the
applicable IPSAS (whichever is earlier).

152. Notwithstanding the transitional provision in paragraph 151, a first-time adopter is encouraged to
disclose the information required by IPSAS 1, IPSAS 18 and/or the applicable IPSAS as soon as
possible.

Current Value Measurement

152A. An entity shall disclose information that helps users of its financial statements assess the assets or
liabilities that are measured at current operational value or fair value on a non‑recurring basis in the
statement of financial position after initial recognition, the measurement techniques and inputs used
to develop those measurements.

152B. To meet the objectives in paragraph 152A, an entity shall consider all the following:
(a) The level of detail necessary to satisfy the disclosure requirements;

(b) How much emphasis to place on each of the various requirements;

(c) How much aggregation or disaggregation to undertake; and

(d) Whether users of financial statements need additional information to evaluate the quantitative
information disclosed.
If the disclosures provided in accordance with this IPSAS and other IPSAS are insufficient to meet the
objectives in paragraph 152A, an entity shall disclose additional information necessary to meet those
objectives.

152C. To meet the objectives in paragraph 152A, an entity shall disclose, at a minimum, the following information
for each class of assets or liabilities measured at current operational value or fair value (including
measurements based on current operational value or fair value within the scope of IPSAS 46, Measurement)
in the statement of financial position after initial recognition:
(a) For non‑recurring current operational value or fair value measurements, the current operational value
or fair value measurement at the end of the reporting period, and the reasons for the measurement.
Non‑recurring current operational value or fair value measurements of assets or liabilities are those
that this Standard requires or permits in the statement of financial position in particular circumstances.

(b) For non‑recurring current operational value or fair value measurements, whether the current
operational value or fair value measurements are estimated using observable or unobservable inputs,
and the level of the fair value hierarchy within which the fair value measurements are categorized in
their entirety (Level 1, 2 or 3), or of the current operational value estimated using unobservable inputs.

(c) For non‑recurring current operational value or fair value measurements estimated using unobservable
inputs, a description of the measurement technique(s) and the inputs used in the current operational
value or fair value measurement. If there has been a change in measurement technique (e.g., changing
from a market approach to an income approach or the use of an additional measurement technique),
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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

the entity shall disclose that change and the reason(s) for making it. For fair value measurements
categorized within Level 3 of the fair value hierarchy, or for current operational value or fair value
measurements estimated using unobservable inputs, an entity shall provide quantitative information
about the significant unobservable inputs used in the current operational value or fair value
measurement. An entity is not required to create quantitative information to comply with this disclosure
requirement if quantitative unobservable inputs are not developed by the entity when measuring current
operational value or fair value (e.g., when an entity uses prices from prior transactions or third‑party
pricing information without adjustment). However, when providing this disclosure an entity cannot
ignore quantitative unobservable inputs that are significant to the current operational value or fair value
measurement and are reasonably available to the entity.
(d) For non‑recurring fair value measurements categorized within Level 3 of the fair value hierarchy, or for
non‑recurring current operational value measurements estimated using unobservable inputs, a
description of the valuation processes used by the entity (including, for example, how an entity decides
its valuation policies and procedures and analyses changes in current operational value or fair value
measurements from period to period).

152D. An entity shall determine the appropriate disaggregation of assets or liabilities on the basis of the following:
(a) The nature, characteristics and risks of the assets or liabilities; and

(b) The level of the fair value hierarchy within which the fair value measurement is categorized, or whether
the current operational value or fair value is observable or unobservable.
The disaggregation may need to be greater for fair value measurements categorized within Level 3 of the fair
value hierarchy, or for current operational value measurements estimated using unobservable inputs,
because those measurements have a greater degree of uncertainty and subjectivity. Determining the
appropriate disaggregation of assets or liabilities for which disclosures about current operational value or fair
value measurements should be provided requires judgment. Assets or liabilities will often require greater
disaggregation than the line items presented in the statement of financial position. However, an entity shall
provide information sufficient to permit reconciliation to the line items presented in the statement of financial
position. If another IPSAS specifies the disaggregation for an asset or a liability, an entity may use that
disaggregation in providing the disclosures required in this Standard if that disaggregation meets the
requirements in this paragraph.

152E. For each class of assets or liabilities not measured at current operational value or fair value in the statement
of financial position but for which the current operational value or fair value is disclosed, an entity shall
disclose the information required by paragraph 152C(b), (c) and (d). However, an entity is not required to
provide the quantitative disclosures about significant unobservable inputs used in fair value measurements
categorized within Level 3 of the fair value hierarchy, or for current operational value or fair value
measurements estimated using unobservable inputs, required by paragraph 152C(c). For such assets or
liabilities, an entity does not need to provide the other disclosures required by this Standard.

152F. An entity shall present the quantitative disclosures required by this Standard in a tabular format unless
another format is more appropriate.

Transitional Provisions
153. Where a first-time adopter has adopted the existing transitional provisions in other accrual basis
IPSAS, it shall continue to apply those transitional provisions until they expire and/or the relevant
items are recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier).
If the first-time adopter elects to adopt the transitional exemptions in this IPSAS, the relief period

IPSAS 33 1124
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

applied in adopting accrual basis IPSAS, may not be longer than the relief period provided in this
IPSAS.

Effective Date and Transition

154. A first-time adopter shall apply this Standard if its first IPSAS financial statements are for a period
beginning on or after January 1, 2017. Earlier application is permitted.

154A. Paragraphs 7 and 8 were deleted by The Applicability of IPSAS, issued in April 2016. An entity shall
apply those amendments for annual financial statements covering periods beginning on or after
January 1, 2018. Earlier application is encouraged. If an entity applies the amendments for a period
beginning before January 1, 2018, it shall disclose that fact.

154B. Paragraphs 36, 102, 104 and 105 were amended and paragraphs 106 and 107 were deleted by
IPSAS 39, Employee Benefits, issued in July 2016. An entity shall apply these amendments for annual
financial statements covering periods beginning on or after January 1, 2018. Earlier application is
encouraged. If an entity applies these amendments for a period beginning before January 1, 2018 it
shall disclose that fact and apply IPSAS 39 at the same time.

154C. Paragraphs 86, 129, 130 and 132 were amended and paragraphs 62A–62C were added by IPSAS 40,
Public Sector Combinations, issued in January 2017. An entity shall apply these amendments for
annual financial statements covering periods beginning on or after January 1, 2019. Earlier
application is encouraged. If an entity applies the amendments for a period beginning before January
1, 2019 it shall disclose that fact and apply IPSAS 40 at the same time.
154D. Paragraphs 36, 64, 72, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122 and 124 were amended and
paragraphs 114A, 119A, 119B, 119C, 119D, 122A, 122B, 122C, and 122D were added by IPSAS 41,
issued in August 2018. An entity shall apply these amendments for annual financial statements
covering periods beginning on or after January 1, 2023. Earlier application is encouraged. If an entity
applies the amendments for a period beginning before January 1, 2023 it shall disclose that fact and
apply IPSAS 41 at the same time.
154E. Paragraphs 78, 79, 123 and 142 were amended by Improvements to IPSAS, 2018, issued in October
2018. An entity shall apply these amendments for annual financial statements covering periods
beginning on or after January 1, 2019. Earlier application is permitted.

154F. Paragraph 85A was added by Improvements to IPSAS, 2018, issued in October 2018. An entity shall
apply this amendment for annual financial statements covering periods beginning on or after
January 1, 2019. Earlier application is permitted. If an entity applies this amendment for a period
beginning before January 1, 2019 it shall disclose that fact and apply the amendments to IPSAS 4
included in Improvements to IPSAS, 2018 at the same time.

154G. Paragraph 36 was amended and paragraphs 134A and 134B were added by IPSAS 42, Social Benefits,
issued in January 2019. An entity shall apply this amendment for annual financial statements
covering periods beginning on or after January 1, 2023. Earlier application is encouraged. If an entity
applies the amendment for a period beginning before January 1, 2023 it shall disclose that fact and
apply IPSAS 42 at the same time.

154H. Paragraph 113 was amended, paragraph 113A was added and paragraph 114 was deleted by
Improvements to IPSAS, 2019, issued in January 2020. An entity shall apply these amendments for
annual financial statements covering periods beginning on or after January 1, 2023. Earlier
application is permitted. If an entity applies these amendments for a period beginning before
January 1, 2023, it shall disclose that fact and apply IPSAS 41 at the same time.

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

154I. Paragraph 85B was added by Improvements to IPSAS, 2021, issued in January 2022. An entity shall
apply this amendment for annual financial statements covering periods beginning on or after
January 1, 2023. Earlier application is permitted. If an entity applies this amendment for an earlier
period, it shall disclose that fact.
154J. Paragraphs 36, 46, 47, 64, 95, and 148, and the headings above paragraphs 46, 95, and 148 were
amended, paragraph 96 was deleted, and paragraphs 96A, 96B, 96C, and 96D were added by IPSAS 43
issued in January 2022. An entity shall apply these amendments for annual financial statements
covering periods beginning on or after January 1, 2025. Earlier application is permitted. If an entity
applies the amendments for a period beginning before January 1, 2025, it shall disclose that fact and
apply IPSAS 43 at the same time.
154K. Paragraph 131A and the associated heading were added by IPSAS 44 issued in May 2022. An entity
shall apply this amendment for annual financial statements covering periods beginning on or after
January 1, 2025. Earlier application is permitted. If an entity applies the amendments for a period
beginning before January 1, 2025, it shall disclose that fact and apply IPSAS 44 at the same time.

154L. Paragraphs 36, 48, 49, 64, 66, 67, and 129 were amended by IPSAS 45 issued in May 2023. An entity
shall apply these amendments for annual financial statements covering periods beginning on or at
after January 1, 2025. Earlier application is encouraged. If an entity applies these amendments for a
period beginning before January 1, 2025, it shall disclose that fact and apply IPSAS 45 at the same
time.

154M. Paragraphs 9, 64–72, 96B, and 148 were amended and paragraphs 41B, 64A, and 152A–152F were
added by IPSAS 46, issued in May 2023. An entity shall apply these amendments for annual financial
statements covering periods beginning on or after January 1, 2025. Earlier application is encouraged.
If an entity applies the amendment for a period beginning before January 1, 2025, it shall disclose
that fact and apply IPSAS 46 at the same time.

154N. Paragraphs 32, 41, and 42 and 43 and their related heading were amended by IPSAS 47, issued in
May 2023. An entity shall apply this amendment for annual financial statements covering periods
beginning on or after January 1, 2026. Earlier application is encouraged. If an entity applies the
amendment for a period beginning before January 1, 2026, it shall disclose that fact and apply
IPSAS 47 at the same time.

154O. Paragraphs 41A, 43A and 43B were added by IPSAS 48, Transfer Expenses, issued in May 2023. An
entity shall apply this amendment for annual financial statements covering periods beginning on or
after January 1, 2026. Earlier application is encouraged. If an entity applies the amendment for a
period beginning before January 1, 2026 it shall disclose that fact and apply IPSAS 48 at the same
time.
154P. Paragraphs 62F and 62G were added by IPSAS 50, issued in November 2024. An entity shall apply
this amendment for annual financial statements covering periods beginning on or after January 1,
2027. Earlier application is encouraged. If an entity applies the amendment for a period beginning
before January 1, 2027, it shall disclose that fact.

154Q. Paragraphs 62H and 62I were added by Stripping Costs in the Production Phase of a Surface Mine
(Amendments to IPSAS 12), issued in November 2024. An entity shall apply this amendment for
annual financial statements covering periods beginning on or after January 1, 2027. Earlier
application is encouraged. If an entity applies the amendments for a period beginning before
January 1, 2027, it shall disclose that fact.

IPSAS 33 1126
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Appendix A
Amendments to Other IPSAS
[Deleted]

IPSAS 33 APPENDIX A 1127

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, IPSAS 33.

Background
BC1. Prior to the development of IPSAS 33, there was no Standard that addresses issues arising from the first-
time adoption of IPSAS. As a result, the IPSASB approved a project in June 2011 to develop a
comprehensive set of principles to be used by entities on the adoption of accrual basis International Public
Sector Accounting Standards (IPSAS).

BC2. While this IPSAS has Implementation Guidance, it is not within the scope of this project to develop more
detailed practical guidance on the first-time adoption of IPSAS. The IPSASB is of the view that because
specific issues relating to first-time adoption are likely to vary from one jurisdiction to the next, and because
the starting point for first-time adopters varies depending on their previous basis of accounting, individual
jurisdictions need to play a role in the development of additional implementation guidance to assist first-time
adopters in their transition to accrual basis IPSAS.

BC3. This IPSAS addresses the transition from either a cash basis, or an accrual basis under another reporting
framework, or a modified version of either the cash or accrual basis of accounting. Consequently, the IPSASB
agreed that the project is not an IFRS convergence project.

BC4. The IPSASB did, however, consider the transitional exemptions included in IFRS 1 First-time Adoption of
International Financial Reporting Standards, as well as the transitional provisions included in the existing
suite of IPSAS, in developing this IPSAS.

BC5. In developing this IPSAS, the IPSASB agreed that, because this IPSAS is not a convergence project, all the
transitional provisions and exemptions should be included in a single pronouncement. In comparison with IFRS
1, the IPSASB agreed that no transitional provisions and exemptions should be included as appendices, as this
could be confusing to the preparers of the financial statements if the provisions and exemptions are dispersed
all over the Standard.

BC6. The transitional exemptions provided in this IPSAS will replace many of the transitional provisions in IPSAS
once they are applied.

BC7. When the IPSASB issues new pronouncements, it will consider specific transitional provisions to be included in
this IPSAS that will provide relief to a first-time adopter. Transitional provisions for entities already applying
accrual basis IPSAS will be included in the new pronouncements that are developed.

Scope
BC8. This IPSAS applies when an entity first adopts accrual basis IPSAS for the first time and during the period
that it transitions to accrual basis IPSAS to the extent that it has adopted one or more of the transitional
exemptions and provisions in this IPSAS. This IPSAS provides relief to a first-time adopter in presenting its
financial statements, and allows a first-time adopter certain voluntary exemptions during the period of
transition.

BC9. This IPSAS requires an entity to comply with each effective IPSAS on the date of adoption, but grants limited
exemptions from requirements in certain areas where the benefits to users of financial statements are less
than the cost of complying with those requirements. Retrospective application of some IPSAS is prohibited,
particularly where they require judgment by management about past conditions.
BC10. The exemptions provided in this IPSAS may override some of the requirements in existing accrual basis
IPSAS during the transition to accrual basis IPSAS.
1128 IPSAS 33 BASIS FOR CONCLUSIONS
 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

BC11. The date of adoption of accrual basis IPSAS is the start of the reporting period in which the first-time adopter
elects to adopt accrual basis IPSAS. If, on the date of adoption of accrual basis IPSAS the first-time adopter
elects to apply one or more of the voluntary exemptions or provisions that affect fair presentation and the
first-time adopter’s ability to assert compliance with accrual basis IPSAS, the first-time adopter will present
transitional IPSAS financial statements during the period of transition. At the end of the transitional period
the first-time adopter must comply with the recognition, measurement, presentation and disclosure
requirements in the other accrual basis IPSAS in order to assert compliance with accrual basis IPSAS as
required in IPSAS 1, Presentation of Financial Statements, even though the date of adoption of accrual basis
IPSAS may have been at an earlier point.

BC12. If, however, on the date of adoption of accrual basis IPSAS the first-time adopter elects not to apply one or
more of the exemptions or provisions that affect fair presentation and the ability to assert compliance with
accrual basis IPSAS, the first-time adopter can present IPSAS financial statements during the period of
transition. IPSAS financial statements are financial statements in which the first-time adopter can make an
explicit and unreserved statement in those financial statements of compliance with accrual basis IPSAS. If a
first-time adopter does not adopt the exemptions in this IPSAS that affect fair presentation and compliance
with accrual basis IPSAS, its first financial statements following the adoption of accrual basis IPSAS may
also be its first IPSAS financial statements.

Developing Criteria to Develop and Assess Transitional Exemptions

BC13. In developing the transitional exemptions in this IPSAS, the IPSASB developed a set of criteria based on
what user information needs are likely to be on the adoption of and transition to accrual basis IPSAS as set
out in Chapter 2 of the Conceptual Framework for General Purpose Financial Reporting by Public Sector
Entities (the Conceptual Framework). These criteria were used to evaluate these transitional provisions,
along with an assessment of the qualitative characteristics, and constraints on, information included in
GPFRs as outlined in Chapter 3 of the Conceptual Framework. The results of these evaluations are included
in paragraphs BC14 to BC19.

BC14. In developing requirements for the first-time adopter’s opening statement of financial position and in
considering the transitional exemptions, the IPSASB referred to the objective of financial statements, as set
out in Chapter 2 of the Conceptual Framework.
BC15. Chapter 2 of the Conceptual Framework states that the objective of financial statements is to provide information
about the financial position, performance and changes in financial position of an entity that is useful to a wide
range of users in providing information for accountability and decision-making purposes.
BC16. Chapter 3 of the Conceptual Framework also identifies qualitative characteristics of information included in
the general purpose financial reports (GPFRs) of public sector entities. These qualitative characteristics are
relevance, faithful representation, understandability, timeliness, comparability and verifiability. The
constraints on information included in GPFRs are materiality and cost-benefit.

Criteria Used to Develop the Transitional Exemptions

Fair Presentation and Compliance with IPSAS

BC17. IPSAS 1 requires that an entity whose financial statements comply with IPSAS shall make an explicit and
unreserved statement of such compliance in the notes to the financial statements. Financial statements shall
not be described as complying with IPSAS unless they comply with all the requirements of IPSAS. Due to
the complexity of issues relating to the first-time adoption of IPSAS, the IPSASB agreed that relief should be
provided in certain instances. The IPSASB however agreed that some relief will affect the fair presentation
of a first-time adopter’s financial statements and the ability to assert compliance with accrual basis IPSAS.

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

BC18. The IPSASB agreed that there should be a differentiation between those transitional exemptions which do not
affect fair presentation of a first-time adopter’s financial statements and those that do. The IPSASB also agreed
that, structuring the Standard in this way will give preparers a better understanding of the affect that the various
transitional provisions and exemptions will have on their financial statements during the period of transition.
Following the differentiation the IPSASB agreed that first-time adopters should be alerted to the fact that they will
not be able to assert compliance with accrual basis IPSAS as required by IPSAS 1 if they adopt certain
exemptions provided in this IPSAS.
BC19. The IPSASB agreed that where a first-time adopter takes advantage of the exemptions that affect fair
presentation and compliance with accrual basis IPSAS, it will not be able to make an unreserved statement of
compliance with accrual basis IPSAS until such time as the exemptions that provided the relief have expired,
or when the relevant items are recognized, measured and/or the relevant information has been presented
and/or disclosed in the financial statements in accordance with the applicable IPSAS (whichever is earlier).

BC20. Following comment received on the proposed IPSAS on First-time Adoption of Accrual Basis IPSAS, the
IPSASB agreed to clarify that a first-time adopter should apply judgment in assessing to what extent the
transitional exemptions and provisions adopted affect fair presentation of the financial statements and the
first-time adopter’s ability to assert compliance with accrual basis IPSAS. Where a first-time adopter elects
to apply one or more of the transitional exemptions and provisions that affect the fair presentation of the
financial statements and its ability to assert compliance with accrual basis IPSAS, the first-time adopter may
still conclude that fair presentation is achieved because the recognition and/or measurement of the item,
transaction or event that are exempted is not significant in relation to the financial statements as a whole.
Applying judgment to assess the significance of the transitional exemption and provision adopted in relation
to the financial statements as a whole needs to be assessed based on the first-time adopter’s specific cir-
cumstances.

BC21. The IPSASB agreed that the financial statements presented at the end of the first reporting period where a
first-time adopter takes advantage of one of more of the transitional exemptions that affect fair presentation
and compliance with accrual basis IPSAS, should be referred to as the transitional IPSAS financial
statements. This is because the first-time adopter will not be able to make an explicit and unreserved
statement of compliance with IPSAS while applying the exemptions in this IPSAS that affect the fair
presentation of the financial statements and a first-time adopter’s ability to assert compliance with accrual
basis IPSAS.

BC22. To provide relevant information during the transition to accrual basis IPSAS disclosures to inform users about
the transitional exemptions adopted by a first-time adopter, and how it transitions from its previous basis of
accounting to accrual basis IPSAS.

BC23. The IPSASB noted that, as part of a first-time adopter’s transition to accrual accounting, an implementation
plan should be developed so as to assess the first-time adopter’s progress reporting under accrual basis
IPSAS. Disclosures on the progress towards recognizing, measuring, presenting and/or disclosing assets,
liabilities, revenue and/or expenses in accordance with this plan will provide useful information to the users
of financial statements in understanding how and by when the first-time adopter intends to comply in full with
the requirements of all the applicable IPSAS.

Presentation of Information on First-Time Adoption

Presenting Comparative Information Following the Adoption of Accrual Basis IPSAS

BC24. The IPSASB considered whether comparative information should be required on the adoption of IPSAS, as
the existing transitional provisions in IPSAS 1, Presentation of Financial Statements do not require
comparative information in respect of the financial statements in which accrual accounting is first adopted in
accordance with IPSAS.
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BC25. In considering the cost-benefit criterion, the IPSASB confirmed that the current approach in IPSAS 1 for the
presentation of comparative information should be retained to promote the adoption of accrual IPSAS. This
IPSAS therefore only encourages the provision of comparative information, with no requirement that a first-
time adopter should provide comparative information in its first transitional IPSAS financial statements, or
first IPSAS financial statements.

BC26. Where a first-time adopter elects to not present comparative information, the IPSASB agreed that, as a
minimum, a first-time adopter’s first transitional IPSAS financial statements, should include one statement of
financial position and an opening statement of financial position at the date of adoption of accrual basis
IPSAS.

BC27. Where an entity elects to present comparative information, the IPSASB agreed that a first-time adopter
should present one statement of financial position with comparative information for the preceding period and
an opening statement of financial position as at the beginning of the reporting period prior to the date of
adoption of accrual basis IPSAS.
BC28. As the adoption of the three year transitional relief period also affects the presentation of comparative
information, the IPSASB agreed that where the first-time adopter takes advantage of any of the transitional
relief periods permitted, it should only adjust comparative information for the year following the date of
adoption of accrual basis IPSAS when information is available about the items that were recognized and/or
measured during that period. Comparative information will thus only be adjusted retrospectively to the extent
that the information is available.

BC29. A first-time adopter shall apply the requirements in IPSAS 1 relating to the disclosure of comparative
information after it has presented its first IPSAS financial statements.

Presenting a Reconciliation Following the Adoption of Accrual Basis IPSAS

BC30. In considering what information would be useful to users of the financial statements in relation to the first-
time adoption of IPSAS, the IPSASB agreed that a reconciliation should be presented in the notes to the
transitional IPSAS financial statements, or first IPSAS financial statements. The presentation of a
reconciliation provides an important link between the information previously presented under the first-time
adopter’s previous basis of accounting, and the information prepared using IPSAS. The purpose of the
reconciliation is to illustrate the adjustments that are necessary to conform with the requirements of accrual
basis IPSAS, and how the transition from the previous basis of accounting to IPSAS affected the first-time
adopter’s reported financial position, financial performance and cash flows. This information will be useful to
the users of financial statements.
BC31. The IPSASB considered two types of reconciliations that could be presented – the first one reconciling
opening balances as at the date of adoption of IPSAS, and the second a reconciliation reconciling the end of
the latest period presented in the first-time adopter’s most recent annual financial statements in accordance
with its previous basis of accounting.

BC32. The IPSASB concluded that the latter option will be too onerous and that the cost of presenting the
reconciliation, outweighs the benefit. It was also concluded that users will not likely make use of such
reconciliations and that the information will not have predictive value.

BC33. As a result, it was agreed that a first-time adopter should only present a reconciliation of its closing balances
reported under its previous basis of accounting, to its net assets/equity in accordance with IPSAS for the
opening statement of financial position. The information should be presented in the notes to the transitional
IPSAS financial statements, or the first IPSAS financial statements.

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BC34. If a first-time adopter previously applied a cash basis of accounting it would not have presented net
assets/equity. The IPSASB therefore agreed that if a first-time adopter’s previous basis of accounting is cash,
it is not required to present a reconciliation.

BC35. To meet the qualitative characteristics of relevance, understandability and comparability during the period of
transition where a first-time adopter takes advantage of the exemption that provides relief from the recognition
and/or measurement of assets and/or liabilities, the IPSASB considered whether a first-time adopter should
be required to present a reconciliation at different points during its transition to accrual basis IPSAS.

BC36. The IPSASB agreed that where a first-time adopter takes advantage of any of the transitional relief periods
permitted, it should present a reconciliation of items that have been recognized and/or measured during the
reporting period when these items have not been recognized and/or measured in the previous reported
financial statements. This reconciliation should be presented in addition to the reconciliation that is presented
to explain differences between the first-time adopter’s previous basis of accounting and those items that are
recognized and/or measured in accordance with IPSAS in the opening statement of financial position.

Presenting a Comparison of Budget and Actual Information in a First-time Adopter’s Financial Statements

BC37. The IPSASB debated whether a first-time adopter should be required to present a comparison of budget and
actual information following the adoption of accrual basis IPSAS, and whether such information is useful to
the users of the financial statements.

BC38. The IPSASB considered that if a first-time adopter prepares its budget on the cash-basis of accounting after
the adoption of IPSAS, presenting this comparison in its transitional IPSAS financial statements, or its first
IPSAS financial statements could be onerous. The IPSASB, however, agreed that such a comparison should
be included in a first-time adopter’s financial statements, as the comparison is a unique feature of IPSAS and
promotes accountability and decision-making.

Presenting a Cash Flow Statement in a First-time Adopter’s Financial Statements

BC39. During the comment period, respondents requested the IPSASB to consider providing transitional
exemptions and provisions for the preparation of the cash flow statement where a first-time adopter elects to
adopt a three year relief period for the recognition and/or measurement of certain assets and/or liabilities.
Respondents noted that it did not seem appropriate to present a cash flow statement when the statement of
financial position is incomplete.
BC40. The IPSASB confirmed its previous decision to not provide any transitional relief as, during the transitional
period, users still need cash flow information on: (a) the sources of cash inflows: (b) the items on which cash
was expensed during the reporting period; and (c) the cash balance as at the end of the reporting period.

Alignment of Accrual IPSAS and Government Finance Statistics Reporting

BC41. As the objective of this Standard is to provide a suitable starting point for accounting in accordance with
accrual basis IPSAS it does not provide specific guidance to a first-time adopter on alignment of GFS
reporting and accrual basis IPSAS. In its Consultation Paper, Alignment of IPSAS and Government Finance
Statistics Reporting Guidelines: Resolution of Differences through Convergence and Management, the
IPSASB discusses where guidance on GFS alignment options within the suite of IPSASB’s pronouncements
will be best addressed. By choosing Government Finance Statistics (GFS) aligned policy options on the first-
time adoption of accrual IPSAS, a first-time adopter may facilitate production of high quality and timely data
for inclusion in their GFS reports.

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Exemptions that Affect Fair Presentation and Compliance with Accrual Basis IPSAS

Transitional Exemptions Relating to the Recognition, Measurement and Classification of Non-Financial Assets

BC42. When an entity first adopts IPSAS, it may not have comprehensive information about the existence of all the
assets under its control, and may require a period of time to obtain and compile appropriate records to
account for such assets. As this is relevant to entities that previously did not apply the accrual basis of
accounting, it is likely that these entities will require considerable effort to recognize, measure and/or classify
their assets in accordance with IPSAS.

BC43. In considering the relief that should be provided to a first-time adopter for the recognition of its assets when
this Standard was issued, the IPSASB had considered the then existing five year relief period in IPSAS 17.
To encourage entities to prepare for the adoption of IPSAS in advance of the preparation of their transitional
IPSAS financial statements, or their first IPSAS financial statements, the IPSASB had agreed that a grace
period not exceeding three years should be allowed. As entities should have prepared well in advance for
their transition to accrual basis IPSAS and not solely rely on the relief period provided in this IPSAS, the
IPSASB was of the view that the three year transitional period was more manageable, and would reduce the
period over which entities would not be able to assert compliance with IPSAS. In developing IPSAS 45,
Property, Plant, and Equipment, the IPSASB noted that these principles are still applicable.

BC44. The IPSASB agreed that prescribing a relief period in this IPSAS, rather than allowing each jurisdiction to
prescribe their own transitional period, reduces inconsistencies between jurisdictions. The credibility and
comparability of financial statements during the period of transition will also be enhanced.

BC45. The IPSASB confirmed that the relief provided in this IPSAS should not be seen as a complete roadmap for
the adoption of accrual basis IPSAS, but rather the end stage of their adoption process. The relief period of
three years provided in this IPSAS is aimed at providing relief to a first-time adopter to assist with the final
conversion to accrual basis IPSAS. Prior to the adoption of this IPSAS, a first-time adopter should adequately
prepare for its transition to accrual basis IPSAS. The complexity and length of the transition will depend on
its previous basis of accounting. The three year relief period should not be seen as the entire adoption phase.
BC46. The guidance in Study 14, Transition to the Accrual Basis of Accounting: Guidance for Governments and
Government Entities issued by the IPSASB may assist a first-time adopter in planning their conversion to
accrual basis IPSAS, prior to adoption of this IPSAS.

BC47. The IPSASB proposed that a relief period of three years should be provided for the following assets:

(a) Investment property;

(b) Property, plant and equipment;

(c) Biological assets and agricultural produce;

(d) Intangible assets; and

(e) Service concession assets.

BC48. Following comment received on this proposed IPSAS, the IPSASB agreed to also allow a relief period for the
recognition and/or measurement of inventory. The IPSASB agreed that, even though inventory is a current
asset which is realised, consumed, sold or used in an entity’s operating cycle, a first-time adopter may need
time to identify and classify its assets appropriately between inventory, investment property or property, plant
and equipment, particularly in respect of land. Inventory may also comprise specialized assets or high
volumes of items, e.g. medical supplies, for which additional time may be required for appropriate
classification.

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

BC49. In considering whether a relief period should be allowed for the recognition of biological assets and
agricultural produce, the IPSASB noted that these assets and activities may be limited in some jurisdictions
while they may be more significant in other jurisdictions, for example, developing countries. On balance, the
IPSASB agreed that a three year relief period should be provided for the recognition of biological assets and
agricultural produce to assist those jurisdictions where this is a significant issue.

BC50. IPSAS 5 allows a first-time adopter to either adopt the benchmark treatment or the allowed alternative
treatment in accounting for borrowing costs incurred on qualifying assets. When a first-time adopter elects
to apply the allowed alternative treatment, there may a timing difference between the capitalization of
borrowing costs on qualifying assets where the first-time adopter takes advantage of the three year
transitional relief period to not recognize certain assets. To address this timing difference, and because it
might not be practical to obtain information on borrowing costs incurred prior to the recognition of the asset
where the first-time adopter takes advantage of the three year transitional exemption period, the IPSASB
agreed that a first-time adopter should not be required to capitalize any borrowing costs on qualifying assets
for which the commencement date for capitalization is prior to the date of adoption of accrual basis IPSAS.
Based on comment received from respondents on the proposed Exposure Draft, the IPSASB also agreed
that any borrowing costs incurred during the period of transition should also not be capitalized until the
exemptions that provided the relief have expired and/or when the relevant assets are recognized in
accordance with the applicable IPSAS (whichever is earlier).

BC51. After comment received on the proposed IPSAS, the IPSASB also agreed that a first-time adopter may
change its accounting policy in respect of the recognition and/or measurement of assets and/or liabilities on
a class-by-class or category-by-category basis where the use of classes or categories are permitted in the
applicable IPSAS.

Transitional Exemptions relating to the Measurement of Non-Financial Assets

BC52. The IPSASB acknowledged that some entities may have recognized non-financial assets under their previous
basis of accounting. The IPSASB therefore agreed that a three year transitional relief period should be
allowed for the measurement of all non-financial assets that were recognized by a first-time adopter under
its previous basis of accounting. During this transitional period, a first-time adopter will be able to develop
reliable models for applying the principles in the IPSAS. During the transitional period the first-time adopter
will not be required to change its accounting policy in respect of the measurement of these assets.

Transitional Exemptions Relating to the Recognition of Liabilities

Interaction Between the Asset Standards and Other IPSAS

BC53. Where a first-time adopter takes advantage of one or more of the transitional exemptions relating to the
recognition of assets, it would, as part of this process, analyze title deeds, contracts and other similar
arrangements, including lease arrangements, in determining what assets should be accounted for and their
measurement. As a result, a first-time adopter may not be in a position to account for finance lease liabilities
related to finance lease assets until such time as the transitional relief period provided has expired and/or
the relevant assets are recognized in accordance with the applicable IPSAS (whichever is earlier).

BC54. Likewise, where a first-time adopter has elected to adopt the transitional relief provided for the recognition of
service concession assets in accordance with IPSAS 32, it will not be in a position to account for the related
liability under either the financial liability model or the grant of a right to the operator model until such time as
the transitional relief period provided has expired and/or the relevant assets are recognized and/or measured
in accordance with IPSAS 32 (whichever is earlier).

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

BC55. The IPSASB agreed that the recognition of finance lease liabilities and the recognition and/or measurement
of liabilities related to service concession assets should also be delayed until the relief period related to the
relevant assets have expired and/or the applicable assets have been recognized and/or measured.

Recognition of Provisions Included in the Initial Cost of Property, Plant and Equipment
BC56. The IPSASB concluded that no transitional relief period should be provided for provisions in IPSAS 19 and
that a first-time adopter should account for all its liabilities on the date of adoption of IPSAS. The IPSASB,
however, acknowledges that the delay in the recognition and/or measurement of property, plant and
equipment affects the recognition and/or measurement of certain provisions which are included in the cost
of such assets.

BC57. When this Standard was issued, IPSAS 17 required an entity to include, as part of the cost of an item of
property, plant and equipment, the initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located, the obligation which an entity incurs either when the item is acquired,
or as a consequence of having used the item during a particular period for purposes other than to produce
inventories during that period. IPSAS 17 required that the obligation for costs accounted for in accordance
with IPSAS 17 was recognized and measured in accordance with IPSAS 19.

BC58. The IPSASB had agreed that it would not be possible to recognize and/or measure provisions for the initial
estimate of costs to dismantle and remove the item and restore the site on which it is located until such time
as the relevant item of property, plant, and equipment was recognized and/or measured in accordance with
IPSAS 17. A transitional relief period was therefore also provided for the recognition and/or measurement of
the provision to address the timing difference. In developing IPSAS 45, the IPSASB noted that these
principles are still applicable.

IPSAS 39, Employee Benefits

BC59. The IPSASB acknowledged that the recognition and/or measurement of specific liabilities in IPSAS 39, will
be challenging for many public sector entities as new systems may be required and/or existing systems may
need to be upgraded. The IPSASB therefore agreed that a first-time adopter should be given a three year
relief period for the recognition and/or measurement of assets and liabilities related to defined benefit plans
and other long-term employee benefits. To avoid a skewed statement of financial position, the IPSASB further
agreed that any plan assets should be recognized and/or measured at the same time as the liabilities. All
other employee benefits should be recognized and/or measured on the date of adoption of IPSAS.

BC60. [Deleted]

IPSAS 42, Social Benefits

BC60A. The IPSASB issued IPSAS 42, Social Benefits, in January 2019. The IPSASB acknowledged that the
recognition and/or measurement of liabilities related to social benefits may be challenging for some public
sector entities. The IPSASB therefore agreed that a first-time adopter should be given a three year relief
period for the recognition and/or measurement of liabilities related to social benefits.

Transitional Exemptions Relating to the Recognition and Measurement of Monetary Assets and/or Liabilities

IPSAS 41, Financial Instruments

BC61. The existing transitional provisions in IPSAS 41 do not provide any relief to a first-time adopter for the
recognition and/or measurement of financial instruments. Because many public sector entities will need some
time to identify and appropriately classify their financial instruments, the IPSASB agreed that a transitional
relief period should be provided to a first-time adopter for the recognition and/or measurement of financial

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

instruments. A transitional relief period of three years was granted in line with the relief period provided for
the recognition and/or measurement of other items.

BC62. The IPSASB, however, agreed that a distinction should be made between those entities that previously
recognized financial instruments and those that did not. The IPSASB was of the view that many basic financial
instruments such as cash, debtors and creditors are already recognized by public sector entities. A three
year relief period for the recognition of financial instruments that have not been recognized under a first-time
adopter’s previous basis of accounting, is therefore provided.

BC63. As with non-monetary assets, the IPSASB agreed that the same principle should be applied to the recognition
and/or measurement of monetary assets and/or liabilities, i.e. to the extent that a first-time adopter has
recognized financial instruments under its previous basis of accounting, the IPSASB agreed that a three year
relief period should be granted for the measurement and classification of financial instruments following the
date of adoption of IPSAS. During this transitional period, a first-time adopter will be able to develop reliable
models for applying the principles in IPSAS 41. It would also be allowed to apply accounting policies for the
measurement of financial instruments that differs from the requirements in IPSAS 41 during the period of
transition.

Transitional Exemptions Relating to the Recognition and Measurement of Revenue

IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers) and IPSAS 47, Revenue

BC64. When this Standard was developed, the existing transitional provisions in IPSAS 23 allowed a first-time
adopter to not change its accounting policy in respect of the recognition and measurement of taxation
revenue for a period of five years. IPSAS 23 also allowed a first-time adopter to not change its accounting
policy in respect of recognition and measurement of revenue from non-exchange transactions, other than
taxation revenue, for a period of three years. It also required that changes in accounting policies should only
be made to better conform to IPSAS 23.

BC65. The IPSASB concluded that it would be challenging for many public sector entities to implement IPSAS 23
as new systems may be required and/or existing systems may need to be upgraded. Because of these
practical challenges, the IPSASB agreed that a transitional relief period should be provided. The IPSASB,
however, acknowledged that a first-time adopter should build up models to assist with the transition to accrual
accounting prior to the adoption of the accrual basis. In line with the relief period of three years provided for
the recognition of assets and/or liabilities in other IPSAS, and in line with the existing three year transitional
relief period provided for other non-exchange revenue in IPSAS 23 at the time this Standard was developed,
it was agreed that a first-time adopter should be granted a relief period of three years to develop reliable
models for recognizing and measuring revenue from non-exchange transactions. The IPSASB agreed that a
transitional period of three years is manageable, and reduces the period over which an entity will not be able
to assert compliance with accrual basis IPSAS. During the period of transition, a first-time adopter will be
allowed to apply accounting policies for the recognition of non-exchange revenue transactions that do not
comply with the provisions in IPSAS 23.

BC65A. IPSAS 47, Revenue, was issued in May 2023 and replaced IPSAS 9, IPSAS 11, Construction Contracts, and
IPSAS 23, and requires an entity to identify and account for revenue based on whether it arises from a binding
arrangement rather than by its classification as exchange or non-exchange. In its development, the IPSASB
noted that it will be similarly challenging for public sector entities to implement IPSAS 47. The accounting for
revenues without binding arrangements, which will encompass most non-exchange transactions previously
in the scope of IPSAS 23, would continue to pose practical challenges. The accounting for revenues arising
from binding arrangements (which may include both exchange or non-exchange revenues) may also require
complex models, and new systems, processes, or internal controls. Consequently, the IPSASB concluded

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that the three-year transitional exemption should also be available for revenues accounted for in accordance
with IPSAS 47 in order to provide transition relief for first-time adopters.

Exemptions from Presentation and/or Disclosure Requirements Where a First-time Adopter Takes Advantage of the
Exemptions that Provide a Three Year Transitional Relief Period
BC66. The IPSASB acknowledged and agreed that the three year exemption provided for the recognition and/or
measurement of assets and/or liabilities also implies that the associated presentation and/or disclosure
requirements in the applicable IPSAS do not need to be complied with as the information will not be available.
The IPSASB agreed that the information need not be provided until the exemptions that provided the relief
have expired or when the relevant assets and/or liabilities are recognized and/or measured in accordance
with the applicable IPSAS (whichever is earlier).
BC67. For the same reason, the IPSASB agreed that a first-time adopter should not be required to provide any
related disclosure requirements in IPSAS 1, Presentation of Financial Statements and IPSAS 18, Segment
Reporting.

IPSAS 5, Borrowing Costs

BC68. The existing transitional provisions in IPSAS 5 encouraged a first-time adopter to adjust its financial
statements retrospectively if it did not recognize borrowing costs under its previous basis of accounting. The
IPSASB agreed that it does not want to provide more relief to a first-time adopter than to those entities that
already apply IPSAS, particularly where the first-time adopter elects to adopt the allowed alternative
treatment under which borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalized as a part of the cost of an asset.

BC69. As a result, the IPSASB agreed that a first-time adopter should only be encouraged to apply the requirements
of IPSAS 5 retrospectively where it adopts or changes its accounting policy to the benchmark treatment.
Providing this relief was seen a necessary because obtaining information retrospectively may be costly and
considerable effort may be needed to obtain such information.

BC70. The IPSASB, however acknowledged that some information may be available to a first-time adopter
depending on its previous basis of accounting. It was therefore agreed that a first-time adopter who adopted
or changed its accounting policy to the benchmark treatment, should apply the principles in IPSAS 5
prospectively, but it may designate a date before the date of adoption of IPSAS in applying IPSAS 5. This
relief can only be adopted to the extent that the information is available.

BC71. The IPSASB does not want to encourage first-time adopters to adopt the allowed alternative treatment.
Therefore it was agreed that where a first-time adopter changes its accounting policy to the allowed
alternative treatment, any borrowing costs incurred on qualifying assets both before and after the date of
adoption of IPSAS, for which the commencement date for capitalization is prior to the date of adoption of
IPSAS, should be recognized retrospectively where the first-time adopter has not taken advantage of the
transitional relief to not recognise and/or measure assets for a period of three years.

IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial Statements and IPSAS 36, Investments
in Associates and Joint Ventures

BC72. The IPSASB considered whether it should provide transitional relief that allows a first-time adopter to not
present consolidated financial statements on adoption of IPSAS. In considering this proposal, it was argued
that providing such an exemption would contradict the concept of a reporting entity and would not result in
fair presentation.

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BC73. The IPSASB therefore agreed that providing a relief period to not present consolidated financial statements
should not be provided, but instead, a first-time adopter should be given a three year relief period from
eliminating balances, transactions, revenues and expenses between entities within the economic entity.

BC74. As some balances, transactions, revenues and expenses may be known on adoption of IPSAS, a first-time
adopter is encouraged to eliminate only those known balances, transactions, revenues and expenses.

BC75. For the same reason, the IPSASB agreed that a similar exemption should also be provided where a first-time
adopter has one or more jointly controlled entity in terms of IPSAS 8, and where it has one or more associate
in terms of IPSAS 7.

Providing a three-year relief for the initial recognition and/or measurement of interests in other entities

BC76. Following comments received on Exposure Draft, the IPSASB agreed that relief should be provided to a first-
time adopter for the initial recognition and/or measurement of its interests in other entities. This relief would
allow those first-time adopters that have not gathered the necessary information on the date of adoption,
more time to appropriately classify and measure their interests in other entities. The relief provided is
consistent with that provided for financial instruments.

Presenting consolidated financial statements where the three-year relief is adopted for the initial recognition and/or
measurement of interests in other entities and/or to not eliminate inter-entity balances, transactions, revenue and
expenses

BC77. Some respondents to the Exposure Draft expressed a view that relief should be provided from preparing
consolidated financial statements where a first-time adopter has elected to not eliminate some, or all of the
inter-entity balances, transactions, revenue and expenses between entities within the economic entity. The
IPSASB concluded that the financial statements that are presented where a first-time adopter has taken
advantage of the three year relief for the initial recognition and/or measurement of interests in other entities,
and/or where it has elected to not eliminate some, or all inter-entity balances, transactions, revenue and
expenses, cannot be presented as consolidated financial statements, until (a) the exemptions that provided
the relief have expired, and/or (b) inter-entity balances, transactions, revenue and expenses have been
eliminated, and/or (c) its interests other entities have been recognized and/or measured appropriately. The
IPSASB agreed that disclosure requirements should be added to explain to users why the financial
statements are not presented as consolidated financial statements.

BC78. The IPSASB agreed that providing this clarification is necessary because, where a first-time adopter has not
eliminated inter-entity balances, transactions, revenue and expenses as required by IPSAS 35 preparing
consolidated financial statements will merely be an aggregation of inter-entity balances, transactions,
revenue and expenses within the economic entity. Such statements would not be useful for accountability
and decision-making purposes.

BC79. Likewise eliminating the carrying amount of an investment in the controlled entity as required by IPSAS 35
may not be possible if the first-time adopter has not recognized and/measured its interest in other entities as
required by the applicable IPSAS.

IPSAS 40, Public Sector Combinations

BC79A. In developing IPSAS 40, Public Sector Combinations, the IPSASB considered whether it should provide
transitional relief that allows a first-time adopter not to recognize and/or measure all the assets and/or
liabilities associated with a public sector combination. The IPSASB noted that IPSAS 40 is applied
prospectively, and so its application would not require a first-time adopter to adjust their accounting for a
public sector combination that occurred prior to the application of that Standard. However, a public sector
combination could occur during a first-time adopter’s three year transitional relief period. The IPSASB

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considered that requiring a first-time adopter to recognize and measure all the assets and liabilities
associated with a public sector combination without requiring them to recognize and measure all similar
assets and liabilities would not provide useful information for the users of the financial statements.

BC79B. Consequently, the IPSASB agreed to provide transitional relief that allows a first-time adopter not to
recognize and/or measure all the assets and/or liabilities associated with a public sector combination as part
of this Standard. The IPSASB also agreed that a first-time adopter should not recognize goodwill where it did
not recognize and/or measure all the assets and/or liabilities associated with a public sector combination.

Exemptions that Do Not Affect Fair Presentation and Compliance with Accrual Basis IPSAS

Deemed Cost

Deemed Cost for Assets and/or Liabilities

BC80. Some measurements in accordance with IPSAS are based on an accumulation of past costs or other
transaction data. If a first-time adopter has not previously collected the necessary information, collecting or
estimating it retrospectively may be costly and/or impractical. To avoid excessive cost, this IPSAS allows a
first-time adopter to use the fair value as a substitute for the initial cost of inventory, investment property
where the first-time adopter elects to use the historical cost model in IPSAS 16, property, plant, and
equipment, financial instruments and service concession assets at the date of adoption of IPSAS. Where a
first-time adopter takes advantage of the exemption that provides a three year transitional relief period to not
recognize and/or measure certain assets, the fair value is the deemed cost at the date at which the asset is
recognized and/or measured during the period of transition.
BC81. While it could be argued that the use of fair value would lead to a lack of comparability, the IPSASB noted
that cost is generally equivalent to fair value at the date of acquisition. Therefore, the use of fair value as the
deemed cost of an asset means that a first-time adopter reports the same cost data as if it had acquired an
asset with the same value or same remaining service potential at the date of adoption of IPSAS. If there is
any lack of comparability, it arises from the aggregation of costs incurred at different dates, rather than from
the use of fair value as deemed cost for some assets at a date. In the view of the IPSASB, using deemed
cost facilitates the introduction of IPSAS in a cost-effective way.

BC82. When this Standard was issued, under the revaluation model in IPSAS 17, if an entity revalued an asset, it
had to revalue all assets in that class. This restriction prevented selective revaluation of only those assets
whose revaluation would lead to a particular result. The IPSASB had considered whether a similar restriction
should be included in determining a deemed cost. IPSAS 21, Impairment of Non-cash-generating Assets and
IPSAS 26, Impairment of Cash-generating Assets required an impairment test if there was any indication that
an asset was impaired. Thus, if a first-time adopter used fair value as deemed cost for assets whose fair
value was likely to be above cost, it could not ignore indications that the recoverable amount or recoverable
service amount of other assets may have fallen below their carrying amount. In developing IPSAS 45, the
IPSASB noted that these principles are still applicable when current operational value or fair value is used
as deemed cost. In reaching this conclusion, the IPSASB noted that the revaluation model in IPSAS 17 is
labeled the current value model in IPSAS 45.
BC83. The IPSASB also considered the circumstances under which a first-time adopter should be allowed to
determine a deemed cost on initial adoption of IPSAS, or where a first-time adopter takes advantage of the
exemption that provides a three year transitional relief period to not recognize and/or measure certain assets.
The IPSASB considered whether the use of a deemed cost should be restricted to those situations where
cost information is not available for assets, or whether it should be allowed in all circumstances, irrespective
of whether cost information is available on the date of adoption of IPSAS, or the date on which the asset is

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 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

recognized and/or measured where a first-time adopter has taken advantage of the exemption that provides
a three year transitional relief period to not recognize and/or measured certain assets.

BC84. The IPSASB agreed that, to avoid the selective valuation of assets, the use of a deemed cost should be
restricted to those circumstances where reliable information about the historical cost of the asset is not
available.

BC84A. As part of the development of IPSAS 46, Measurement, additional guidance on deemed cost was developed.
This guidance was developed to clarify the application of deemed cost in practice. Measurement guidance
in IPSAS 46 is generic in nature and was developed to supplement specific guidance in specific IPSAS. The
deemed cost guidance in IPSAS 46 was developed to be consistent with the existing guidance in this
Standard. However, where specific deemed cost guidance in this Standard exists, it takes precedent over
the generic guidance in IPSAS 46.

Deemed Cost for Investments in Controlled Entities, Joint Ventures or Associates

BC85. The IPSASB also agreed that a first-time adopter may elect to measure an investment in a controlled entity,
joint venture or associate at cost in its separate financial statements on the date of adoption of IPSAS at
either cost as determined in accordance with IPSAS 6, or deemed cost. Deemed cost is determined as fair
value in accordance with IPSAS 41, Financial Instruments.

Deemed Cost for Intangible Assets

BC86. In considering whether a first-time adopter should be allowed to determine a deemed cost for intangible
assets, the IPSASB considered the existing transitional provisions in IPSAS 31. IPSAS 31 allows a first-time
adopter to use a previous revaluation of intangible assets at, or before, the date of transition as deemed cost
at the date of the revaluation if the revaluation is broadly comparable to fair value or cost or depreciated cost
that is adjusted to reflect for example, changes in a general or specific price index. IPSAS 31, however, only
allows a first-time adopter to determine a deemed cost if the recognition criteria in IPSAS 31 (including the
reliable measurement of original cost), and the criteria for revaluation (including the existence of an active
market), have been met.
BC87. The IPSASB debated whether public sector entities will be likely to fulfil the second criterion on initial adoption
of IPSAS, i.e. existence of an active market. The IPSASB acknowledged that it may be uncommon for an
active market to exist in the public sector for intangible assets, and as a consequence, the use of the deemed
cost approach will likely be considerably restricted. As a result, a first-time adopter may be unable to
determine a deemed cost for some intangible assets such as in-house developed IT systems.

BC88. The IPSASB considered whether the reliable measurement of original cost should be required for first-time
adopters which previously applied a cash basis of accounting, as some entities might find it cumbersome to
identify the original cost of their intangible assets. It was also argued that where a first-time adopter has
previously applied the accrual basis of accounting and it has acquired intangible assets through a non-
exchange transaction, it might not be able to reliably measure original cost.

BC89. Based on these considerations, the IPSASB concluded that the reliable measurement of the original cost
should be excluded as a criterion for the application of the deemed cost approach on first-time adoption of
IPSAS.

BC90. The IPSASB therefore agreed that a first-time adopter is allowed to determine a deemed cost for intangible
assets where that deemed costs meets: (a) the recognition criteria in IPSAS 31 (excluding the reliable
measurement criterion) and (b) the criteria in IPSAS 31 for revaluation (including the existence of an active
market).

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BC91. In considering whether a first-time adopter should be allowed to determine a deemed cost for internally
generated intangible assets, the IPSASB concluded that it would be difficult to retrospectively assess the
probability of expected future economic benefits or service potential through reasonable and supportable
assumptions as management would not be able to apply hindsight in obtaining such information. Due to the
absence of reliable information on the date of adoption of IPSAS, it was therefore agreed that a deemed cost
may not be determined for internally generated intangible assets.

Alternative Measurement Bases for Fair Value in Determining Deemed Cost

BC92. When this Standard was issued, the IPSASB had considered whether some revaluations in accordance with
a first-time adopter’s previous basis of accounting might be more relevant to users than original cost. It was
concluded that it would not be reasonable to require a time-consuming and expensive estimation of cost, if
previous revaluations already complied with IPSAS. This IPSAS therefore allowed a first-time adopter to use
a revaluation under its previous basis of accounting for property, plant, and equipment determined at or
before the date of adoption of IPSAS, as deemed cost. This was allowed to be used if the revaluation was,
at the date of the revaluation, broadly comparable to:

(a) Fair value; or

(b) Cost or depreciated cost, where appropriate, in accordance with IPSAS adjusted to reflect, for example,
changes in a general or specific price index.

BC93. In determining “fair value”, when IPSAS 33 was developed, the guidance in each applicable IPSAS was
considered, where such guidance was provided. In IPSAS 17, it was noted that fair value was normally
determined by reference to market-based evidence, often by appraisal. IPSAS 17 also stated that if market-
based evidence was not available to measure items of property, plant, and equipment, an entity could
estimate fair value using replacement cost, reproduction cost or a service units approach. In developing
IPSAS 45, the IPSASB noted that these principles have been moved to IPSAS 46, Measurement. In reaching
this conclusion, the IPSASB noted that IPSAS 45 refers to historical cost rather than cost and uses current
operational value rather than fair value.
BC94. The IPSASB noted that the fair value guidance in IPSAS 16 only considered a market-based value, and that
limited guidance was provided in IPSAS 12 in determining fair value. The IPSASB concluded that because a
first-time adopter may find it difficult to determine a market-based fair value for all investment properties and
all inventories, other measurement alternatives may need to be considered in determining deemed cost for
inventory or investment property.

BC94A. The IPSASB has since issued IPSAS 46, which provides a consistent approach to measuring fair value in all
IPSAS. The IPSASB noted that the guidance in that Standard includes a fair value hierarchy, which guidance
on measurement techniques that may be used where there is no observable market data. The IPSASB
considered whether the continued use of measurement alternatives was appropriate and noted that the
alternatives included in IPSAS 33 are consistent with measurement techniques available in IPSAS 46 to
estimate fair value. The IPSASB agreed to modify the wording of IPSAS 33 accordingly.

BC95. The IPSASB agreed that a first-time adopter may consider the following measurement techniques in
determining a deemed cost if observable inputs of fair value are not available on the date of adoption of
IPSAS, or on the date that the asset is recognized and/or measured where a first-time adopter takes
advantage of the exemption that provides a three year transitional relief period to not recognize and/or
measure certain assets:

(a) For inventory, current replacement cost; and

(b) For investment property of a specialized nature, depreciated replacement cost.

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Determining a Deemed Cost Where the First-Time Adopter has Taken Advantage of the Three-Year Transitional
Exemption Period

BC96. The IPSASB concluded that, to the extent that a first-time adopter has elected to adopt one or more of the
transitional exemptions that provides relief for the recognition and/or measurement of assets, it may not be
able to retrospectively adjust the value of the asset to the date of adoption of accrual basis IPSAS.
Retrospectively adjusting the value of the asset would require consideration of the price of the asset and
other market factors that existed on the date of adoption of accrual basis IPSAS, including whether there was
any indication that the asset was impaired.

BC97. The IPSASB concluded that this would not be cost effective. It was therefore agreed that, where a first-time
adopter takes advantage of the exemption which allows a three year transitional relief period to not recognize
and/or measure an asset, it may determine a deemed cost for that asset at any point of time within the three
year transitional relief period. Any adjustments resulting from the recognition of the asset are recognized
against the opening accumulated surplus or deficit in the year in which asset is recognized and/or measured.

IPSAS 18, Segment Reporting

BC98. The IPSASB considered whether relief should be provided to a first-time adopter for the presentation of
segment information. The IPSASB agreed that, despite the fact that the presentation of segment information
might be useful, a first-time adopter should be provided a relief period, as the information used in presenting
segment information needs to be built on existing information in the financial statements.

BC99. As the IPSASB agreed to allow a three year transitional relief period for the recognition and/or measurement
of assets and liabilities, the information which is needed to present segment information may only be available
when the exemptions that provided the relief have expired, or when the relevant items are recognized and/or
measured in accordance with the applicable IPSAS (whichever is earlier). As relevant and reliable information
may not be available to present a meaningful segment report during the period of transition, and because the
presentation of a segment report may not be a priority for users during the transition to accrual basis IPSAS
it was agreed that a three year exemption period should also be provided for the presentation of segment
information.

BC100. The IPSASB also concluded that, because segment information is additional to the information required on
the elements presented in the financial statements, allowing this relief is appropriate.

IPSAS 20, Related Party Disclosures

BC101. In providing a first-time adopter time to build up information on its related party relationships and related party
transactions, the IPSASB agreed that the disclosure of related party relationships, related party transactions
and information about key management personnel should be treated in the same way as the required
eliminations of balances, transactions, revenue and expenses between entities in IPSAS 6 to 8.

BC102. This IPSAS therefore provides a transitional exemption for a period of three years for the disclosure of related
party relationships, related party transactions and information about key management personnel.

IPSAS 21, Impairment of Non-Cash-Generating Assets and IPSAS 26, Impairment of Cash-Generating Assets

BC103. The IPSASB acknowledged that a first-time adopter may have applied an accounting policy for the
recognition and reversal of impairment losses that are different to the requirements in IPSAS 21 and 26, or
may have not considered impairment at all. On adoption of IPSAS, it may be difficult to determine the amount
of adjustments resulting from retrospective application of a change in an accounting policy, as this requires
hindsight.

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BC104. As a result, the IPSASB agreed that IPSAS 21 and 26 should be applied prospectively, but that the first-
time adopter should be required to assess whether an indicator of impairment has been triggered for its
cash-generating and non-cash-generating assets in the opening statement of financial position.

BC105. In recognizing the effect of an impairment loss on first-time adoption of IPSAS 21 or IPSAS 26, the IPSASB
considered two options. The first option was to measure such assets at their recoverable amount, or
recoverable service amount and use that as the deemed cost. The IPSASB noted that the effect of applying
this option may means that impairment losses could not be reversed in the future. This option was therefore
not seen as appropriate.

BC106. The second option, which provides more relevant information is to measure the assets at their recoverable
amount, or recoverable service amount, and report the effect in net assets/equity. The IPSASB supported
this option.

Timing of Impairment Test for Assets Where an Entity Adopts the Relief Period for the Recognition of Assets

BC107. The IPSASB concluded that where a first-time adopter takes advantage of the exemption that provides relief
for the recognition and/or measurement of assets, it may be difficult to retrospectively adjust the value of the
asset to the date of adoption of IPSAS. A first-time adopter may find it difficult to determine the amount of
adjustments that would be required based on impairment that may or may not have existed at the date of
transition.

BC108. The IPSASB therefore agreed that IPSAS 21 and IPSAS 26 should be applied prospectively from the date
when the transitional exemptions that provided the relief have expired, or when the relevant asset is
recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier).

IPSAS 39, Employee Benefits

BC109. In developing IPSAS 33, the IPSASB also agreed that, where a first-time adopter took advantage of the
exemptions that provide relief for the recognition and/or measurement of liabilities, it should provide
information about amounts for the current and previous four annual periods of the present value of the defined
benefit obligation, the fair value of the plan assets, and the surplus or deficit in the plan and adjustments as
required by IPSAS 25 prospectively. IPSAS 39, Employee Benefits, was issued in July 2016. IPSAS 39
deleted paragraph 107 of this Standard as the requirement in paragraph 141(p) of IPSAS 25 to disclose
information on experience adjustments was not adopted in IPSAS 39.

IPSAS 28, Financial Instruments: Presentation

BC110. IPSAS 28 requires an entity to split a compound financial instrument at inception of the agreement, into
separate liability and equity components. It was concluded that separating these two portions would be costly
and would not provide relevant information to users of financial statements if the liability component of the
compound instrument is no longer outstanding at the date of adoption of IPSAS. As a result, this IPSAS
requires that, if the liability component is no longer outstanding at the date of adoption of IPSAS, the first-
time adopter need not separate the cumulative interest on the liability component from the net assets/equity
component.

IPSAS 41, Financial Instruments

BC111. The IPSASB concluded that, as it is in most instances impracticable to apply impairment principles
retrospectively, the impairment of financial instruments should be applied prospectively. This exemption is
consistent with the exemption provided for non-cash-generating assets and cash-generating assets in
accordance with IPSAS 21 and 26.

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IPSAS 30, Financial Instruments: Disclosures

BC112. The IPSASB concluded that if a first-time adopter did not disclose information relating to financial instruments,
and the nature and extent of risks arising from financial instruments under its previous basis of accounting,
obtaining such information may be costly, and therefore is not feasible.
BC113. The IPSASB therefore agreed that the disclosure requirements relating to financial instruments should be
applied prospectively from the date of adoption of IPSAS, or where the first-time adopter takes advantage of
the exemption that provides a three year transitional relief period to not recognize and/or measure financial
assets, when the exemptions expire, or when the relevant items are recognized and/or measured in
accordance with the applicable IPSAS (whichever is earlier).

BC114. To the extent that a first-time adopter elects to present comparative information, it was agreed that a first-
time adopter need not present comparative information for disclosures relating to the nature and extent of
risks arising from financial instruments for the comparative period because obtaining such information may
be costly, and is therefore not feasible.

IPSAS 31, Intangible Assets

BC115. On first-time adoption of IPSAS, a first-time adopter will be required to recognize all assets and liabilities for
which recognition is required by IPSAS. IPSAS 31 requires that past expenditure on an intangible asset that
was initially recognized as an expense should not be recognized as part of the cost of an intangible asset at
a later date.

BC116. The IPSASB concluded that, because a first-time adopter may have expensed costs incurred on intangible
assets under its previous basis of accounting prior to the adoption of IPSAS, a first-time adopter should be
allowed to recognize all intangible assets that meet the recognition criteria and other criteria in IPSAS 31
(i.e., identifiable control of an asset and that future economic benefits or service potential that are attributable
to the asset will flow to the entity), even though such costs may have been expensed prior to adoption of
IPSAS. It was however, confirmed that such assets should only be recognized as intangible assets if reliable
cost information is available and an active market exists for that asset on the date of adoption of IPSAS.

Interests in Other Entities

BC117. The IPSASB considered whether IPSAS 33 should refer to IPSAS 6, Consolidated and Separate Financial
Statements, IPSAS 7, Investments in Associates, and IPSAS 8, Interests in Joint Ventures, as well as
IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial Statements, and IPSAS 36,
Investments in Associates and Joint Ventures, which were published in January 2015 with an effective date
of January 1, 2017, with early adoption permitted. The IPSASB noted that as IPSAS 33 was published in
January 2015, any entity adopting IPSAS 33 and electing to apply the 3 year exemptions, would be required
to apply IPSAS 34–36 by the time the transitional period is complete. The IPSASB formed a view that it was
very unlikely that entities adopting IPSAS 33, prior to January 1, 2017, would adopt IPSAS 6–8 as this would
require a further transition to IPSAS 34–36 shortly afterwards. The IPSASB therefore concluded that
IPSAS 33 should not include provisions relating to IPSAS 6-8.

Revision of IPSAS 33 as a result of the IPSASB’s The Applicability of IPSAS, issued in April 2016
BC118. The IPSASB issued The Applicability of IPSAS in April 2016. This pronouncement amends references in all
IPSAS as follows:

(a) Removes the standard paragraphs about The Applicability of IPSAS to “public sector entities other
than GBEs” from the scope section of each Standard;

(b) Replaces the term “GBE” with the term “commercial public sector entities”, where appropriate; and

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(c) Amends paragraph 10 of the Preface to International Public Sector Accounting Standards by providing
a positive description of public sector entities for which IPSAS are designed.

The reasons for these changes are set out in the Basis for Conclusions to IPSAS 1.

Revision of IPSAS 33 as a result of Improvements to IPSAS, 2018

BC119. Following the issue of IPSAS 33, the IPSASB became aware that stakeholders were uncertain whether the
exemption from providing comparative information applied to the first financial statements issued following
the adoption of accrual basis IPSAS, or all financial statements issued during the transition period. Paragraph
77 referred to an entity’s ‘first transitional IPSAS financial statements’ whereas other paragraphs referred to
an entity’s ‘transitional IPSAS financial statements.’ The IPSASB agreed to amend the other paragraphs to
clarify that the exemption applies only to the first financial statements issued following the adoption of accrual
basis IPSAS.

BC120. The IPSASB reviewed the requirements of IFRIC 22, Foreign Currency Transactions and Advance
Consideration, issued by the IASB in December 2016, and the considerations of the IFRS Interpretations
Committee in reaching its consensus as set out in its Basis for Conclusions. The IPSASB generally concurred
that there was no public sector specific reason for not incorporating these requirements into IPSAS 4, The
Effects of Changes in Foreign Exchange Rates. Consequently, the IPSASB agreed to incorporate the
requirements of IFRIC 22 into Appendix A of IPSAS 4. The IPSASB noted that entities are permitted to apply
the requirements of Appendix A prospectively, and therefore agreed that first-time adopters need not apply
the requirements to assets, expenses and revenue in the scope of Appendix A initially recognized before the
date of adoption of IPSAS.

Revision of IPSAS 33 as a result of Improvements to IPSAS, 2019

BC121. The amendments to paragraphs 113, 113A and 114 update the guidance on classifying financial instruments
on initial adoption of accrual basis IPSAS resulting from IPSAS 41, Financial Instruments which were
inadvertently omitted when IPSAS 41 was issued. The IPSASB agreed to include these minor amendments
in Improvements to IPSAS, 2019.

Revision of IPSAS 33 as a result of COVID-19: Deferral of Effective Dates

BC122. The IPSASB published Improvements to IPSAS, 2019 in January 2020, which included amendments to
IPSAS 33: First-Time Adoption of Accrual Basis International Public Sector Accounting Standards (IPSAS).
At the time these amendments were finalized, the Board decided that an entity shall apply them for annual
financial statements covering periods beginning on or after January 1, 2022.

BC123. In June 2020, the IPSASB discussed the effect of the COVID-19 pandemic on financial reporting. The Board
noted that the pandemic has created significant pressures on the resources public sector entities might
otherwise allocate to the implementation of these amendments.

BC124. The Board concluded that deferral during a time of significant disruption would provide much-needed
operational relief to public sector entities. Therefore, the Board decided to propose a one-year deferral of the
effective date of these amendments.

BC125. The Board did not propose any changes to the amendments other than the deferral of the effective date.
Earlier application of the amendments will continue to be permitted.

Revision of IPSAS 33 as a result of Improvements to IPSAS, 2021

BC126. The IPSASB reviewed the revisions to IFRS 1, First-time Adoption of International Financial Reporting
Standards, included in Annual Improvements to IFRS® Standards (2018-2020) issued by the IASB in May

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2020, and the IASB’s rationale for making these amendments as set out in its Basis for Conclusions and
concurred that there was no public sector specific reason for not adopting these amendments.

Revision of IPSAS 33 as a result of IPSAS 46, Measurement

BC127. IPSAS 46, issued in May 2023, provides generic guidance on the initial and subsequent measurement of
assets and liabilities, to ensure a consistent approach across all IPSAS. Paragraph 70 of this Standard
permits a first-time adopter to consider replacement cost as a measurement alternative to fair value when
observable inputs are not available for inventory or investment property. Since IPSAS 46 does not identify
replacement cost as measurement bases, the IPSASB consider whether it should be replaced.

BC128. Since replacement cost is retained in IPSAS 12, Inventories, and IPSAS 16, Investment Property, the
IPSASB agreed to retain replacement cost in the context of this Standard to maintain consistency in principles
between the specific requirements in individual IPSAS, and the principles on first-time adoption.

BC129. Furthermore, the IPSASB agreed to add current operational value as an alternative measurement basis to
fair value for property, plant, and equipment. Current operational value was added to align the principles in
this Standard with IPSAS 45, Property, Plant, and Equipment, which, as a result of IPSAS 45, permits
measuring property, plant, and equipment at current operational value for subsequent measurement.

BC130. IPSAS 46 also provided additional generic guidance on the application of deemed cost. This guidance is
consistent with the deemed cost guidance in this Standard (see BC84A).

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Implementation Guidance
This guidance accompanies, but is not part of, IPSAS 33.

IG1. The purpose of this Implementation Guidance is to illustrate certain aspects of the requirements of IPSAS 33.

Date of Adoption of IPSAS

IG2. The date of adoption of IPSAS is the date an entity adopts accrual basis IPSAS for the first time in preparing
its financial statements.
IG3. Prior to the adoption of this IPSAS, a first-time adopter shall have adequately prepared for its transition to
accrual basis IPSAS. The guidance provided in Study 14, Transition to the Accrual Basis of Accounting:
Guidance for Governments and Government Entities issued by the IPSASB, may assist a first-time adopter
with planning the conversion to accrual basis IPSAS. The relief provided in this IPSAS shall therefore not be
seen as a complete roadmap for the adoption of accrual basis IPSAS, but rather the end stage of the adoption
process.
IG4. A first-time adopters’ date of adoption will therefore to be the start of the reporting period in which it elects to
adopt accrual basis IPSAS for which it presents its transitional IPSAS financial statements or its first IPSAS
financial statements. For example, an entity elects to adopt accrual basis IPSAS from January 1, 20X1 for
its reporting period ending December 31,20X1. The date of adoption of IPSAS will be January 1, 20X1.

Transitional IPSAS Financial Statements

IG5. On the date of adoption of IPSAS, a first-time adopter may elect to adopt one or more of the exemptions
included in IPSAS 33, First-time Adoption of Accrual Basis International Public Sector Accounting Standards
(IPSAS). Some of the exemptions included in IPSAS 33 affect the fair presentation of a first-time adopter’s
financial statements and its ability to assert compliance with accrual basis IPSAS (Appendix A lists the
transitional exemptions and provisions that a first-time adopter is required to apply and/or can elect to apply
on adoption of accrual basis IPSAS and illustrates whether fair presentation and the first-time adopter’s ability
to assert compliance with accrual basis IPSAS will be affected).
IG6. As a first-time adopter is not able to make an explicit and unreserved statement of compliance with accrual
basis IPSAS following the adoption of the exemptions provided in IPSAS 33, the financial statements
presented for the first reporting period following the adoption of accrual basis IPSAS, will be referred to as
the “transitional IPSAS financial statements”.
IG7. For example, if the first-time adopter adopts the transitional exemption that provides relief for the recognition
of certain items of property, plant and equipment when adopting accrual basis IPSAS on January 1, 20X1, it
would not be able to make an explicit and unreserved statement of compliance with accrual basis IPSAS at
the end of its first reporting period, i.e. December 31, 20X1. The financial statements prepared for the first
reporting period, will therefore be referred to as the “first transitional IPSAS financial statements”.
IG8. The financial statements presented during the period of transition until the exemptions that provided the relief
have expired, and/or when the relevant items are recognized and/or measured in the financial statements in
accordance with the applicable IPSAS, will be referred to as the “transitional IPSAS financial statements”.

Basis of Preparation When Preparing Transitional IPSAS Financial Statements

IG9. As stated in paragraph 27 of IPSAS 33, a first-time adopter that elects to adopt one or more of the exemptions
included in IPSAS 33, may not be able to make an explicit and unreserved statement of compliance with
accrual basis IPSAS as required by IPSAS 1. During the period of transition, this fact shall be highlighted to
the users of financial statements in presenting the “basis of preparation” in the financial statements.
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IG10. As an illustration, if a first-time adopter elected to adopt the transitional exemption that allows it three years
in which to recognize and/or measure investment property, the following explanation may be provided in the
“basis of preparation” paragraph in the financial statements during the period of transition:

Basis of preparation
The financial statements have been prepared in accordance with accrual basis International Public Sector
Accounting Standards (IPSAS). IPSAS 33 allows a first-time adopter a period of up to three years to
recognize and/or measure certain assets and/or liabilities.
In its transition to accrual basis IPSAS, Public Sector Entity X took advantage of this transitional exemption
for investment property. As a result, it is unable to make and explicit an unreserved statement of compliance
with accrual basis IPSAS in preparing its transitional IPSAS financial statements for this reporting period.
Public Sector Entity X intends to recognize and/or measure its investment property by 20X3.

First IPSAS Financial Statements

IG11. A first-time adopter’s first IPSAS financial statements will be the first set of financial statements that it presents
in which it makes an explicit and unreserved statement of compliance with accrual basis IPSAS.

IG12. A first-time adopter will not be able to prepare its first IPSAS financial statements until the exemptions in
IPSAS 33 that provided relief which affected fair presentation and compliance with IPSAS, have expired, or
when the relevant items are recognized, measured and/or the relevant information has been presented
and/or disclosed in accordance with the applicable IPSAS (whichever is earlier).

IG13. Following from the example in IG5, the transitional exemptions that provided the relief for the recognition of
certain items of property, plant and equipment expire after three years, i.e. December 31, 20X3. If it is
assumed that the entity has not adopted any other transitional exemptions in IPSAS 33 that affect fair
presentation and compliance with IPSAS, and that it recognizes and/or measures the items of property, plant
and equipment during the transitional period, a first-time adopter will present its first IPSAS financial
statements for the period ending December 31, 20X3.

IG14. If a first-time adopter has not adopted any of the exemptions in IPSAS 33 that affect fair presentation and its
ability to claim compliance with accrual basis IPSAS, its first accrual financial statements will also be its first
IPSAS financial statements.

To illustrate:
Timeline – First Time Adoption IPSAS (assuming that entity elects to apply the three year transitional
relief for the recognition and/or measurement of certain assets)

An entity adopts accrual basis IPSAS on 1 January 20X0 by applying IPSAS 33, First Time Adoption of
Accrual Basis IPSAS

The first-time adopter elects to apply the three year relief for the recognition of property, plant, and equipment.
Assume that it does not adopt of any other relief periods. It also elects not to present comparative information.

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The first-time adopter recognizes all property, plant, and equipment by 31 December 20X2.

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Estimates
IG15. Paragraph 23 of IPSAS 33 requires that a first-time adopter’s estimates in accordance with IPSAS at the
date of adoption of IPSAS shall be consistent with estimates made at the end of its comparative period in
accordance with the previous basis of accounting (after adjustments to reflect any difference in accounting
policies), unless there is objective evidence that those estimates were in error. An entity may receive
information after the date of adoption of IPSAS about estimates that it had made under the previous basis of
accounting. In accordance with paragraph 24, a first-time adopter shall treat the receipt of that information in
the same way as non-adjusting events after the reporting period in accordance with IPSAS 14, Events after
the Reporting Period.

IG16. For example, assume that a first-time adopter’s date of adoption of IPSAS is January 1, 20X4 and new
information on July 15, 20X4 requires the revision of an estimate made in accordance with the previous basis
of accounting at December 31, 20X3. The first-time adopter shall not reflect that new information in its
opening statement of financial position (unless the estimates require adjustment for any differences in
accounting policies or there is objective evidence that the estimates were in error). Instead, the first-time
adopter shall reflect that new information in surplus or deficit for the year ended December 31, 20X4.

Transitional Exemptions that Provide Three Year Relief for the Recognition and/or Measurement of Assets
and/or Liabilities

IG17. IPSAS 33 provides a first-time adopter a period of up to three years’ relief in which it is allowed to not
recognize and/or measure certain assets and liabilities. Where a first-time adopter takes advantage of this
exemption, it will have to consider and analyze title deeds, contracts and other similar arrangements in
accounting for, and classifying these assets in accordance with the applicable IPSAS.

IG18. For example, assume that a first-time adopter controls a wide range of property, plant and equipment when
it adopts accrual basis IPSAS on January 1, 20X1. If the first-time adopter takes advantage of the exemption
that provides a three year transitional relief period to not recognize and/or measure the property, plant and
equipment, it may recognize and/or measure the property, plant and equipment during the period of transition
from January 1, 20X1 until December 31, 20X3. If the property, plant and equipment is recognized for
example, on April 1, 20X2, the first-time adopter shall adjust the opening accumulated surplus or deficit on
January 1, 20X2. As required by paragraph 142 of IPSAS 33, the first-time adopter shall, as part of the notes
to the financial statements, provide a reconciliation to the accumulated surplus or deficit as at December 31,
20X1 (i.e. the opening balance as at January 1, 20X2) for the property, plant and equipment that was
recognized on April 1, 20X2.

IG19. Where a first-time adopter has taken advantage of the three year relief period, it shall not derecognise any
of the assets and/or liabilities that were recognized under its previous basis of accounting unless it is to
comply with an IPSAS requirement. Any adjustments to the assets and/or liabilities recognized under its
previous basis of accounting shall be adjusted during the period of transition against the opening accumu-
lated surplus of deficit in the period in which the adjustment is made.

Accounting for Leases

IG20. Where a first-time adopter that is a lessee takes advantage of the exemption that provides a three year
transitional relief period to not recognize its right-of-use assets, it will also not be able to comply with the
recognition requirements relating to the lease liabilities, until the transitional exemptions related to the right-
of-use assets have expired.
IG21. For example, assume that a first-time adopter that is a lessee has a right-of-use asset as a result of a lease
contract on the date of adoption of accrual basis IPSAS on January 1, 20X1. The first-time adopter takes

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advantage of the exemption that provides a three year transitional relief period to not recognize the right-of-
use asset. The right-of-use asset is recognized on December 31, 20X3 when the exemption expires.
IPSAS 33 requires the first-time adopter to only recognize the corresponding lease liability for the right-of-
use asset on December 31, 20X3, i.e. on the date that the right-of-use asset is recognized.

Recognition of Provisions Included in the Initial Cost of an Item of Property, Plant and Equipment

IG22. IPSAS 45, Property, Plant, and Equipment recognizes that in some cases, the construction or commissioning
of an item of property, plant, and equipment will result in an obligation for an entity to dismantle or remove
the item of property, plant and equipment and restore the site on which the asset is located. An entity is
required to apply IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets in recognizing and
measuring the resulting provision to be included in the initial cost of the item of property, plant, and equip-
ment.

IG23. IPSAS 33 provides an exemption for the recognition of this liability. A first-time adopter is allowed to not
recognize and/or measure the liability relating to the initial estimate of costs of dismantling and removing the
item and restoring the site on which it is located, until such time as the exemption for IPSAS 45 expires and/or
the relevant asset is recognized and/or measured and relevant information has been presented and/or dis-
closed in the financial statements in accordance with IPSAS 45 (whichever is earlier).

IG24. For example, an entity adopts accrual basis IPSAS on January 1, 20X1 and takes advantage of the exemption
in IPSAS 33 that provides a three year transitional relief period to not recognize a government owned nuclear
power station. The first-time adopter determines a deemed cost for the asset on June 30, 20X3 and
recognizes the asset on that date at CU1,000,000. The first-time adopter determines that it has a
decommissioning obligation under IPSAS 19 of CU500,000 at the date of adoption of IPSAS. The obligation
amounts to CU550,000 on June 30, 20X3 when the asset is recognized.

IG25. IPSAS 33 requires the first-time adopter to only recognize and/or measure its obligation relating to the
dismantling and restoring of the site on June 30, 20X3, i.e. the date on which the asset is recognized. The
liability will be measured at CU550,000 which reflects the first-time adopter’s obligation on the date that the
asset is recognized. The first-time adopter shall, as part of the notes to the financial statements, provide a
reconciliation to the accumulated surplus or deficit as at December 31, 20X2 (i.e. the opening balance as at
January 1, 20X3) for the recognition of the obligation and the related asset that was recognized on June 30,
20X2.

Borrowing Costs Incurred on Qualifying Assets

IG26. Paragraph 90 of IPSAS 33 requires that, where a first-time adopter elects to account for borrowing costs in
accordance with the allowed alternative treatment, it is required to apply the requirements in IPSAS 5,
Borrowing Costs retrospectively, for any borrowing costs incurred on qualifying assets before the date for
adoption of IPSAS.

IG27. Paragraph 44 of IPSAS 33 provides an exemption to this requirement by allowing a first-time adopter to
commence capitalization of borrowings costs incurred on qualifying assets after the recognition of an asset
where the first-time adopter takes advantage of the exemption that provides a three year transitional relief
period for the recognition of assets.

IG28. For example, a first-time adopter adopts the allowed alternative treatment in accounting for borrowing costs
incurred on qualifying assets. The date of adoption of IPSAS is January 1, 20X1. The first-time adopter
determines that the borrowing cost incurred prior to the adoption of IPSAS on January 1, 20X1 amounts to
CU500,000 and that borrowing costs incurred at the end following two reporting periods amounted to
CU20,000 and CU30,000. In addition, the first-time adopter adopts the exemption that provides three year

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transitional relief from the recognition of property, plant and equipment and as a result, recognizes the item
of property, plant and equipment at the end of the second reporting period at CU1,000,000.

At the end of 20X2, the item of property, plant and equipment recognized on the statement of financial position
will be CU1,030,000 (CU1,000,000 + CU30,000). Borrowing costs incurred prior to the recognition of the item
of property, plant and equipment, i.e. CU500,000 and CU20,000 shall not be included as part of the cost of
the qualifying asset.

Presenting Comparative Information

IG29. Paragraph 78 of IPSAS 33 encourages, but does not require an entity to present comparative information in
its first transitional IPSAS financial statements or its first IPSAS financial statements in accordance with this
IPSAS. The decision to present comparative information affects not only the extent of the information
presented, but also the date of adoption of IPSAS.

Date of Adoption of IPSAS

IG30. To illustrate: The end of a first-time adopter’s first accrual basis reporting period is December 31, 20X5. The
first-time adopter decides to present comparative information in those financial statements for one year only
(see paragraph 78 of IPSAS 33). Therefore, its date of adoption of IPSAS is the beginning of the comparative
period i.e. January 1, 20X4 (or equivalently December 31, 20X3).

Information Presented when a First-Time Adopter Elects to Prepare Comparative Information

IG31. Where the first-time adopter elects to prepare comparative information, it is required to apply the accrual
basis IPSAS effective for periods ending on December 31, 20X5 in:
(a) Preparing and presenting its opening accrual basis statement of financial position at January 1, 20X4;
and

(b) Preparing and presenting its:

(i) Statement of financial position for December 31, 20X5 (including comparative amounts for
20X4);

(ii) Statement of financial performance (including comparative amounts for 20X4);

(iii) Statement of changes in net assets/equity for December 31, 20X5 (including comparative
amounts for 20X4);

(iv) Statement of cash flows for the year to December 31, 20X5 (including comparative amounts for
20X4);

(v) Disclosures (including comparative information for 20X4);

(vi) A comparison of budget and actual amounts for the year to December 31, 20X5; and
(vii) Reconciliations in accordance with paragraph 142.

First-Time Adopter Elects to Not Prepare Comparative Information

IG32. Where a first-time adopter elects to not prepare comparative information, it is required to apply the accrual
basis IPSAS effective for periods ending on December 31, 20X5:

(a) Preparing and presenting its opening accrual basis statement of financial position at 1 January 20X5;
and

(b) Preparing and presenting its:

(i) Statement of financial position for December 31, 20X5;

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(ii) Statement of financial performance for December 31, 20X5;

(iii) Statement of changes in net assets/equity for December 31, 20X5;

(iv) Statement of cash flows for the year to December 31, 20X5;

(v) Disclosures;
(vi) A comparison of budget and actual amounts for the year to December 31, 20X5; and

(vii) Reconciliations in accordance with paragraph 142.

Adoption of Three-Year Transitional Relief Period

IG33. Where the first-time adopter takes advantage of the exemptions that provide relief from the recognition and/or
measurement of assets and/or liabilities, IPSAS 33 requires it to only adjust comparative information for
reporting periods following the date of adoption of IPSAS to the extent that reliable and relevant information
is available about the items that have been recognized and/or measured.

IG34. To illustrate: The end of a first-time adopter’s first accrual basis reporting period is December 31, 20X2. The
first-time adopter on the date of adoption of IPSAS on January 1, 20X1, adopts the transitional exemption
providing a three year relief period for the recognition of investment property. At the end of 20X3 the first-
time adopter has recognized the investment property, which is included in the statement of financial position
as at December 31, 20X3. Only if reliable and relevant information is available about the value of the
investment property recognized during 20X3, will the first-time adopter adjust the comparative information
presented (i.e., for the period ending December 31, 20X2).

Presenting Reconciliations
IG35. Paragraph 142 of IPSAS 33 requires a first-time adopter to present a reconciliation of its closing balances
reported under its previous basis of accounting, to its net assets/equity in accordance with IPSAS for its first
transitional IPSAS financial statements or its first IPSAS financial statements. A reconciliation is also
presented of its accumulated surplus or deficit in accordance with its previous basis of accounting to its
accumulated surplus or deficit at the date of adoption of IPSAS.

IG36. For example, a first-time adopter, which previously applied a modified-accrual basis of accounting, adopts
accrual basis IPSAS on January 1, 20X4 and elects to present comparative information as permitted in IPSAS
33. The first-time adopter shall, in accordance with paragraphs 142 and 143 of IPSAS 33, present a
reconciliation in the notes to its transitional IPSAS financial statements that provides sufficient detail to enable
users to understand the material adjustments to the opening statement of financial position as at January 1,
20X4, and the restated comparative statement of financial performance, where applicable.

IG37. Paragraph 146 further requires a first-time adopter that takes advantage of the exemptions that provide a
three year transitional relief period to not recognize and/or measure items, to present a reconciliation of
items that have been recognized and/or measured during the reporting period which were not recognized
and/or measured in the previous financial statements.
IG38. Following from the example in IG29, a first-time adopter adopts the exemption in IPSAS 33 that allows it to
not recognize investment property for a period of three years. The first-time adopter applies this exemption
and only recognizes the investment property at the end of year three, i.e. December 31, 20X4. As an
adjustment is made to the opening balance of accumulated surplus or deficit as on January 1, 20X4 in
recognizing the investment property, paragraph 146 requires the first-time adopter to present a reconciliation
in its notes to the financial statements for the year ending December 31, 20X4 to allow users to understand
the adjustment that was made following the recognition of the investment property.

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Deemed Cost
IG39. IPSAS 33 allows a first-time adopter to determine a deemed cost as a substitute for acquisition cost or
depreciated cost at the date of adoption of IPSAS, where a first-time adopter takes advantage of the
exemption that provides a three year transitional relief period to not recognize and/or measure certain assets
and/or liabilities. A deemed cost may however only be determined if no cost information is available about
the historical cost of the asset and/or liability. When a first-time adopter initially measures these assets and/or
liabilities on the date of adoption of IPSAS, or when the transitional exemptions that provided the first-time
adopter with a three year relief period to not recognize and/or measure certain assets and/or liabilities have
expired, it recognizes the effect directly in accumulated surplus or deficit in the opening statement of financial
position in the period in which the deemed cost is determined.
To illustrate:

Public Sector Entity X adopted accrual basis IPSAS on January 1, 20X4 and applied deemed cost to measure
investment property. In applying deemed cost, investment property was valued at CU 1,800,000 on the date
of adoption. Public Sector Entity X elected to not present comparative information.

Statement of Changes in Net Assets/Equity for the Year ended December 31, 20X4
Attributable to owners of the controlling entity Total net assets/equity

Accumulated sur-
plus/deficit Other Reserves
CU CU CU

Opening balance as at January 1, 20X4 210,000 10,000 220,000

Measurement of investment property at 1,500,000 1,500,000

deemed cost in accordance with IPSAS
33 (see note 34)

Restated opening balance as at January 1,710,000 10,000 1,720,000

1, 20X4

Surplus for the period 5,000 5,000

Balance as at December 31, 20X4 1,715,000 10,000 1,725,000

Notes to the financial statements of Public Sector Entity X as at December 31, 20X4:
Note 34 – Investment Property

December 31, 20X4CU

Opening balance of investment property recognized un- 300,000

der previous basis of accounting

Investment property measured at deemed cost as pro- 1,500,000

vided in IPSAS 33 on January 1, 20X4

Restated opening balance of investment property at Jan- 1,800,000

uary 1, 20X4

Additions …….

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Transitional exemptions adopted in IPSAS 33 on adoption of accrual basis IPSAS

Public Sector Entity X adopted accrual basis IPSAS on January 1, 20X4 and applied deemed cost in
measuring investment property as reliable cost information about some investment properties was not
available. As a result, Public Sector Entity X restated its opening balance of investment property with an
additional value of CU1,500,000 on January 1, 20X4.

Note 54 – Reconciliation of net assets/equity and surplus or deficit on January 1, 20X4

Reconciliation of net assets/equity as on January 1, 20X4

Net assets/equity as on January 1, 20X4
CU
Opening balance of net assets/equity as on January 1, 20X4 220,000
reported under previous basis of accounting
Recognition of investment property at deemed cost (see note 1,500,000
34)
Restated opening balance of net assets/equity as on 1,720,000
January 1, 20X4

Reconciliation of surplus or deficit on January 1, 20X4

Surplus or deficit on January 1, 20X4

CU
Surplus or deficit as at 31, December 20X3 as reported under previous 210,000
basis of accounting
Recognition of investment property at deemed cost (see note 34) 1,500,000
Restated surplus or deficit as on January 1, 20X4 1,710,000

Determining a Deemed Cost During the Period of Transition

IG40. If a first-time adopter takes advantage of the exemption in IPSAS 33 that provides a three year transitional
relief period to not recognize and/or measure an asset, the IPSAS requires that it may determine a deemed
cost for that asset during any point of time within the three year transitional relief period.
IG41. Subsequent depreciation and amortization, if applicable, is based on that deemed cost and starts from the
date of adoption of IPSAS, or when the transitional exemptions that provided the relief have expired, or when
the relevant items are recognized and/or measured in accordance with the applicable IPSAS (whichever is
earlier).

IG42. For example, a first-time adopter adopts IPSAS on January 1, 20X1 and adopts the exemption that provides
a three-year transitional relief period for the recognition of an investment property. Because the first-time
adopter does not have reliable cost information about the historical cost of the investment property on the
date of adoption of IPSAS, it decides to determine a deemed cost for the investment property. The deemed
cost for the investment property is determined during the second reporting period (i.e., 20X2) in which the
first-time adopter applies the exemption. IPSAS 33 allows the first-time adopter to use the deemed cost
determined during 20X2 in recognizing the investment property by adjusting the opening accumulated surplus
and deficit on January 1, 20X2. The deemed cost as determined on January 1, 20X2 will be used in
determining subsequent depreciation and in assessing impairment where the first-time adopter elects to
apply the historical cost model as its subsequent measurement basis in applying IPSAS 16.

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IPSAS 5, Borrowing Costs

IG43. An entity adopts the accrual basis IPSAS on January 1, 20X3 and adopts the allowed alternative treatment
in accounting for borrowing costs. Borrowing costs directly attributable to the acquisition of the asset amounts
to CU525,000, of which CU500,000 was incurred prior to the adoption of accrual basis IPSAS, while
CU25,000 was incurred in the first reporting period ending December 31, 20X3. Paragraph 90 of IPSAS 33
requires the first-time adopter to retrospectively recognize any borrowing costs incurred prior to the adoption
of accrual basis IPSAS when it adopts the allowed alternative method. Therefore, CU500,000 shall be
capitalized to the cost of the asset recognized in the opening statement of financial position as at January 1,
20X3.

IG44. If the entity has elected to apply the benchmark treatment, paragraph 88 of IPSAS 33 encourages, but
does not require, the first-time adopter to apply the accounting policy retrospectively. If the first-time
adopter elects to apply its accounting policy prospectively, it will only expense CU25,000 in the statement
of financial performance for the period ending December 31, 20X3.

IPSAS 47, Revenue

IG45. If a first-time adopter has received amounts that do not yet qualify for recognition as revenue in accordance
with IPSAS 47 (for example, the proceeds of a transaction that does not qualify for recognition as revenue),
the first-time adopter recognizes the amounts received as a liability in its opening statement of financial
position and measures that liability at the amount received. It shall derecognize the liability and recognize the
revenue in its statement of financial performance when the recognition criteria in IPSAS 47 are met.

IPSAS 10, Financial Reporting in Hyperinflationary Economies

IG46. A first-time adopter complies with IPSAS 4, The Effects of Changes in Foreign Exchange Rates in
determining its functional currency and presentation currency. When the first-time adopter prepares its
opening statement of financial position, it applies IPSAS 10, Hyperinflationary Economies, to any periods
during which the economy of the functional currency or presentation currency was hyperinflationary.

IG47. If the first-time adopter elects to use the exemptions in paragraphs 64 to 76 of IPSAS 33, it applies IPSAS 10
to periods after the date for which the revalued amount or fair value was determined.

IPSAS 14, Events After the Reporting Date

IG48. Except as described in paragraph IG49, a first-time adopter applies IPSAS 14, Events After the Reporting
Date in determining whether:
(a) Its opening statement of financial position reflects an event that occurred after the date of transition;
and

(b) Comparative amounts in its transitional IPSAS financial statements or its first IPSAS financial
statements, where applicable, reflect an event that occurred after the end of that comparative period.

IG49. Paragraphs 23–26 of IPSAS 33 require some modifications to the principles in IPSAS 14 when a first-time
adopter determines whether changes in estimates are adjusting or non-adjusting events at the date of
adoption of IPSAS (or, when applicable, the end of the comparative period). Cases 1 and 2 below illustrate
those modifications. In case 3 below, paragraphs 23–26 of IPSAS 33 do not require modifications to the
principles in IPSAS 14.
(a) Case 1—If a first-time adopter’s previous basis of accounting required estimates of similar items for
the date of adoption of IPSAS, using an accounting policy that is consistent with IPSAS. In this case,
the estimates in accordance with IPSAS need to be consistent with estimates made for that date in
accordance with previous basis of accounting, unless there is objective evidence that those estimates

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were in error (see IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors). The
first-time adopter reports later revisions to those estimates as events of the period in which it makes
the revisions, rather than as adjusting events resulting from the receipt of further evidence about con-
ditions that existed at the date of adoption of IPSAS.
(b) Case 2—Previous basis of accounting required estimates of similar items for the date of adoption of
IPSAS, but the first-time adopter made those estimates using accounting policies that are not
consistent with its accounting policies in accordance with IPSAS. In this case, the estimates in
accordance with IPSAS need to be consistent with the estimates required in accordance with the
previous basis of accounting for that date (unless there is objective evidence that those estimates were
in error), after adjusting for the difference in accounting policies. The opening statement of financial
position reflects those adjustments for the difference in accounting policies. As in case 1, the first-time
adopter reports later revisions to those estimates as events of the period in which it makes the
revisions.
For example, the previous basis of accounting may have required a first-time adopter to recognize and
measure provisions on a basis consistent with IPSAS 19, Provisions, Contingent Liabilities and
Contingent Assets, except that the previous basis of accounting’s measurement was on an
undiscounted basis. In this example, the first-time adopter uses the estimates in accordance with its
previous basis of accounting as inputs in making the discounted measurement required by IPSAS 19.

(c) Case 3—Previous basis of accounting did not require estimates of similar items for the date of adoption
of IPSAS. Estimates in accordance with IPSAS for that date reflect conditions existing at that date. In
particular, estimates of market prices, interest rates or foreign exchange rates at the date of adoption
of IPSAS reflect market conditions at that date. This is consistent with the distinction in IPSAS 14
between adjusting events after the reporting period and non-adjusting events after the reporting period.

IG50. To illustrate: Entity A’s first transitional IPSAS financial statements are for the period ending December 31,
20X5 with the first-time adopter electing to present comparative information. In terms of its previous basis of
accounting the following transactions and events are noted in entity A’s financial statements for December
31, 20X3 and 20X4:

(a) Estimates of accrued expenses and provisions were made at those dates;

(b) The entity accounted on a cash basis for a defined benefit pension plan; and

(c) No provision was recognized for a court case arising from events that occurred in September 20X4.
When the court case was concluded on June 30, 20X5, entity A was required to pay CU1000 and paid
this on July 10, 20X5.

In preparing its transitional IPSAS financial statements, entity A concludes that its estimates in accordance
with its previous basis of accounting of accrued expenses and provisions at December 31, 20X3 and 20X4
were made on a basis consistent with its accounting policies in accordance with IPSAS. Although some of
the accruals and provisions turned out to be overestimates and others to be underestimates, entity A
concludes that its estimates were reasonable and that, therefore, no error had occurred. As a result,
accounting for those overestimates and underestimates involves the routine adjustment of estimates in
accordance with IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors.

Application of Requirements
In preparing its opening statement of financial position at January 1, 20X4 and in its comparative statement of financial
position at December 31, 20X4, entity A:

(a) Does not adjust the previous estimates for accrued expenses and provisions; and

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(b) Makes estimates (in the form of actuarial assumptions) necessary to account for the pension plan in accordance
with IPSAS 39, Employee Benefits. Entity A’s actuarial assumptions at January 1, 20X4 and December 31, 20X4
do not reflect conditions that arose after those dates. For example, entity A’s:

(i) Discount rates at January 1, 20X4 and December 31, 20X4 for the pension plan and for provisions reflect
market conditions at those dates; and

(ii) Actuarial assumptions at January 1, 20X4 and December 31, 20X4 about future employee turnover rates
do not reflect conditions that arose after those dates—such as a significant increase in estimated employee
turnover rates as a result of a curtailment of the pension plan in 20X5.

The treatment of the court case at December 31, 20X4 depends on the reason why entity A did not recognize a provision
in accordance with its previous basis of accounting at that date.

Assumption 1 – The previous basis of accounting was consistent with IPSAS 19, Provisions, Contingent Liabilities and
Contingent Assets. Entity A concluded that the recognition criteria were not met. In this case, entity A’s assumptions in
accordance with IPSAS are consistent with its assumptions in accordance with its previous basis of accounting.
Therefore, entity A does not recognize a provision at December 31, 20X4.

Assumption 2 – Entity A’s previous basis of accounting was not consistent with IPSAS 19. Therefore, entity A develops
estimates in accordance with IPSAS 19. Under IPSAS 19, an entity determines whether an obligation exists at the end
of the reporting period by taking account of all available evidence, including any additional evidence provided by events
after the reporting period. Similarly, in accordance with IPSAS 14, Events after the Reporting Period, the resolution of
a court case after the reporting period is an adjusting event after the reporting period if it confirms that the entity had a
present obligation at that date. In this instance, the resolution of the court case confirms that entity A had a liability in
September 20X4 (when the events occurred that gave rise to the court case). Therefore, entity A recognizes a provision
at December 31, 20X4. Entity A measures that provision by discounting the CU1 000 paid on July 10, 20X5 to its present
value, using a discount rate that complies with IPSAS 19 and reflects market conditions at December 31, 20X4.

IG51. Paragraphs 23–26 of the IPSAS 33 do not override requirements in other IPSAS that base classifications or
measurements on circumstances existing at a particular date. Examples include:

(a) The identification of a lease (see IPSAS 43, Leases); and

(b) The distinction between financial liabilities and equity instruments (see IPSAS 28, Financial
Instruments: Presentation).

IPSAS 43, Leases

IG52. In accordance with paragraph 95 of IPSAS 33 and paragraph 70 of IPSAS 43, a lessor classifies leases as
operating leases or finance leases on the basis of circumstances existing at the inception of the lease, on
the date of adoption of accrual basis IPSAS. In some cases, the lessee and the lessor may agree to change
the provisions of the lease, other than by renewing the lease, in a manner that would have resulted in a
different classification for the lessor in accordance with IPSAS 43 had the changed terms been in effect at
the inception of the lease. If so, the revised agreement is considered as a new contract over its term from the
date of adoption of accrual basis IPSAS.

IPSAS 45, Property, Plant, and Equipment

IG53. If a first-time adopter’s depreciation methods and rates in accordance with its previous basis of accounting
are acceptable in accordance with IPSAS, it accounts for any change in estimated useful life or depreciation
pattern prospectively from when it makes that change in estimate (paragraphs 22 and 26 of IPSAS 33 and
paragraph 57 of IPSAS 45). However, in some cases, a first-time adopter’s depreciation methods and rates
in accordance with its previous basis of accounting may differ from those that would be acceptable in
accordance with IPSAS (for example, if they do not reflect a reasonable estimate of the asset’s useful life). If

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those differences have a material effect on the financial statements, the entity adjusts accumulated
depreciation in its opening statement of financial position retrospectively so that it complies with IPSAS.

IG54. A first-time adopter may elect to use one of the following amounts as the deemed cost of property, plant, and
equipment:
(a) Current operational value or fair value at the date of adoption of IPSAS (paragraph 67 of IPSAS 33),
in which case the first-time adopter provides the disclosures required by paragraph 148 of IPSAS 33;
or
(b) A revaluation in accordance with its previous basis of accounting that meets the criteria in paragraph 67
of IPSAS 33.

IG55. Subsequent depreciation is based on that deemed cost and starts from the date for which the first-time
adopter determined the deemed cost, or where the first-time adopter takes advantage of the exemption that
provides a three year transitional relief period to not recognize certain assets, when the exemptions providing
the relief have expired, or the asset has been recognized in accordance with IPSAS 45 (whichever is earlier).
IG56. If a first-time adopter chooses as its accounting policy the current value model in IPSAS 45 for some or all
classes of property, plant, and equipment, it presents the cumulative revaluation surplus as a separate
component of net assets/equity. The revaluation surplus at the date of adoption of IPSAS is based on a
comparison of the carrying amount of the asset at that date with its cost or deemed cost. If the deemed cost
is the current operational value or fair value at the date of adoption of IPSAS or where the first-time adopter
takes advantage of the exemption that provides a three year transitional relief period to not recognize and/or
measure certain assets, when the exemptions providing the relief have expired, or the asset has been
recognized and/or measured in accordance with IPSAS 45 (whichever is earlier), the first-time adopter
provides the disclosures required by paragraph 148 of IPSAS 33.

IG57. If revaluations in accordance with the first-time adopter’s previous basis of accounting did not satisfy the
criteria in paragraphs 67 or 69 of IPSAS 33, the first-time adopter measures the revalued assets in its opening
statement of financial position on one of the following bases:

(a) Historical cost (or deemed cost) less any accumulated depreciation and any accumulated impairment
losses under the historical cost model in IPSAS 45;

(b) Deemed cost, being the current operational value or fair value or an alternative when market-based
evidence of current operational value or fair value is not available, at the date of adoption of IPSAS, or
where a first-time adopter takes advantage of the exemption that provides a three year transitional
relief period to not recognize and/or measure certain assets, the date at which the asset is recognized
and/or measured during the period of transition, or when the transitional exemptions expire (whichever
is earlier); or

(c) A revalued amount, if the entity adopts the current value model in IPSAS 45 as its accounting policy in
accordance with IPSAS for all items of property, plant, and equipment in the same class.

IG58. IPSAS 45 requires each part of an item of property, plant, and equipment with a cost that is significant in
relation to the total cost of the item to be depreciated separately. However, IPSAS 45 does not prescribe the
unit of measurement for recognition of an asset, i.e. what constitutes an item of property, plant, and
equipment. Thus, judgment is required in applying the recognition criteria to an entity’s specific circumstances
(see paragraphs 8 and 41).

IPSAS 39, Employee Benefits

IG59. At the date of adoption of IPSAS, a first-time adopter applies IPSAS 39 in measuring defined benefits plans
and other long-term employee benefits, and recognizes all cumulative actuarial gains or losses from the

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inception of the plan until the date of adoption of IPSAS, or where the first-time adopter takes advantage of
the exemption that provides a three year transitional relief period from the recognition of defined benefit plans
and other long-term employee benefits, the date on which the exemptions expire or when the defined benefits
plans and other long-term employee benefits are recognized and/or measured in accordance with IPSAS 39
(whichever is earlier).

IG60. A first-time adopter’s actuarial assumptions at the date of adoption of IPSAS, or where the first-time adopter
takes advantage of the exemptions that provide relief from the recognition of defined benefit plans and other
long-term employee benefits, the date on which the exemptions expire or when the defined benefits plans
and other long-term employee benefits are recognized and/or measured in accordance with IPSAS 39
(whichever is earlier), are consistent with actuarial assumptions made at the end of its comparative period (if
the first-time adopter elects to present comparative information in accordance with paragraph 78 of
IPSAS 33) in accordance with its previous basis of accounting (after adjustments to reflect any difference in
accounting policies), unless there is objective evidence that those assumptions were in error (paragraph 23
of the IPSAS 33). Any later revisions to those assumptions are an actuarial gain or loss of the period in which
the first-time adopter makes the revisions.

IG61. A first-time adopter may need to make actuarial assumptions at the date of adoption of IPSAS, or where the
first-time adopter takes advantage of the exemptions that provide relief from the recognition of defined benefit
plans and other long-term employee benefits, the date on which the exemptions expire or when the defined
benefits plans and other long-term employee benefits are recognized and/or measured in accordance with
IPSAS 39 (whichever is earlier), that were not necessary in accordance with its basis of accounting. Such
actuarial assumptions do not reflect conditions that arose after the date of adoption of IPSAS, or where the
first-time adopter takes advantage of the exemptions that provide relief from the recognition of defined benefit
plans and other long-term employee benefits, the date on which the exemptions expire or when the defined
benefits plans and other long-term employee benefits are recognized and/or measured in accordance with
IPSAS 39 (whichever is earlier). In particular, discount rates and the fair value of plan assets at the date of
adoption of IPSAS, or where the first-time adopter takes advantage of the exemptions that provide relief from
the recognition of defined benefit plans and other long-term employee benefits, the date on which the
exemptions expire or when the liabilities are recognized and/or measured in accordance with IPSAS 39
(whichever is earlier), reflect market conditions at that date. Similarly, the first-time adopter’s actuarial
assumptions at the date of adoption of IPSAS, or where the first-time adopter takes advantage of the
exemptions that provide relief from the recognition of defined benefit plans and other long-term employee
benefits, the date on which the exemptions expire or when the defined benefits plans and other long-term
employee benefits are recognized and/or measured in accordance with IPSAS 39 (whichever is earlier),
about future employee turnover rates do not reflect a significant increase in estimated employee turnover
rates as a result of a curtailment of the pension plan that occurred after the date of adoption of IPSAS, or
where the first-time adopter takes advantage of the exemptions that provide relief from the recognition of
defined benefit plans and other long-term employee benefits, the date on which the exemptions expire or
when the defined benefits plans and other long-term employee benefits are recognized and/or measured in
accordance with IPSAS 39 (whichever is earlier) (paragraph 23 of IPSAS 33).

IG62. In many cases, a first-time adopter’s transitional IPSAS financial statements or its first IPSAS financial
statements will reflect measurements of employee benefit obligations at three dates (where a first-time
adopter elects to present comparative information in accordance with paragraph 78 of IPSAS 33): the end of
the first reporting period, the date of the comparative statement of financial position (where the first-time
adopter elects to present comparative information) and the date of adoption of IPSAS, or where the first-time
adopter takes advantages of the exemptions that provide relief from the recognition of defined benefit plans
and other long-term employee benefits, the date on which the exemptions expire or when the defined benefits
plans and other long-term employee benefits are recognized and/or measured in accordance with IPSAS 39

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(whichever is earlier). IPSAS 39 encourages the first-time adopter to involve a qualified actuary in the
measurement of all material post-employment benefit obligations. To minimize costs, a first-time adopter may
request a qualified actuary to carry out a detailed actuarial valuation at one or two of these dates and roll the
valuation(s) forward or back to the other date(s). Any such roll forward or roll back reflects any material
transactions and other material events (including changes in market prices and interest rates) between those
dates (paragraph 61 of IPSAS 39).

IPSAS 21, Impairment of Non-Cash-Generating Assets and IPSAS 26, Impairment of Cash-Generating Assets
IG63. Paragraph 98 and 108 of IPSAS 33 requires a first-time adopter to apply the requirements in IPSAS 21 and
IPSAS 26 prospectively from the date of adoption of accrual basis IPSAS, or where a first-time adopter takes
advantage of the exemptions that provide a three year transitional relief period to not recognize and/or meas-
ure an asset, the date when the exemptions that provided the relief expire and/or the asset is recognized
and/or measured. For example, if an entity adopts accrual basis IPSAS on January 1, 20X1 and takes ad-
vantage of the three year transitional relief period to not recognize and/or measure an item or property, plant
and equipment, if would not be required to assess the item of property, plant and equipment for impairment
until (a) December 31, 20X3 (i.e. the date on which the transitional exemption expire) or (b) the date following
the recognition of the item of property, plant and equipment if it was recognized and/or measured during the
period of transition (whichever is earlier).

IG64. The estimates used to determine whether a first-time adopter recognizes an impairment loss (and to measure
any such impairment loss) at the date of adoption of IPSAS, or where the first-time adopter takes advantage
of the exemption that provides relief from the recognition of assets, the date on which the exemptions expire
or when the assets are recognized and/or measured in accordance with the applicable IPSAS (whichever is
earlier) are consistent with estimates made for at the end of its comparative period (if the first-time adopter
elects to present comparative information in accordance with paragraph 78 of IPSAS 33) the first-time
adopter’s previous basis of accounting (after adjustments to reflect any difference in accounting policies),
unless there is objective evidence that those estimates were in error (paragraphs 23 and 24 of IPSAS 33).
The first-time adopter reports any later revisions to those estimates as an event of the period in which it
makes the revisions.

IG65. In assessing whether it needs to recognize an impairment loss (and in measuring any such impairment
loss) at the date of adoption of IPSAS, or where the first-time adopter takes advantage of the exemption
that provides relief from the recognition of assets, the date on which the exemptions expire or when the
assets are recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier),
the first-time adopter may need to make estimates for that date that were not necessary in accordance
with its previous basis of accounting. Such estimates and assumptions do not reflect conditions that arose
after the date of transition, or where the first-time adopter takes advantage of the exemption that provides
relief from the recognition of assets, the date on which the exemptions expire or when the assets are
recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier) (paragraph
25 of IPSAS 33).

IPSAS 28, Financial Instruments: Presentation

IG66. In its opening statement of financial position, a first-time adopter applies the criteria in IPSAS 28 to classify
financial instruments issued (or components of compound instruments issued) as either financial liabilities or
net asset/equity instruments in accordance with the substance of the contractual arrangement when the
instrument first satisfied the recognition criteria in IPSAS 28 (paragraphs 13 and 35), without considering
events after that date (other than changes to the terms of the instruments).

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IPSAS 41, Financial Instruments

Recognition
IG67. A first-time adopter recognizes all financial assets and financial liabilities (including all derivatives) that qualify
for recognition in accordance with IPSAS 41 and have not yet qualified for derecognition in accordance with
IPSAS 41, except non-derivative financial assets and non-derivative financial liabilities derecognized in
accordance with its previous basis of accounting before the date of adoption of IPSAS, or where the first-
time adopter takes advantage of the exemption that provides relief from the recognition of financial
instruments, the date on which the exemptions expire or when the financial instruments are recognized and/or
measured in accordance with the applicable IPSAS (whichever is earlier), to which the first-time adopter does
not choose to apply paragraph 116 of IPSAS 33 (see paragraphs 115 and 116 of IPSAS 33).

IG68. For example, a first-time adopter that does not apply paragraph 116 of IPSAS 33 does not recognize
assets transferred in a securitization, transfer or other derecognition transaction that occurred before
the date of adoption of IPSAS if those transactions qualified for derecognition in accordance with its
previous basis of accounting. However, if the first-time adopter uses the same securitization
arrangement or other derecognition arrangement for further transfers after the date of transition to
IPSAS, or where the first-time adopter takes advantage of the exemption that provides relief from the
recognition and/or measurement of financial instruments, the date on which the exemptions expire or
when the financial instruments are recognized and/or measured in accordance with the applicable
IPSAS (whichever is earlier), those further transfers qualify for derecognition only if they meet the
derecognition criteria of IPSAS 41.

Embedded Derivatives
IG69. When IPSAS 41 requires a first-time adopter to separate an embedded derivative from a host contract, the
initial carrying amounts of the components at the date when the instrument first satisfies the recognition
criteria in IPSAS 41 reflect circumstances at that date (IPSAS 41 paragraph 49). If the first-time adopter
cannot determine the initial carrying amounts of the embedded derivative and host contract reliably, it
measures the entire combined contract as at fair value through surplus or deficit (IPSAS 41 paragraph 52).

Measurement
IG70. In preparing its opening statement of financial position, a first-time adopter applies the criteria in IPSAS 41
to identify those financial assets and financial liabilities that are measured at fair value and those that are
measured at amortized cost.

Adjusting the Carrying Amount of Financial Instruments on the Date of Adoption of Accrual Basis IPSAS or During the
Period of Transition
IG71. A first-time adopter shall treat an adjustment to the carrying amount of a financial asset or financial liability
as an adjustment to be recognized in the opening balance of accumulated surplus or deficit at the date of
adoption of IPSAS, or where the first-time adopter takes advantage of the exemption that provides relief from
the recognition and/or measurement of financial instruments, the date on which the exemptions expire or
when the financial instruments are recognized and/or measured in accordance with the applicable IPSAS
(whichever is earlier), only to the extent that it results from adopting IPSAS 41. Because all derivatives, other
than those that are financial guarantee contracts or are designated and effective hedging instruments, are
classified as held for trading, the differences between the previous carrying amount (which may have been
zero) and the fair value of the derivatives are recognized as an adjustment of the balance of accumulated
surplus or deficit at the beginning of the financial year in which IPSAS 41 is initially applied, or where the first-
time adopter takes advantage of the exemption that provides relief from the recognition and/or measurement
of financial instruments, the date on which the exemptions expire or when the financial instruments are
recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier).
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Hedge Accounting
IG72. Paragraphs 117 to 119 of IPSAS 33 deal with hedge accounting. The designation and documentation of a
hedge relationship must be completed on or before the date of adoption of IPSAS, or where the first-time
adopter takes advantage of the exemption that provides relief from the recognition and/or measurement of
financial instruments, the date on which the exemptions expire or when the financial instruments are
recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier) if the hedge
relationship is to qualify for hedge accounting from that date. Hedge accounting can be applied prospectively
only from the date that the hedge relationship is fully designated and documented.
IG73. A first-time adopter may, in accordance with its previous basis of accounting, have deferred or not recognized
gains and losses on a fair value hedge of a hedged item that is not measured at fair value. For such a fair
value hedge, a first-time adopter adjusts the carrying amount of the hedged item at the date of adoption of
IPSAS, or where the first-time adopter takes advantage of the exemption that provides relief from the
recognition of financial instruments, the date on which the exemptions expire or when the financial
instruments are recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier).
The adjustment is the lower of:

(a) That portion of the cumulative change in the fair value of the hedged item that reflects the designated
hedged risk and was not recognized in accordance with its previous basis of accounting; and

(b) That portion of the cumulative change in the fair value of the hedging instrument that reflects the
designated hedged risk and, in accordance with its previous basis of accounting, was either (i) not
recognized or (ii) deferred in the statement of financial position as an asset or liability.

IG74. A first-time adopter may, in accordance with its previous basis of accounting, have deferred gains and losses
on a cash flow hedge of a forecast transaction. If, at the date of adoption of IPSAS, or where the first-time
adopter takes advantage of the exemption that provides relief from the recognition and/or measurement of
financial instruments, the date on which the exemptions expire or when the financial instruments are
recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier), the hedged
forecast transaction is not highly probable, but is expected to occur, the entire deferred gain or loss is
recognized in net assets/equity. Any net cumulative gain or loss that has been reclassified to net
assets/equity on initial application of IPSAS 41 or where the first-time adopter takes advantage of the
exemption that provides relief from the recognition and/or measurement of financial instruments, the date on
which the exemptions expire or when the financial instruments are recognized and/or measured in
accordance with the applicable IPSAS (whichever is earlier) remains in net assets/equity until (a) the forecast
transaction subsequently results in the recognition of a non-financial asset or non-financial liability, (b) the
forecast transaction affects surplus or deficit or (c) subsequently circumstances change and the forecast
transaction is no longer expected to occur, in which case any related net cumulative gain or loss is reclassified
from net assets/equity to surplus or deficit. If the hedging instrument is still held, but the hedge does not
qualify as a cash flow hedge in accordance with IPSAS 41, hedge accounting is no longer appropriate starting
from the date of adoption of IPSAS, or where the first-time adopter takes advantage of the exemption that
provides relief from the recognition and/or measurement of financial instruments, the date on which the
exemptions expire or when the financial instruments are recognized and/or measured in accordance with the
applicable IPSAS (whichever is earlier).

IPSAS 31, Intangible Assets

IG75. A first-time adopter’s opening statement of financial position excludes all intangible assets and other
intangible items that do not meet the criteria for recognition in accordance with IPSAS 31 at the date of
adoption of IPSAS, or where the first-time adopter takes advantage of the exemption that provides relief from
the recognition of intangible assets, the date on which the exemptions expire and/or when the intangible

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assets are recognized and/or measured in accordance with the applicable IPSAS (whichever is earlier) and
includes all intangible assets that meet the recognition criteria in IPSAS 31 at that date.

IG76. The criteria in IPSAS 31 require an entity to recognize an intangible asset if, and only if:

(a) It is probable that the future economic benefits that are attributable to the asset will flow to the entity;
and

(b) The cost of the asset can be measured reliably.

IPSAS 31 supplements these two criteria with further, more specific, criteria for internally generated intangible
assets.

IG77. In accordance with paragraphs 63 and 66 of IPSAS 31, an entity capitalises the costs of internally generated
intangible assets prospectively from the date when the recognition criteria are met. IPSAS 33 allows an entity
to recognize previously expensed intangible assets to the extent that the item meets the definition of an
intangible asset, and the recognition criteria in IPSAS 31. Thus, if an internally generated intangible asset
qualifies for recognition at the date of adoption of IPSAS, or where the first-time adopter takes advantage of
the exemption that provides relief from the recognition of intangible assets, the date on which the exemptions
expire and/or when the intangible assets are recognized and/or measured in accordance with the IPSAS 31
(whichever is earlier) the first-time adopter recognizes and/or measures the asset in its opening statement of
financial position even if it had recognized the related expenditure as an expense in accordance with its
pervious basis of accounting.

IG78. If the asset does not qualify for recognition in accordance with IPSAS 31 until a later date, its cost is the sum
of the expenditure incurred from that later date.

IG79. The criteria in paragraph IG76 also apply to intangible assets acquired separately. In many cases,
contemporaneous documentation prepared to support the decision to acquire the asset will contain an
assessment of the future economic benefits or service potential. Furthermore, as explained in paragraph 33
of IPSAS 31, the cost of a separately acquired intangible asset can usually be measured reliably.

IG80. A first-time adopter may elect to use one of the following amounts as the deemed cost of intangible assets
(except for internally generated intangible assets):

(a) Fair value at the date of adoption of IPSAS, or where a first-time adopter takes advantage of the
exemption that provides a three year transitional relief period to not recognize and/or measure certain
assets, the date at which the asset is recognized and/or measured during the period of transition, or
the date on which the exemptions expire (whichever is earlier) (paragraph 67 of IPSAS 33), in which
case the entity gives the disclosures required by paragraph 148 of IPSAS 33; or
(b) A revaluation in accordance with its previous basis of accounting that meets the criteria in paragraph
67 of IPSAS 33.

IG81. If a first-time adopter’s amortization methods and rates in accordance with its previous basis of accounting
are acceptable in accordance with IPSAS, it accounts for any change in estimated useful life or amortization
pattern prospectively from when it makes that change in estimate (paragraphs 23 and 24 of IPSAS 33 and
paragraph 103 of IPSAS 31). However, in some cases, the first-time adopter’s amortization methods and
rates in accordance with its previous basis of accounting may differ from those that would be acceptable in
accordance with IPSAS (for example, if they do not reflect a reasonable estimate of the asset’s useful life). If
those differences have a material effect on the financial statements, the first-time adopter adjusts
accumulated amortization on in its opening statement of financial position retrospectively so that it complies
with IPSAS.

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IPSAS 35, Consolidated Financial Statements

IG82. If a first-time adopter did not consolidate a controlled entity in accordance with its previous basis of
accounting, then, in its consolidated financial statements, the first-time adopter measures the controlled
entity’s assets and liabilities at the same carrying amounts as in the accrual basis financial statements of the
controlled entity following its adoption of IPSAS, after adjusting for consolidation procedures and for the
effects of the public sector combination in which it acquired the controlled entity (paragraph 130 of IPSAS 33).
If the controlled entity has not adopted accrual basis IPSAS in its financial statements, the carrying amounts
described in the previous sentence are those that IPSAS would require in those financial statements.

Controlling Entity Adopts Accrual Basis IPSAS Before the Controlled Entity
Background

IG83. Controlling entity A presents its (consolidated) first IPSAS financial statements in 20X5. Its controlled entity
B, wholly owned by controlling entity A since formation, prepares information in accordance with accrual
basis IPSAS for internal consolidation purposes from that date, but controlled entity B does not present its
first IPSAS financial statements until 20X7.
Application of Requirements

IG84. If controlled entity B applies paragraph 129(a) of IPSAS 33, the carrying amounts of its assets and liabilities
are the same in both its opening IPSAS statement of financial position at January 1, 20X6 and controlling
entity’s A consolidated statement of financial position (except for adjustments for consolidation procedures)
and are based on controlled entity B’s date of adoption of IPSAS.

IG85. Alternatively, controlled entity B, in accordance with paragraph 129(b) of IPSAS 33, measure all its assets or
liabilities based on its own date of adoption of IPSAS (January 20X6). However, the fact that controlled entity
B becomes a first-time adopter in 20X7 does not change the carrying amounts of its assets and liabilities in
controlling entity A’s consolidated financial statements.

Controlled Entity Adopts Accrual Basis IPSAS Before the Controlling Entity
Background

IG86. Controlling entity C presents its (consolidated) transitional IPSAS financial statements IPSAS in 20X7. Its
controlled entity D, wholly owned by controlling entity C since formation, presented its transitional IPSAS
financial statements in 20X5. Until 20X7, controlled entity D prepared information for internal consolidation
purposes in accordance with controlling entity’s C previous basis of accounting.
Application of Requirements

IG87. The carrying amounts of controlled entity D’s assets and liabilities at January 1, 20X6 are the same in both
controlling entity’s C (consolidated) opening accrual basis statement of financial position and controlled entity
D’s financial statements (except for adjustments for consolidation procedures) and are based on controlled
entity D’s date of adoption of IPSAS. The fact that controlling entity C becomes a first-time adopter in 20X7
does not change those carrying amounts (paragraph 129 of IPSAS 33).

IG88. Paragraphs 129 and 130 of IPSAS 33 do not override the following requirements:

(a) The rest of IPSAS 33 in measuring all assets and liabilities for which paragraphs 129 and 130 of
IPSAS 33 are not relevant.

(b) To give all disclosures required by this IPSAS as of the first-time adopter’s own date of transition to
IPSAS.
IG89. Paragraph 129 of IPSAS 33 applies if a controlled entity becomes a first-time adopter later than its controlling
entity, for example if the controlling entity previously prepared a reporting package in accordance with accrual

1165 IPSAS 33 IMPLEMENTATION GUIDANCE

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

basis IPSAS for consolidation purposes but did not present a full set of financial statements in accordance
with IPSAS. This may be relevant not only when a controlling entity reporting package complies fully with the
recognition and measurement requirements of IPSAS, but also when it is adjusted centrally for matters such
as review of events after the reporting date and central allocation of pension costs. However, paragraph 129
of IPSAS 33 does not permit a controlled entity to ignore misstatements that are immaterial to the
consolidated financial statements of its controlling entity but material to its own financial statements.

IPSAS 48, Transfer Expenses

IG89A. If a first-time adopter applies IPSAS 48 on a retrospective basis and has transferred amounts that do not yet
qualify for recognition as an expense (for example, the transfer of resources where the related transfer right
has not yet been extinguished), the first-time adopter recognizes the amounts transferred as an asset in its
opening statement of financial position and measures that asset at the amount transferred. It shall derecog-
nize the asset and recognize the expense in its statement of financial performance when the recognition
criteria in IPSAS 48 are met.

Presentation and Disclosure

IG90. Paragraphs 135 to 140 in IPSAS 33 require a first-time adopter to disclose certain information when it has
taken advantage of the transitional exemptions and provisions in its adoption of accrual basis IPSAS.

To illustrate:

Notes to the financial statements for the year ending December 31, 20X2

Note 48 – Adoption of transitional exemptions and provisions in IPSAS 33

Public Sector Entity X adopted accrual basis IPSAS on January 1, 20X1 and elected to adopt the transitional
exemption in IPSAS 33 that allows it to apply a deemed cost and a period of up to three years in which to
measure land and buildings and investment property.
Public Sector Entity X took advantage of these exemptions in determining a deemed cost, and to measure
its land and buildings and investment property. As a result of adopting these transitional exemptions and
provisions the entity is not able to make an explicit and unreserved statement about its compliance with
accrual basis IPSAS, as the adoption of these transitional exemptions affect the fair presentation of Public
Sector Entity X’s financial statements and its ability to assert compliance with accrual basis IPSAS.

No other transitional exemptions that affect fair presentation and compliance with accrual basis IPSAS during
the period of transition were adopted or applied to any other assets and/or liabilities.

During the period under review, Public Sector Entity X restated its opening balance of investment property
with an additional value of CU 1 200 000 after determining the deemed cost on June 30, 20X2 for the invest-
ment property under its control.

As at year end, Public Sector Entity X has not yet determined a deemed cost for land and buildings and has
not yet measured these assets in its financial statements. Land and buildings reflect a closing balance of CU
2 500 000 as at December 31, 20X2. This value was determined under Public Sector Entity X’s previous
basis of accounting.

Public Sector Entity X plans to apply a three year transitional exemption for measuring its land and buildings
and in determining a deemed cost for these asset.

Public Sector Entity X has appointed an appraiser to value the land and has developed a model for the
measurement of buildings. The progress in determining the valuations for land and buildings is in accordance
with its implementation plan.

IPSAS 33 IMPLEMENTATION GUIDANCE 1166

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Summary of Transitional Exemptions and Provisions Included in IPSAS 33 First-time Adoption of Accrual Ba-
sis IPSAS

IG91. The diagram below summarizes the transitional exemptions and provisions included in other accrual basis
IPSAS.
IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

IPSAS 1, Presen- √ • Presenting

tation of Financial To extent comparative
Statements that info encour-

Three- aged

year relief
period
was
adopted

IPSAS 2, Cash √
Flow Statements

IPSAS 3, Account-
ing Policies, √
Changes in Ac-
counting Esti-
mates and Errors

IPSAS 4, The Ef- • Exemption to

fects of Changes comply with
in Foreign Ex- requirements
change Rates for cumulative
translation

• Not required
to apply Ap-
pendix A to
items initially
recognized
before the
date of adop-
tion of IPSAS

IPSAS 33 IMPLEMENTATION GUIDANCE 1167

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

IPSAS 5, Borrow- √ • Encouraged

ing Costs When allowed to apply

alternative is benchmark

elected as ac- treatment ret-

counting policy rospectively

• Allowed alter-
native must be
applied retro-
spectively

IPSAS 10, Finan- • Provisions

cial Reporting In around severe
Hyperinflationary hyperinflation
­Economies

IPSAS 12, Inven- √ √ √

tories Inventory not Inventory rec-
recognized un- ognized under
der previous ba- previous basis
sis of account- of accounting
ing

IPSAS 14,
Events After the √
Reporting Date

IPSAS, 16 In- √ √ √
vestment Prop- Investment Investment
erty property not property rec-
recognized un- ognized under
der previous previous basis
basis of ac- of accounting
counting

IPSAS 18, Seg- √

ment Reporting No seg-
ment report
to the

IPSAS 33 IMPLEMENTATION GUIDANCE 1168

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

extent that
three-year
relief pe-
riod was
adopted

IPSAS 19, Provi- √ √

sions, Contingent Only liabilities Only liabilities
Liabilities and related to as- related to as-
Contingent As- sets not recog- sets recog-
sets nized under nized under
previous basis previous basis
of accounting of accounting
to be included to be included
initial estimate initial estimate
of cost of dis- of cost of dis-
mantling/ re- mantling/ re-
moving item/ moving item/
restoring site restoring site

IPSAS 20, Re- √

lated Party Dis-
closures

IPSAS 21, Im- • Prospective

pairment of Non- application
Cash-Generating
Assets

IPSAS 22, Dis- √

closure of Infor-
mation About the
General Govern-
ment Sector

IPSAS 24, √
Presentation of
Budget

1169 IPSAS 33 IMPLEMENTATION GUIDANCE

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

Information in Fi-
nancial State-
ments

IPSAS 26, Im- √ • Prospective

pairment of application
Cash-Generating
Assets

IPSAS 27, Agri- √ √

culture Biological and Biological and
agricultural ac- agricultural ac-
tivities not rec- tivities recog-
ognized under nized under
previous basis previous basis
of accounting of accounting

IPSAS 28, Finan- • Provisions not

cial ­Instruments: to separate lia-
Presentation bility and net
asset/equity
component un-
der specific cir-
cumstances

IPSAS 30, Finan- • No compara-

cial Instruments: tive info about
Disclosures nature and ex-
tent of risks

IPSAS 31, Intangi- √ √ √ • Provision to

ble Assets Intangible Intangible as- Intangible as- recognise pre-

assets sets not recog- sets recognized viously ex-

other than nized under under previous pensed inter-

internally previous basis basis of ac- nally generated

generated of accounting counting intangible as-

I/A sets

IPSAS 33 IMPLEMENTATION GUIDANCE 1170

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

IPSAS 32, Service √ √ √ • Provision on

Concession Arran- Service Service conces- Service conces- how to recog-
gements: Grantor conces- sion asset and sion asset and nize related lia-

sion asset related liability related liability bility

not recognized recognized un-

under previous der previous
basis of ac- basis of ac-
counting counting

IPSAS 35, Consol- √ √ √ • Provisions

idated Financial To appro- when control-
Statements priately ling and/or

classify and controlled en-

identify in- tity adopts IP-

terests in SAS at differ-

other enti- ent time

ties • Exemption to
not prepare fi-
nancial state-
ments as con-
solidated finan-
cial statements

• (Assess if in-
vestment entity
on date of
adoption and
measure at fair
value at that
date)

IPSAS 36, Invest- √ √ √ • Provisions

ments in Associ- To appro- when control-
ates and Joint priately ling entity and
Ventures classify and associate

identify in- adopts IPSAS

terests in

1171 IPSAS 33 IMPLEMENTATION GUIDANCE

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

other enti- at different

ties time

• Exemption to
not include in-
vestment in as-
sociate in con-
solidated finan-
cial statements

√ √ √ • Provisions

To appro- when control-

priately ling entity and

classify and associate and

identify in- jointly con-

terests in trolled entities

other enti- adopt IPSAS at

ties different time

• Exemption to
not include in-
terests in joint
venture in con-
solidated finan-
cial statements

IPSAS 37, Joint • Provision on

Arrangements how to meas-
ure invest-
ment in joint
venture previ-
ously ac-
counted for
using propor-
tionate con-
solidation

IPSAS 39, Em- √ √ • Provisions

ployee Benefits on how to

IPSAS 33 IMPLEMENTATION GUIDANCE 1172

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

defined benefit for defined determine

plans and benefit and initial liability
other long- other long- • Provision to
term employee term employee not separate
benefits not benefits recog- cumulative
recognized un- nized under actuarial
der previous previous basis gains and
basis of ac- of accounting losses
counting

IPSAS 41, Finan- √ √ √ • Provisions

cial Instruments For financial For financial around des-

instruments instruments ignation/ de-

not recognized recognized un- recognition/

under previous der previous hedge ac-

basis of ac- basis of ac- counting

counting counting • Apply im-

pairment
principles
prospec-
tively

IPSAS 42, Social √ √

Benefits liabilities for liabilities for
social benefits social benefits
not recognized recognized un-
under previous der previous
basis of ac- basis of ac-
counting counting

IPSAS 43, Leases √ √

Leased assets Leased assets

and/or liabilities and/or liabilities
not recognized recognized un-
under previous der previous
basis of

1173 IPSAS 33 IMPLEMENTATION GUIDANCE

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

IPSAS Transitional exemption provided

NO YES

Deemed Three-year Three-year Three-year Three- Elimina- Other

cost transitional re- transitional re- transitional year tran- tion of
lief for recog- lief for meas- relief for sitional transac-
nition urement recogni- relief for tions, bal-
tion and/or disclo- ances,
measure- sure revenue
ment and ex-
penses

basis of ­ac-
counting

IPSAS 45, √ √ √
Property, Plant, Property, plant, Property, plant,
and Equipment and equipment and equipment
not recognized recognized un-
under previous der previous
basis of ac- basis of ac-
counting counting
√ √ √
IPSAS 47,
All revenue not All revenue rec- To the ex-
Revenue
recognized un- ognized under tent that
der previous ba- previous basis three-year
sis of account- of accounting relief period
ing was
adopted for
assets
and/or lia-
bilities
√ √ √
IPSAS 48, Trans- To extent
All transfer ex- All transfer ex-
fer Expenses penses not rec- penses recog- that three-
ognized under nized under pre- year relief
previous basis of vious basis of period was
accounting accounting adopted for
assets
and/or liabili-
ties

IPSAS 33 IMPLEMENTATION GUIDANCE 1174

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Appendix
Differentiation between transitional exemptions and provisions that a first-time adopter is required to apply
and/or can elect to apply on adoption of accrual basis IPSAS

This Appendix summarizes how the transitional exemptions and provisions that a first-time adopter is required to apply
in terms of this IPSAS, and those that a first-time adopter may elect to apply on adoption of accrual basis IPSAS.

As the transitional exemptions and provisions that may be elected can also affect the fair presentation and the first-time
adopter’s ability to assert compliance with accrual basis IPSAS as explained in paragraphs 27 to 32 of IPSAS 33, the
Appendix makes a distinction between those transitional exemptions and provisions that affect fair presentation and the
ability to assert compliance with accrual basis IPSAS, and those that do not.

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

IPSAS 1 √
• Present comparative information

IPSAS 4
• Cumulative transitional differences at
√
the date of adoption
• Not required to apply Appendix A to √
items initially recognized before the
date of adoption of IPSAS

IPSAS 5
• Allowed alternative treatment and has √
taken advantage of relief period
√
• Adopt allowed alternative treatment on
date of adoption – retrospective √
application
• Adopt bench mark treatment on the
date of adoption – retrospective
application of costs incurred before and
after date of adoption

IPSAS 10
• Determine if hyperinflationary economy √
is subject to severe hyperinflation at the
date of adoption

IPSAS 33 APPENDIX 1175

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

• Measure assets and liabilities if date of √

adoption is on or after normalisation
date

IPSAS 12
• Three-year relief for recognition and/or √
measurement of assets and changing
the accounting policy to measure
assets

IPSAS 16
• Three-year relief for recognition and/or √
measurement of assets and changing
the accounting policy to measure
assets

IPSAS 18
• No preparation of segment report within √
three years of adoption

IPSAS 19
• No recognition and measurement of √
liability relating to initial estimate of
costs of dismantling and removing item
if relief for recognition and/or
measurement of assets are adopted

IPSAS 20
• No disclosure of related party √
relationships, related party transactions
and information about key management
personnel

IPSAS 21
• Apply impairment provisions √
prospectively on date of adoption or
when assets are recognised when relief
period was applied

IPSAS 26

IPSAS 33 APPENDIX 1176

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

• Apply impairment provisions √

prospectively on date of adoption or
when assets are recognised when relief
period was applied

IPSAS 27
• Three-year relief for recognition and/or √
measurement of assets and changing
the accounting policy to measure
assets

IPSAS 28
• Determine if financial instrument has √
liability and net asset/equity component
√
on date of adoption
• Do not separate compound financial
instrument if no liability exists on date of
adoption

IPSAS 30
• No disclosure of information about √
nature and extent of risks

IPSAS 31
• Three-year relief for recognition and/or √
measurement of assets and changing
√
the accounting policy to measure
assets
• Recognize all internally generated
intangible assets

IPSAS 32
• Three-year relief for recognition and/or √
measurement of assets and/or liabilities
and changing the accounting policy to
measure assets and/or liabilities √
• Measure liability either under financial
liability model or grant of a right to the
operator model on date of adoption or
when asset is recognised if relief period
is adopted

1177 IPSAS 33 APPENDIX

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

Applying deemed cost to assets and/or √

­liabilities

Applying deemed cost to assets acquired √

in a non-exchange transaction

Using deemed cost for investments in √

controlled entities, jointly controlled
entities and associates

Preparing reconciliations during √

transitional period

IPSAS 35
• Relief to recognize and/or measure √
interests in controlled entity
√ √
• Elect to not eliminate inter-entity
balances, transactions, revenue and
expenses
• Controlled entity becomes first-time
adopter later or earlier than its
controlling entity

• Not present financial statements as

consoli­dated financial statements if
three-year relief for recognition and/or √ √
measurement and/or elimination option
was adopted
• Assess if investment entity on date of
adoption and determine fair value at
that date

IPSAS 36
• Relief to recognize and/or measure √
interest in associate
√ √
• Elect to not eliminate share in
associate’s surplus and deficit
• Associate becomes first-time adopter √

IPSAS 33 APPENDIX 1178

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

later or earlier than its controlling entity

• Not present investment in associates in
consolidated financial statements if
three-year relief for recognition and/or
measurement and/or elimination option
was adopted

IPSAS 37
• Measure investment in joint venture √
previously accounted for using
proportionate consolidation

IPSAS 39
• Three-year relief for recognition and/or
measurement of assets and/or liabilities
√ √
and changing the accounting policy to
measure assets and/or liabilities √
• Determine initial liability for defined
benefit and other long-term employee
benefit plans on date of adoption or
when relief period expired
• Recognize increase/decrease on date
of adoption or when relief period expires
in opening accumulated surplus/deficit

IPSAS 41
• Three-year relief for recognition and/or √
measurement of assets and/or liabilities
√
and changing the accounting policy to
measure assets and/or liabilities
Designation √
• Designate financial asset or liability at
fair value through surplus or deficit on
date of adoption
Impairment
• Apply impairment provisions
prospectively on date of adoption

Derecognition
• Apply derecognition provisions √

1179 IPSAS 33 APPENDIX

 FIRST-TIME ADOPTION OF ACCRUAL BASIS IPSAS

Transitional exemption or provision Transitional Transitional exemptions or provisions that

exemptions or may be applied or elected
provisions that
have to be applied

Do not affect fair Do not affect fair Affect fair presentation

presentation and presentation and and compliance with
compliance with compliance with accrual basis IPSAS
accrual basis IPSAS accrual basis IPSAS

prospectively on date of adoption

• Apply derecognition provisions √
retrospectively if information is
available as at the date of initial
accounting

Hedge accounting
• Measure derivatives at fair value √
• Eliminate all deferred losses and gains √
• Only reflect hedges that qualify for √
hedge accounting on date of adoption √
• Discontinue hedge transaction if
conditions of hedge accounting on date
of adoption are not met

IPSAS 43
• Where a first-time adopter is a lessee √
no recognition and/or measurement of
√
lease liability and right-of-use asset if
relief period for recognition and/or
measurement of assets is adopted
• Identification of a lease based on
circum­stances at adoption of accrual
basis IPSAS

IPSAS 45
• Three-year relief for recognition and/or √
measurement of assets and changing
the accounting policy to measure
assets

IPSAS 47
• Relief for recognition and/or
measurement of revenue related to
√
adoption of three-year relief period for
recognition and/or measurement of
assets and/or liabilities

IPSAS 33 APPENDIX 1180