Question

1. Which of the IPSASs’ deals with “CASH FLOW STATEMENTS”?   

2. This IPSAS was drafted from the International Accounting Standards. Which IAS was this IPSAS mainly drafted?                                                                                                                                   

3. List and explain 4 similarities of this IPSAS to its corresponding IAS?   

4. List and explain 4 differences of the IPSAS from its corresponding IAS?   

Answer 1

1. International Public Sector Accounting Standards 2 (IPSAS 2) deals with "CASH FLOW STATEMENTS".

2. IPSAS 2 was drafted from International Accounting Standards-7(IAS-7) "Cash Flow Statements".

3. Similarities of the IPSAS from its corresponding IAS:-

• Both the standards follow direct or indirect method to present cash flows from operating, Investing and financing activities and cash flows are reported on a net basis.
• Interest paid and interest and dividends received are classified as operating cash flows.
• Cash flows arising from transactions in a foreign currency shall be recorded in an entity's functional currency by applying to the exchange rate as on the date of cash flow.
• Investing and financing transactions that do not require the use of cash or cash equivalents are excluded from cash flow statement.

Eg:- Conversion of debt to equity, purchase of non current asset on credit etc.,

4. Differences of the IPSAS from its corresponding IAS:-

• Terminology used in IFSAS 2 is different from IAS 7. For example ENTERPRISE is termed as ENTITY, INCOME is termed as REVENUE, INCOME STATEMENT is termed as STATEMENT OF FINANCIAL PERFORMANCE, BALANCE SHEET is termed as STATEMENT OF FINANCIAL POSITION.
• The definitions of technical terms provided in IPSAS is different from IAS.

Eg:-(a) Economic entity means a group of entities comprising a controlling entity or one or more controlled entities.

(b) Net assets/equity is the residual interest in the assets of the entity after deducting all its liabilities.

• IAS 7 uses either direct or indirect method to present cash flows from operating activities. Even IPSAS 2 also uses direct method to present cash flows from operating activities. Addition to this it discloses reconciliation of surplus or deficit to operating cash flows in the notes to financial statements.
• Appendix to IPSAS 2 does not include an illustration of a Cash flow statement for a Financial Institution.