Agenda Item 10: Public Sector Specific Financial Instruments Ross - - PowerPoint PPT Presentation

▶
agenda item 10 public sector specific financial
SMART_READER_LITE
LIVE PREVIEW

Agenda Item 10: Public Sector Specific Financial Instruments Ross - - PowerPoint PPT Presentation

Oct 26, 2023 271 likes •520 views

Agenda Item 10: Public Sector Specific Financial Instruments Ross Smith, Technical Manager IPSASB Meeting June 24-27, 2014 Toronto, Canada Page 1 | Confidential and Proprietary Information Public Sector Specific Financial Instruments

slide-1
SLIDE 1

Page 1 | Confidential and Proprietary Information

Agenda Item 10: Public Sector Specific Financial Instruments

Ross Smith, Technical Manager IPSASB Meeting June 24-27, 2014 Toronto, Canada

slide-2
SLIDE 2

Page 2 | Confidential and Proprietary Information

Objective of Agenda Item

Public Sector Specific Financial Instruments

Consider and provide directions on key issues Materials Presented

  • Agenda Item 10.1 Issues Paper
  • Agenda Item 10.2 SA GRAP 108 Statutory Receivables
slide-3
SLIDE 3

Page 3 | Confidential and Proprietary Information

Background (paras. 3 – 6)

Public Sector Specific Financial Instruments

  • March Meeting:

– Discussion of issues: Monetary reserve transactions

  • Issues to be addressed further in September

– Monetary Gold – IMF SDRs and IMF Transactions – Currency and Coin

slide-4
SLIDE 4

Page 4 | Confidential and Proprietary Information

Issues (para. 6)

Public Sector Specific Financial Instruments

Discussion of issues on:

  • Statutory receivables
  • Statutory payables
  • Securitizations
slide-5
SLIDE 5

Page 5 | Confidential and Proprietary Information

Task Force (Para. 7)

Public Sector Specific Financial Instruments

  • Look to add two members to TBG
  • IMF member identified
  • Central bank working group
slide-6
SLIDE 6

Page 6 | Confidential and Proprietary Information

Statutory Receivables & Payables (1) (Para. 9)

Public Sector Specific Financial Instruments

Gap in IPSAS literature for non-contractual receivables and payables

  • IPSAS 28-30, Financial Instruments – contractual only
  • Non-contractual transactions
slide-7
SLIDE 7

Page 7 | Confidential and Proprietary Information

Statutory Receivables & Payables (2) (Paras. 12-18)

Public Sector Specific Financial Instruments

Statutory receivables and payables arise through laws, legislation or regulation, types of transactions categorized as follows:

  • Taxes
  • Government transfers
  • Fines and penalties
  • Fees
  • Social benefits
slide-8
SLIDE 8

Page 8 | Confidential and Proprietary Information

Statutory Receivables & Payables (3) (Para. 18)

Public Sector Specific Financial Instruments

Key factor is the non-contractual nature of transactions (taxes, transfers, penalties & fines, fees and social benefits) Matters for Consideration: (i) Agree with the analysis of the nature of transactions (contractual vs. non-contractual); and (ii) Aware of other types of transactions which should be considered?

slide-9
SLIDE 9

Page 9 | Confidential and Proprietary Information

National Standards & Others (Paras. 19 – 23)

Public Sector Specific Financial Instruments

  • South Africa GRAP 108 Statutory Receivables
  • Canada PS 3510, Tax Revenue
  • Canada PS 3410, Government Transfers
  • New Zealand Treasury – guidance on tax receivables
  • Australia – Statutory receivables not financial instruments

Matter for Consideration: Other national standards or other sources for further research?

slide-10
SLIDE 10

Page 10 | Confidential and Proprietary Information

Statutory Receivables (1) (Paras. 24 – 28)

Public Sector Specific Financial Instruments

  • IPSAS 9 and IPSAS 23 cover recognition criteria and

initial measurement for receivables

  • Guidance for subsequent measurement and

derecognition/impairment in IPSAS 29 for contractual receivables

  • Lack of guidance for subsequent measurement and

derecognition/impairment for non-contractual receivables

slide-11
SLIDE 11

Page 11 | Confidential and Proprietary Information

Statutory Receivables (2) (Paras. 29 – 30)

Public Sector Specific Financial Instruments

Need exists to address identified gap in IPSAS literature

  • Approach one: Update IPSAS 23 to address identified gap
  • Approach two: New standard similar to SSASB GRAP 108

Matter for Consideration: Note information on statutory receivables and provide directions on the two proposed approaches to address accounting for statutory receivables

slide-12
SLIDE 12

Page 12 | Confidential and Proprietary Information

Statutory Payables (1) (Paras. 31 – 37)

Public Sector Specific Financial Instruments

IPSAS guidance for accounting for payables in the following standards:

– IPSAS 19, IPSAS 25, IPSAS 29 and IPSAS 1

  • If entity has a liability, assessment as to whether it arises

from a contract.

  • Contractual liabilities – IPSAS 28-30, Financial

Instruments

  • Non-contractual – consider IPSAS 19 for uncertain items

– When timing and amount is certain – lack of guidance

slide-13
SLIDE 13

Page 13 | Confidential and Proprietary Information

Statutory Payables (1) (Paras. 38 – 39)

Public Sector Specific Financial Instruments

Need to address identified gap in IPSAS literature

  • Approach one: New IPSAS based on IPSAS 19
  • Approach two: Do nothing at this time – preparers to

continue to use IPSAS 3 Matter for Consideration: Note information on statutory payables and provide direction

  • n the two proposed approaches to address accounting for

non-contractual payables

slide-14
SLIDE 14

Page 14 | Confidential and Proprietary Information

Securitizations (1) (Paras. 40 – 43)

Public Sector Specific Financial Instruments

  • Securitizations common in the private and public sector
  • Complex and types of schemes vary
  • Securitization schemes are always contractual in nature
  • Securitization of assets not recognized in the statement of

financial position

  • Used as alternative method for raising capital
slide-15
SLIDE 15

Page 15 | Confidential and Proprietary Information

Securitizations (2) (Paras. 44 – 46)

Public Sector Specific Financial Instruments

Types of securitizations:

  • Asset-backed securities (ABS)
  • Mortgage-backed securities (MBS)
  • Collateralized debt obligations (CDO)
  • Future flow securitizations

Future flow securitizations occur most often in the public sector.

slide-16
SLIDE 16

Page 16 | Confidential and Proprietary Information

Securitizations (3) (Paras. 47 – 48)

Public Sector Specific Financial Instruments

Future flow securitizations can be undertaken for several reasons:

  • Obtain better rates for borrowing
  • Obtain foreign denominated currency
  • As a result of restrictions on conventional borrowing
  • Increase liquidity of non-liquid receivables
slide-17
SLIDE 17

Page 17 | Confidential and Proprietary Information

Securitizations (4) (Paras. 49 – 50)

Public Sector Specific Financial Instruments

Public sector securitization examples

  • Mexican states securitized future vehicle ownership and

payroll taxes

  • Australia considering securitizing student debt
  • The UK securitized £900 million in old student debt in
  • 2013. Considering further securitizations of student debt

and assets of the Royal Mail

slide-18
SLIDE 18

Page 18 | Confidential and Proprietary Information

Securitizations (5) (Paras. 51 – 55)

Public Sector Specific Financial Instruments

Originator SPV CMIs

Originator transfers assets to SPV for a lump sum payment. CMIs buy debt securities issued by the SPV. SPV issues debt securities backed by assets from originator. Cash flows from assets fund payments to CMIs.

slide-19
SLIDE 19

Page 19 | Confidential and Proprietary Information

Securitizations (6) (Paras. 56 – 60)

Public Sector Specific Financial Instruments

National standards and other guidance

  • GASB Statement No. 48, Sales and Pledges of

Receivables and Future Revenues

  • SNA 2008 22.131 and 22.132
  • Eurostat decision – STAT/07/88
slide-20
SLIDE 20

Page 20 | Confidential and Proprietary Information

Securitizations (7) (Paras. 61 – 67)

Public Sector Specific Financial Instruments

Accounting for securitizations

  • Contractual
  • IPSAS 28-30 and IPSAS 6-8
  • IPSAS 29.AG51 – requires an assessment as to if the

SPV is consolidated, if so detailed step by step process to determine if the assets are derecognized and passed through to investors (partially or completely)

  • IFRS 12, Disclosure of Interests in Other Entities

–

slide-21
SLIDE 21

Page 21 | Confidential and Proprietary Information

Securitizations (8) (Paras. 68 – 69)

Public Sector Specific Financial Instruments

Options for members to consider

  • Approach one: Do nothing and rely on existing application

guidance in IPSAS 29

  • Approach two: develop additional guidance or a separate

IPSAS to address the issue of future flow securitizations of assets not recognized Matter for Consideration: Note information on securitizations and provide direction on the two proposed approaches to address accounting for securitizations

slide-22
SLIDE 22

Page 22 | Confidential and Proprietary Information

Project Output (1) (Paras. 70 – 71)

Public Sector Specific Financial Instruments

  • Distinction between topics related to monetary reserve

transactions, statutory receivables/payables and securitizations

  • Staff view that initial project output would be separate

consultation paper Matter for Consideration: Directions on the proposal from staff on separate consultation papers

slide-23
SLIDE 23

www.ipsasb.org