The International Public Sector Accounting Standards Board (IPSASB) has published an Exposure Draft (ED 53), First-Time Adoption of Accrual Basis International Public Sector Accounting Standards. This proposed standard, which is applicable to entities that present accrual basis financial statements during the process of adopting and implementing International Public Sector Accounting Standards (IPSASs), provides exemptions during the transition period.

“Entities understand that adoption of accrual basis IPSASs is a complex process that requires time and detailed guidance,” said IPSASB Chair Andreas Bergmann. “This ED provides a helpful starting point for first-time adoption of accrual basis IPSASs. It grants specific transitional exemptions from the requirements in IPSASs where the cost of complying would likely exceed the benefits to users of financial statements. As a global standard setter, the IPSASB does not give entity specific guidance on how to manage the IPSAS implementation process. We have compiled good practices on relevant areas in Study 14 Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities, which is available from our website in English and Spanish.”

Specifically, ED 53 allows a first-time adopter three years to recognize certain assets and liabilities. This transition period acknowledges that entities may not have comprehensive information about the existence of assets and liabilities, and that considerable effort may be required to identify, measure, and classify assets and liabilities in accordance with IPSASs. ED 53 also allows a first-time adopter to determine a surrogate for acquisition cost or depreciated cost of an asset when reliable information about the historical cost of an asset is not available.

ED 53 encourages, but does not require, entities to provide comparative information in their transitional IPSAS financial statements or their first IPSAS financial statements. Where comparative information is presented, ED 53 states that the comparative information should be adjusted retrospectively to the extent that information is available. Where an entity elects not to present comparative information, ED 53 specifies those financial statements that an entity’s transitional IPSAS financial statements must, at a minimum, include.

The ED states that a reconciliation should be presented in the notes to an entity’s transitional IPSAS financial statements or first IPSAS financial statements. A reconciliation is not required where the entity previously applied the cash basis of accounting. A reconciliation is important for users to understand the relationship between information presented under the previous basis of accounting and the IPSAS information.

ED 53 identifies those transitional exemptions that impact fair presentation and an entity’s ability to assert compliance with accrual basis IPSASs, and separates them from those that do not. The transitional exemptions in ED 53 will replace many of the existing transitional provisions contained in IPSASs. Future IPSASs will only prescribe transitional provisions to address changes to a standard where entities already apply that standard.

How to Comment
To access the ED and the At-a-Glance document, which provides a summary of the ED, or to submit a comment, please visit the IPSASB website at www.ipsasb.org. Comments on the ED are requested by February 15, 2014. The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of these EDs to their members and employees.

About the IPSASB
The IPSASB develops accounting standards and guidance for use by public sector entities. The structures and processes that support the operations of the IPSASB are facilitated by IFAC. The IPSASB receives support (both direct financial and in-kind) from the World Bank, the Asian Development Bank, the Chartered Professional Accountants of Canada, the South African Accounting Standards Board, and the governments of Canada, New Zealand, and Switzerland.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

This summary provides an overview of Exposure Draft (ED 53), First-Time Adoption of Accrual Basis International Public Sector Accounting Standards. 

Note to Editors: This article is available for IFAC member organizations to publish in their journals and/or websites. Email permissions@ifac.org for access and copyright information. 

The acquisition of new clients continues to be a dominant driver of profitability for small- and medium-sized practices (SMPs). Indeed, in the latest edition of the IFAC SMP Quick Poll, the largest portion of respondents identified acquisition of new clients as the main driver of practice profitability—by a wide margin (see chart below).

While SMPs understand the importance of improving operational leverage (doing more with less), improving productivity (e.g., changing work practices or introducing technology), reducing overheads, and better utilization of assets, these are not the main drivers of profitability for most SMPs. This is not surprising given the fact that practice overheads are relatively fixed.

The poll results seem to question the wisdom of many practice management “gurus” who say that the cost of acquiring a new client is far higher than the cost of retaining, or selling more services to, an existing client. What those “gurus” may be failing to recognize is the full potential and cost effectiveness of a marketing campaign that includes low-cost social media.

This article looks at promotion and marketing and, in particular, the role of social media in acquiring new clients and driving practice profitability. 

Branding

The first step of a marketing strategy is to identify your target customers and what they need. You then have to determine how you can satisfy those needs at a profit and, at the same time, differentiate yourself from your competitors. This becomes your brand. The aim of your marketing strategy is to have people associate your brand with their needs and desires, choose you over the competition, and, if you do it right, pay a premium for your services.

Promotion and Marketing

An organic growth strategy involves leveraging promotion and marketing activities to build brand and attract new clients or sell additional services to existing clients. Remember that most businesses in the market are likely to already have an accountant. In the majority of cases, that means for you to grow your practice you will need to win clients from rival practices. And, in order to do that, you must offer a compelling reason for them to switch. This makes promotion and marketing more important than ever—and demands that practices build the capability to proficiently promote and market their brand and service offerings. You will likely be faced with the classic “make-or-buy” dilemma, that of using (and training as needed) existing staff to do promotion and marketing, or else recruiting or outsourcing for the requisite skills.

Promotion and marketing efforts are most effective when a number of activities and channels are used simultaneously: this harnesses the momentum of such efforts and is likely to be more impactful. There are many “tried and true” strategies for marketing but the newest one, social media, has already broken the mold. Social media marketing has rapidly grown in prominence and gone from marginal to mainstream in the marketing space. Social media is a low-cost channel with a very wide reach into your target market.

Social Media Marketing

Social media essentially has taken traditional word-of-mouth marketing (historically the norm for accountants) and moved it to a digital space, exponentially increasing opportunities to influence. It is one of the most powerful tools to engage customers and drive revenue growth. But according to Steven D. Strauss, small business expert and author of The Small Business Bible, while small business owners recognize how important social media is to their success, they’re not taking advantage of social media’s full potential.¹ And, chances are, the same applies to SMPs: after all, SMPs are effectively small businesses in the accountancy sector.

Getting started in social media marketing and deciding whether it can benefit your practice can be quite overwhelming—even scary, at first. Here are some steps to take when building a social media presence:

1. Set aside preconceived notions—social media carries risks but the rewards are greater: it will take time and expense to plan and execute but there are many tools, resources, and articles to help.
2. Learn about the what, why, and how—take the time to read and educate yourself about social media, including Twitter (see Twitter’s Small Business Guide), LinkedIn, Facebook, and blogging, and see what your peers are doing.
3. Check out the tools and resources available to help—there is a growing suite of tools, resources, and guidance available, for example, the AICPA PCPS has developed a number of resources, many of which are available for free, including a social media toolkit and articles.
4. Create a strategy and action plan—define goals, decide how you will measure success and allocate responsibility, then start out small by, for example, pilot testing one of the tools. See “10 Questions to Ask When Creating a Social Media Marketing Plan.”
5. Implement the plan—aim to provide content that creates conversation rather than advertises and involve staff from the millennial generation as they often have the most experience.
6. Periodically evaluate, analyze, and update the plan—track your efforts and monitor the return on investment using common metrics including likes, shares, followers, traffic, and conversions.
7. Consider the need for a policy—this can help manage the risks and reap the rewards.

Resources

IFAC’s website hosts a range of resources and tools to help SMPs grow their practices, especially the Guide to Practice Management for Small- and Medium-Sized Practices).

The International Public Sector Accounting Standards Board (IPSASB) has published the following five exposure drafts (EDs):

• ED 48, Separate Financial Statements;
• ED 49, Consolidated Financial Statements;
• ED 50, Investments in Associates and Joint Ventures;
• ED 51, Joint Arrangements; and,
• ED 52, Disclosure of Interests in Other Entities.

These five EDs will replace current requirements in three International Public Sector Accounting Standards (IPSASs):

• IPSAS 6, Consolidated and Separate Financial Statements;
• IPSAS 7, Investments in Associates; and,
• IPSAS 8, Interests in Joint Ventures. 

A key part of the IPSASB’s strategy is to converge IPSASs, to the extent appropriate, with the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). The IPSASB developed these EDs in light of the relevant IFRSs, while also considering public sector-specific differences and, as a result, these five EDs propose some important changes to make the standards appropriate for application in the public sector.

“These five EDs present proposals on how public sector entities, including governments, should account for their interests in other entities,” said IPSASB Chair Andreas Bergmann. “Comprehensive and transparent reporting of interests in other entities is essential given the wide range of government interventions in the economy and the scale of those interventions.”

The following highlights particular aspects of each ED:

ED 48, Separate Financial Statements

The requirements for separate financial statements in ED 48 are very similar to the current requirements for separate financial statements in IPSAS 6.

ED 49, Consolidated Financial Statements

ED 49 will supersede the requirements in IPSAS 6 regarding consolidated financial statements. ED 49 still requires that control be assessed having regard to benefits and power, but it proposes a new definition of control and considerably more guidance on assessing control. The definition of control focuses on an entity’s ability to influence the nature and amount of benefits through its power over another entity. This new definition of control may introduce additional requirements that could impact previous assessments of control.

ED 49 introduces the concept of investment entities. Generally an investment entity measures its investments in controlled entities at fair value through surplus or deficit. An entity that controls an investment entity retains this method of accounting for an investment entity’s investments in its consolidated financial statements.

In contrast with IPSAS 6, ED 49 no longer permits an exemption from consolidation for temporarily controlled entities. Consistent with its goal of minimizing differences between IPSASs and statistical reporting guidance, the IPSASB has aligned the principles in ED 49 with the Government Finance Statistics Manual 2013 (GFSM 2013) where feasible.

ED 50, Investments in Associates and Joint Ventures

ED 50 explains the application of the equity method of accounting, which is to be used in accounting for investments in associates and joint ventures. The proposals are very similar to the current guidance in IPSAS 7; the key difference is that the ED encompasses joint ventures. ED 50 and ED 51 propose that investments in joint ventures be accounted for using the equity method of accounting.

In contrast with IPSAS 7, ED 50 does not permit a different accounting treatment for temporary investments. 

ED 51, Joint Arrangements

ED 51 contains proposals for classifying and accounting for different types of joint arrangements. It proposes that joint arrangements be classified as either joint operations or joint ventures. In a joint operation, the parties to the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. In a joint venture, the parties to the arrangement have rights to the net assets of the arrangement. This proposed classification differs from IPSAS 8, which referred to three types of arrangements (jointly controlled entities, jointly controlled operations, and jointly controlled assets).

ED 51 proposes that an entity account for its interest in a joint operation by recognizing its share of the assets, liabilities, revenue, and expenses of the joint arrangement and that joint ventures be accounted for in consolidated financial statements using the equity method. Previously, IPSAS 8 permitted jointly controlled entities to be accounted for using either the equity method or proportionate consolidation.

ED 52, Disclosure of Interests in Other Entities

ED 52 brings together the disclosures that were previously included in IPSASs 6–8 and introduces certain new disclosure requirements, including those related to structured entities that are not consolidated.

How to Comment
To access the EDs and the At-a-Glance document, which provides a summary of the EDs, or to submit a comment, please visit the IPSASB website at www.ipsasb.org. Comments on the EDs are requested by February 28, 2014. The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of these EDs to their members and employees.

About the IPSASB
The IPSASB develops accounting standards and guidance for use by public sector entities. The structures and processes that support the operations of the IPSASB are facilitated by IFAC. The IPSASB receives support (both direct financial and in-kind) from the World Bank, the Asian Development Bank, the Chartered Professional Accountants of Canada, the South African Accounting Standards Board, and the governments of Canada, New Zealand, and Switzerland.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

This summary provides an overview of five Exposure Drafts (EDs): ED 48, Separate Financial Statements; ED 49, Consolidated Financial Statements; ED 50, Investments in Associates and Joint Ventures; ED 51, Joint Arrangements; and ED 52,