The International Public Sector Accounting Standards Board has opened a global consultation seeking feedback on a proposed sustainability reporting framework for the public sector, echoing recent private sector initiatives.
The IPSASB has published its Consultation Paper, Advancing Public Sector Sustainability Reporting, seeking comments by September 9, 2022. In the consultation paper, the IPSASB proposes to serve as a standard setter for guidance on sustainability reporting specific to the global public sector, drawing on its experience, its processes and global relationships. It also plans to develop initial guidance focused on the topics of general disclosure requirements for sustainability-related information and climate-related disclosures building on the initial work of the new International Sustainability Standards Council in these areas. . The IPSASB hopes to develop guidance at an accelerated pace, with the possibility of issuing the first guidance by the end of 2023.
The move comes as the International Sustainability Standards Board, which operates under the oversight of the International Financial Reporting Standards Foundation alongside the International Accounting Standards Board, released its own proposals in late March for sustainability-related disclosures and to the climate by companies (see the story). In the United States, the Securities and Exchange Commission also published a proposed rule for climate-related disclosures by public issuers in March (see the story). The IPSASB proposal would relate to sustainability reporting by governments.
Efforts have accelerated internationally to control the rapid pace of climate change and to engage accountants in sustainability and provide assurance related to environmental, social and governance (ESG) reporting. The ISSB was officially launched last fall at the United Nations COP26 climate change conference in Glasgow, Scotland, when it announced that the Value Reporting Foundation, which includes the Sustainability Accounting Standards Board and the International Integrated Reporting Council, would be consolidated into the ISSB, along with the Climate Reporting Standards Board (see the story).
“The sustainability report is on everyone’s agenda due to climate change, COP26, etc. said IPSASB Chairman Ian Carruthers. “The formation of the ISSB was a big step forward in history because before, you had all these different organizations that were in this space, and everyone was like, ‘Well, I’d like the TO DO. We think we should do it, but how do we do it? There is no single framework for doing this. The creation of the ISSB, which incorporates the SASB, integrated reporting and the Climate Disclosure Standards Board, is really starting to catch the attention of private sector capital market players. More and more people are starting to say, “OK, that’s great, we need this on the corporate side, but what about the public sector?”
He thinks the public sector is going to need more guidance in terms of the commitments they are making to tackle climate change and achieve the UN Sustainable Development Goals.
“We don’t really have time,” Carruthers said. “Someone has to take the lead and that’s what we propose to do.”
“It’s really important that we get stakeholder support moving forward,” Carruthers said. “It’s a combination of international organizations and standards users, both in terms of preparers, but also investors. This is where the World Bank report is particularly illuminating due to the fact that governments are major players in capital markets. The World Bank knows the different aspects of our work, and they said we think that needs to be addressed and that you should lead the consultation.
The IPSASB coordinates with the ISSB and was an observer on the technical readiness working group that produced the ISSB’s recent exposure drafts on sustainability and climate-related disclosures. The IPSASB also works with the Global Reporting Initiative and national standard setters to bring the public sector perspective to minimize differences in sustainability standards.
The IPSASB has also published its Summary of the consultation on the mid-term work program Wednesday, listing several projects it plans to add to its agenda, while seeking feedback from stakeholders. These include the global consultation on public sector sustainability reporting, as well as a more limited scope project on sustainability program reporting, as well as projects on financial statement presentation and differential reporting. .
The IPSASB originally proposed adding four more limited-scope projects. These have all received strong stakeholder support, so several projects have been added as pre-commitments for the IPSASB’s future work program, with work to start as resources will be available from 2023. They include IPSAS 21, Impairment of Non-Cash Generating Assets; IPSAS 31, Intangible Assets; IPSAS 33, First-Time Adoption of Accrual IPSAS; and Practice Statement: Making Materiality Judgments.
“We’ve also added another project with a limited scope on sustainability program reporting and information,” Carruthers said. “The idea is that it should accompany some OECD work on developing green budgeting principles. We think we have some existing guidance on performance and reporting on long-term financial sustainability, where you can actually apply the principles to bring sustainability insights. This is non-financial information, but understanding the financial implications and being clear about the expected results in terms of progress. We think this is something that could ship quite quickly and would actually help people, because being clear about the settings and what you’re trying to do is a very important first step.
While planning future projects, the council has been busy publishing standards and guidelines. Last week, the IPSASB issued International Public Sector Accounting Standard (IPSAS) 44, Non-current assets held for sale and discontinued operations, which is based on International Financial Reporting Standard (IFRS) 5, Non-current Assets Held for Sale and Discontinued Operations. The new IPSAS clarifies the accounting for assets held for sale and the presentation and disclosure of discontinued operations. IPSAS 44 includes additional requirements for the public sector, in particular the disclosure of the fair value of assets held for sale that are measured at their carrying amount, when the carrying amount is significantly less than their fair value.
“What we’re trying to do is make sure we can continue the existing financial reporting standards program where there’s still a lot of work to do, in addition to starting to address sustainability reporting, which which is clearly something stakeholders want to do,” Carruthers said. “That’s where we tried to strike a balance in terms of the additional projects we’re adding right now.”