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IPSASB releases accounting standard IPSAS 40

The International Public Sector Accounting Standards Board (IPSASB) today issued the accounting standard IPSAS 40.

The IPSAS 40 is an international accounting requirement that specifically addresses the needs of the public sector when accounting for combinations of entities and operations. This can include the reorganisations of government departments, which raise accounting issues different in the public sector than the private sector.

IPSAS 40 recognises two types of public sector combinations; amalgamations and acquisitions. For amalgamations, the standard requires use of the “modified pooling of interests” method of accounting, which is a variation of the pooling of interests (also referred to as “merger accounting”), in which the amalgamation is recognised on the date it takes place.

For acquisitions, IPSAS 40 requires use of the “acquisition” method of accounting, applying the same approach as in IFRS 3, Business Combinations. This is supplemented with additional guidance for public sector specific situations.

The standard applies from 1 January 2019, with earlier adaptation encouraged.

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