Interpretation and Application of IPSAS

19 Cash Basis IPSAS

The IPSASB has in addition to its suite of accrual-based IPSAS issued a standard for financial reporting under the cash basis of accounting. This standard has been developed taking into account the circumstances and requirements of the public sector and as such there is no equivalent standard for the private sector within the IFRS/IAS suite of standards.

Compliance with the cash basis IPSAS supports public sector entities to enhance accountability in regards to cash receipts, cash payments, and cash balances at the reporting date. The measurement focus in cash-based financial statements is therefore on the balances of cash and fluctuations thereof. Sound cash-based accounting provides input for assessments of public sector entities' ability to generate adequate cash flows in the future as well as the sources and uses of cash.

Public sector entities that apply and comply with the cash-basis IPSAS will strengthen their financial reporting pertaining to cash receipts, cash payments, and cash balances. The disadvantage of cash accounting is that it tells only part of the financial story (see Table 19.1). Cash basis IPSAS will however serve as a sound starting point for public sector entities that do not have any accounting standards in place to strengthen their financial reporting practices.

Table 19.1 Cash accounting versus accrual accounting – a high-level overview

Cash Accounting	Accrual Accounting
Transactions are accounted for only at the point ...