Bica technical bulletin 11102017

SEPT

2017 I S S U E 002

technical ebulletin News from Botswana Institute of Chartered Accountants

Contents

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Tax refunds and their administration

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The Role of Accountants in a Transformed Public Sector.

STORY By Eddie Bayen, Director, Technical and Public Sector Accounting Services BICA

STORY By Jonathan Hore – Managing Consultant, Aupracon Tax Consultants.

STORY By Aubrey Mbewe, Ag. Director, School of Business and Leisure, Botswana Accountancy College

STORY By Eddie Bayen, Director Technical and Public Sector Accounting Services BICA

STORY By By George Kiilu, Director, Rankuke Investment (Pty) Ltd

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Accounting for compensated absences.

03

The Code of Ethics for Professional Accountants

05

IPSAS 33 - First-time Adoption Of Accrual Basis IPSAS.

Editor

It gives me great pleasure to bring you the secound issue of the BICA Technical e-Bulletin which will also be published every month. With each issue, our goal is to provide you with the highest quality and relevant content applicable in today’s highly regulated technical environment, as well as to equip members and other stakeholders with important information on technical issues, standards and other pronouncements.

This issue contains highlights such as: Accounting for compensated absences.

Tax refunds and their administration, The Code of Ethics for Professional Accountants.

IPSAS 33 - First-time adoption of accrual basis IPSAS. Do provide us with feedback on which articles are of interest and what you would like to see covered in this newsletter. I would also wish to urge BICA members to contribute articles to the newsletter, I thank those that have contributed to this edition.

Thank you, enjoy this great read.

Send us an email at BICA-Technical@bica.org.bw or contact bica-pr&marketing@bica.org.bw

The Role of Accountants in a Transformed Public Sector.

Accounting for compensated absences.

By Eddie Bayen, Director, Technical and Public Sector Accounting Services BICA Introduction Every employer in Botswana is required to grant each of their employees at least 1.25 days of paid annual leave per month by Section 98 (2) of the Employment Act. S 100 (1) of the Act also requires the granting to employees of at least 20 days of sick leave annually. The normal practice is that

few employees are willing to make the accountant’s life easier by taking all the leave earned during a period. A number of questions therefore arise that every accountant in Botswana has to grapple with: 1. What are the accounting requirements for the leave pay liability?

2. How do we resolve legacy issues arising from non-compliance with the Employment Act? Both IFRS and the Employment Act would need to be applied to answer these questions.

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IFRS, Employment Act and the leave pay liability IAS 19 Employee Benefits classifies paid annual and sick leave as short-term employee benefits. Short-term employee benefits are those that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employee renders the service. IAS 19 requires an entity to recognise a liability for compensated absences if the four conditions discussed below are met.

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Employer has an obligation to compensate employees for future absences.

Now, an employer in Botswana is obliged by the Employment Act to compensate the employee for these absences. That is the employee will be paid for a minimum of 15 days every year (Well done to those employers who offer more than legally required) during which they will be on annual leave, providing no service to the employer, and for up to 20 of the days during which they are sick and consequently doing no work. IAS 19 requires the entity

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to accrue a liability for future compensated absences in the period in which the employee’s services were rendered. Simple example, Company A, which strictly applies, recognises an expense for compensation for 15 annual leave days and for the paid sick days taken during the year. Short term compensated absences fall into two groups, accumulating and non-accumulating. Non-accumulating absences are those that cannot be carried forward to the next period. This happens with sick leave, maternity or paternity leave for instance, as any leave not taken is not typically carried forward to be used in the next year.

Some organisations also do not allow the annual leave to be carried forward, paying out the balance at yearend.

There is no further obligation to the employee for unused leave entitlement beyond the current period.

When paying the employee’s salary during the month of the absence or by paying the leave compensation out when it is encashed, the absence is accounted for and there is no need for an accrual. Compensated absences that are non-accumulating and hence cannot be carried forward to the next period are therefore not recognised as a liability at period end.

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Leave pay rights accumulate from period to period Accumulating paid absences are those that are carried forward and can be used in future periods if the current period’s entitlement is not used in full.

Section 98 (4) of the Employment Act allows any balance of annual leave not taken to be accumulated year by year for up to three years after the end of the period in respect of which the leave was first accumulated. Compensated absences that are earned in the current year and can be used in following financial periods (maximum of three) are to be accounted for as a liability in accordance with IAS 19.

In our example, company A would accrue as a liability the compensation for any of the employee’s 15 annual leave days that were not taken and are thus expected to be taken in the next period. Any days not taken in the next period would be accumulated to the next up to the end of year four as required by the Act.

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It is probable that the amount will be paid S 98 (4) provides that at the end of the three year period following the period in which the leave days are earned, all the accumulated leave together with all the leave earned in respect of the immediately preceding period of 12 months shall be taken. S 98 (6) provides that in the case of termination of the employment by either party, any accumulated leave shall be paid out. This is described by IAS 19 as vesting accumulated paid absences. Generally, the scenarios for expiry of leave days envisaged by the Act are that: The employee’s rights to accumulated leave will either be paid directly with cash when the employee leaves the entity or Indirectly when the employee is paid whilst he is on leave and renders no services.

The possibilities are that an employee would eventually take all their leave days or cash out some of them. For Company A operating in Botswana, the IAS 19 condition that there should be a probability of payment is therefore met as both eventualities involve payment. For companies that manage the leave calendar to ensure that this is the case, the simple next step is to determine how to measure the liability.

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A reliable estimate can be made of the amount of the obligation As mentioned above, the timing of the recognition of liability for accumulated leave pay is a function of the work that the employee renders giving rise to the accumulated benefit. However, the measurement of the liability is driven by whether the obligation is vesting or not as follows: A vesting obligation is where employees are entitled to a cash payment for unused leave entitled upon leaving the entity.

A non-vesting obligation is where employees are not entitled to a cash payment for unused leave entitlement on leaving the employer.

The non-vesting situation should not arise in Botswana due to S 98 (6) requiring all outstanding leave days to be paid out at the rate of the employee’s basic pay in the event of termination of contract by either party.

The amount of the obligation for a vesting obligation is therefore equal to the number of unused leave days multiplied by the relevant employee’s gross salary at the reporting date. There is a reason we account at gross instead of basic pay. When accounting for the

leave accrual at year end, we realise that there are two possible ways in which the liability can be imminently expired: the employee will either take the leave (paid at gross) or it would be paid out in cash on termination (paid at basic).

Prudence concept requires that we measure the liability at the less favourable of the two outcomes, which is gross pay, unless we can establish that the other outcome (termination at basic pay) is more likely. The auditor will be all over you to justify measurement at basic. It’s probably not worth the stress from a materiality perspective unless you are expecting significant layoffs.

How about non-compliance with S 98 (4) of the Act? As mentioned earlier, leave in Botswana should not legally be accumulated beyond three years after it is earned as per S 98 (4). Allowing this to happen is a lapse of governance as it is a failure to respect the law.

However, we know that is does happen due to the management practices of the previous management team.

Especially if there were no BICA members in that management team.

The Employment Act does not advice companies on what they should do if they have breached S 98 (4) since it does not expect this to happen. After 04

the three years following the year leave was earned, one can only assume that any leave from that year and the immediately preceding 12 months that was not taken or paid out has been forfeited. This view is supported by case law.

What the organisation needs to do then is to make a decision about this leave if it is still recorded in the books. There is no legal obligation, so one extreme would be to write off any liability still being carried for this leave. This would however certainly impact employee morale, especially if a constructive

obligation was created in the sense that employees were allowed to accumulate this leave in the past beyond four years. The other extreme which is paying out the liability is complicated by cash flow and fiduciary issues with shareholders since there is no existing liability.

What is certain is that the relevant balance of this liability should be written off immediately, and whether or by how much employees are compensated is a matter that management would need to decide, possibly after negotiations with employees.

Tax refunds and their administration

By Jonathan Hore – Managing Consultant, Aupracon Tax Consultants jhore.aupracon@btcmail.co.bw They say there is no equity about a tax. To a greater extent, that is true as taxpayers are compelled by law to pay tax and they do not have a chance to opt out. In all fairness, if individuals or corporates were given the chance to opt out of a tax or not to pay tax levied on them, I guess over 99% would opt not to pay. This therefore drives authorities to enact laws that impose taxes on taxpayers, with or without their consent. As you may know, tax revenue builds roads, schools, aids in national security through remunerating law-enforcement agencies etc. The list is endless. But is it 100% correct to say there is no equity about a tax? Not quite. Keep reading.

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WHAT ARE TAX REFUNDS? A tax refund is an amount that is due to a taxpayer from BURS and usually arises from the submission of a tax return bearing such refund. For VAT, if a taxpayer acquires inputs into his business and in that process pays VAT of say P1m and yet he collects VAT of P0.75m from sales he makes, he becomes entitled to a VAT refund of P 0.25m as he paid more than he collected.

For income tax purposes, a refund arises in instances where tax chargeable is less that tax already paid. Corporate tax for example, is required to be paid in advance (Self-Assessment Tax) during the course of a financial year. If one’s financial year-end is 31 December, he is required to pay advance corporate tax by 31 March, 30 June, 30 September and 31 December. Any shortfalls are

payable by the time of submitting the return, i.e. by 30 April following the end of his financial year.

Refunds under income tax may also arise from the fact that a taxpayer has a tax loss and yet he could have paid Self-Assessment Tax. This simply means that he would claim back the tax so paid to BURS. Income tax may also be

paid in advance as withholding taxes such as withholding tax on rental income deducted by a tenant or withholding tax on construction contracts. If the withholding tax exceeds the tax chargeable or if the taxpayer is in a tax loss situation, then he gets a tax refund.

WHAT HAPPENS IF YOU PAY TAX LATE? So what does the taxman do to you in case you pay tax late? You probably guessed it right. He punishes the taxpayer in the form of an interest charge, at a compound rate of 1.5% per month or part of a month. This interest is meant to deter late payments, which are not ideal for tax

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collections. So, let’s be fair and analyse this matter. You have an obligation to pay tax and you skip the payment date; then the taxman pounces on you.

That is fair, isn’t it? Yes, it’s fair because you are short-changing the fiscus by not paying your taxes on time? What if the

taxman refunds you late? Can you penalise him in the same way he penalises you? Well, if you could, then one would say that there is some equity in the Tax Acts.

YOU CAN CHARGE BURS INTEREST! The Tax laws provide that should BURS refund you late, you as a taxpayer can claim interest, in the same manner that BURS charges you interest for late-payment of tax. Oh, yes, there is

some equity there. The equity comes in the sense that you are not prejudiced

by BURS when they refund you late as you will get compensated for the late refunds.

SO WHEN ARE YOU TO RECEIVE REFUNDS? Income tax refunds (corporate tax and personal tax) are supposed to be paid to taxpayers not later than 6 months from the date of submitting a tax return.

There is no requirement that a tax assessment should have been issued.

So, whenever you submit a return to BURS, get a stamp or proof of submission, to help you claim your interest, where applicable. The interest is 1% per month or part thereof, i.e. it is

simple interest and is not compounded.

Well, I know someone is thinking that’s not fair.

For VAT, exporters are supposed to receive refunds by the end of the calendar month following the due date of their returns. Assuming an exporter filed a return that was due on 25 May 2017, they should receive their refunds by 30 June 2017. If the refund is paid

late, then 1% compound interest is claimable per month or part thereof.

Any other VAT registrants are supposed to receive their VAT refunds not later than the end of the second calendar month following the due date of the return in question. So, if a person who is not an exporter is required to file a return on 25 May 2017, they would be entitled to a refund not later than 31 July 2017.

SO, IS THERE EQUITY IN THE TAX? Well, they are correct that there is no equity about a tax but the above-mentioned instances where you can charge BURS interest brings about some degree of equity in the Tax laws. So, make sure you pay your taxes in time to avoid being penalised

through interest. But when the taxman does not refund you in time, claim your interest. Now, there is some degree of equity for you. If you have fears in claiming this interest, engage a Tax consultant to do it for you.

Disclaimer: Jonathan Hore is a practicing Tax Consultant with over 17 years in Tax and Customs matters and writes on behalf of Aupracon Tax Specialists. The information contained in this article is of a general nature and is not meant to address particular circumstances of any person.

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The Code of Ethics

for Professional Accountants:

Responding to non-compliance with laws and regulations (NOCLAR)

By Aubrey Mbewe, Ag. Director, School of Business and Leisure, Botswana Accountancy College

Introduction

The duty of confidentiality, a fundamental principle in the Code for professional accountants has been waived so as to disclose non-compliance with laws and regulations (NOCLAR) to relevant public authorities whenever the circumstances permit. In July 2016, the International Ethics Standards Board’s Code of Ethics for Professional Accountants (IESBA) made their final pronouncement on the professional accountants’ responsibilities in relation to non-compliance with laws and regulations (NOCLAR). The effective date for adoption of the pronouncements was 15 July 2017 with earlier adoption permitted. Therefore, it applies to all IFAC members, which includes BICA members, with varying responsibilities depending on whether the members are; Auditors or professional accountants in public practice Assurance practitioners

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Professional accountants who are employed serving in senior level roles/directorship Other professional accountants in business.

What is NOCLAR?

The IESBA define NOCLAR as (“non-compliance”) which comprises acts of omission or commission, intentional or unintentional, committed by a client, or by those charged with governance (TCWG), by management or by other individuals working for or under the direction of a client which are contrary to the prevailing laws or regulations.

Scope The scope of NOCLAR applies to: Laws and regulations applicable on the determination of material amounts and disclosures in the client’s financial statements; and Other laws and regulations that may be essential to the entity’s business and its operations

Members are not required to be experts in these laws beyond what they require to undertake their duties in employment or undertake a professional service.

Examples of laws and regulations addressed by the pronouncement are extensive and include laws that deal with fraud, corruption, money laundering, bribery, terrorist financing, securities and market trading, banking laws, taxation, pensions, public health and safety etc. The laws and regulations are obviously jurisdiction dependent. Similarly, personal misconduct unrelated to the business activities of clients or employing organizations are not within the scope of NOCLAR. What happens to the Fundamental Code on Confidentiality?

Seen as obstructive by many, the fundamental code of ethics on confidentiality required disclosure only when public interest matters arose such as those required by law e.g. Fraud.

However, NOCLAR affords members the right, while not creating a duty, to

disclose non-compliance matters to an appropriate authority. It allows members to waive the duty of confidentiality permitting them to disclose as circumstances allow on NOCLAR to relevant public authorities.

The duty to disclose remains, where it is a requirement to disclose the matter as required by country jurisdiction. In addition, NOCLAR provides clear guidance and a clear pathway to disclosure of NOCLAR to appropriate public authorities in certain circumstances.

Members’ responsibilities: auditors or accountants in public practice

The professional accountant shall: I. Discuss the matter with the appropriate level of management and, where appropriate, those charges with governance. The appropriate level of management is generally at least one level above the person or persons involved or potentially involved in the matter. It is the responsibility of management and TCWG to ensure compliance with laws and regulations, and to identify and address any non-compliance.

II. Assess the appropriateness of the response, and determine if further action is needed in the public interest.

Further action may include I. Disclosing the matter to an appropriate authority (unless prohibited by law or regulation) even when there is no legal or regulatory requirement to do so.

II. Withdrawing from the engagement and the professional relationship where permitted by law or regulation.

III. Assurance practitioners cannot turn a ‘blind eye’ to the matter by simply withdrawing from the engagement and the professional relationship without the matter being appropriately addressed.

IV. Crucially, auditors will no longer simply resign from client relationships without NOCLAR issues being appropriately addressed.

In Botswana, Section 204 of the Companies Act already requires that where an auditor becomes aware of any material irregularity in the company’s financial affairs or any matters which in his opinion is relevant to the exercise of powers and duties imposed by this Act, and the Board does not remedy or report the matter to shareholders within thirty days of the auditor reporting it to them, the auditor should report the matter to the Stock Exchange where the company is listed, and to the Registrar of Companies where it is not.

What about professional accountants that are not practitioners?

positions and influence within the employing organization, there is now a greater expectation for them to take whatever action is appropriate in the public interest to respond to non-compliance or suspected non-compliance. These include; I. Communication to those charged with governance to enable them to fulfil their responsibilities; II. Requirement to comply with applicable laws and regulations

IV. Reduce the risk of re-occurrence V. Seek to deter the commission of the non-compliance if it has not yet occurred.

Documentation Documentation for auditors or accountants in public practice in relation to identified or suspected non-compliance is mandatory as part of documentation requirements under applicable auditing standards.

Non-practicing accountants are encouraged to document as guided by the scope of NOCLAR Conclusion A distinguishing mark of the accountants is integrity, professional behaviour and the responsibility to act in the public interest. Professional accountant’s awareness and understanding of their legal and regulatory responsibilities when they face NOCLAR will be improved, thereby helping to stimulate increased reporting of NOCLAR to public authorities pursuant to reporting requirements in law or regulation. The IESBA sees this standard as an enabler for the accountancy profession to play a greater role in the global fight against NOCLAR, such as financial fraud, money laundering, and corruption. It will help protect stakeholders and the general public from substantial harm resulting from violation of laws and regulations, and strengthen the reputation of the profession. .

III. Have the consequences of the non-compliance or suspected non-compliance rectified, remediated or mitigated; 09

The Role of Accountants in a Transformed Public Sector.

By Eddie Bayen, Director Technical and Public Sector Accounting Services BICA

Introduction The Ministry of Finance and Economic Development’s Public Finance Management reform project would transform the public sector in many ways. It is expected to have a significant impact to the “business model” of government and therefore has major implications for the everyday working lives of public sector accountants. There is bound to be changes not only to accounting mechanisms such as the budgets and the manner in which they are developed, the integrated financial

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management systems and procurement systems, but on the competences and profiles of the people managing these mechanisms.

While there is a lot of debate on how the public sector would be transformed, there remains little doubt about the visibility of, and importance of accounting in the ‘New Public Sector’.

Consequently, there is an important agenda to determine the effects of such changes on accountants.

Pressures on accountants Public sector accountants continue to face pressures to identify efficiency gains and to demonstrate

value-for-money in services. This pressure is in the context of significant changes involving the restructuring of public sector organisations and the introduction of new styles of management to replace the old-style public administration. These changes must also be seen in the context of wider societal expectations of the public sector in particular, expectations of cultural change, with the citizen now regarded as a ‘consumer’. All of this is happening in a situation where there is a strong emphasis on public-private partnerships.

The Public Sector Accountant of the future The Institute of Chartered Accountants of Scotland published research performed by a team from the University of Edinburgh which produced findings that were based on the views of an expert group of senior accountants. The sample included eminent members of the UK accounting profession in the public sector, with significant experience of major changes in their own industries or organisations who were interrogated on how the accountant of the future would be affected by the changes, at the time when the UK was transforming its public sector in a manner similar to what Botswana is contemplating. The final report findings are summarised herein and they identified five major dimensions of the role of the public sector accountant of the future. This entailed both continuity and change: the potential for continuing existing practice as well as developing and evolving new practices. The five dimensions identified were as follows:

1. Regularity: establishing the main budget, overseeing preparation of the accounts. This is currently a major role for public sector accountants but would diminish in importance as the public sector transforms, particularly due to increased automation in the processes involved.

2. Inward looking: greater focus on management accounting for best use of resources. This dimension of the public sector accountant’s role is also another currently crucial one which is going to see its importance dwindle in the “New Public Sector” 3. Strategic Accounting: a greater pre-occupation with the position of the organisation vis-à-vis other organisations. This is an emerging dimension which is expected to be a dominant activity in the future.

This view coincides with multiple calls by stakeholders to migrate towards a business model which is based on “Integrated Thinking” for the public sector.

4. Liaison: IT advances of devolved management structures, shifting the focus of Chief Financial officer to a central liaison or coordinating role?

The Integrated Financial Management Systems being acquired and implemented by central government would lead to a significant enhancement of the importance of IT skills. Coordination of integrated functions would be key to the accountant’s role.

5. Entrepreneurial: a major emphasis on income generation and on radical reappraisal of services, with a sensitivity to market opportunities.

The public sector accountant of the future would find themselves under significant pressure to develop an entrepreneurial orientation as government’s patience with Government Business Enterprises and agencies that depend on Appropriation Acts for their finance needs grows progressively shorter.

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In addition to the role of the accountant in the transformed public sector, the competencies of the accountant of the future were discussed with the expert group.

The results show a significant shift from public sector accounting as it is currently practised to a kind of ‘public sector financial manager’.

The views of this group on the increasing importance of marketing, human resource and general management skills raises issues not only for existing professionals in the field, but also for the recruitment and training of would be accountants in the ‘New Public Sector’. A summary of their views is shown in the table below.

Competencies

Now

Future

Communication Skills

Essential

Essential

Quantification

Core

Still important but less so due to increased automation

Financial Expertise

Central

Central

Marketing Skills

Little evidence

Increasingly important (income generation)

Human Resource Skills

Limited

Increasingly very important

General Management Skills

Limited

Increasingly very important

Other

Political skills

IT skills an absolute necessity

Observations made regarding the skills and competencies of the public sector accountant of the future include the following: 1. management techniques (specifically strategic management accounting –

Conclusion The move from cash-based to full accrual accounting within the public sector can be seen as a dramatic change, as a move towards closer convergence with the practices of the private sector. However, it is not the change in accounting practice which is of greatest significance. The transformation process is much more about wider issues, about the softer

skills discussed above in bringing about changes in public sector corporate culture. These findings have major implications for employers of public sector accountants in terms of the skills mix required of employees in the future. These findings also have important implications for professional accounting bodies like BICA. They raise issues of both necessary competencies as part of formal training and as part of post-qualifying training. This is why

especially benchmarking – and the Balanced Scorecard) are where the future lies, and 2. ‘softer’ management skills would be more important

BICA’s Public Sector Committee under the guidance of Chairperson, Ms Tshegofatso Modise, has initiated a process of developing a road map for identifying and satisfying training needs at all phases of the transformation project. The Committee also plans to ensure that public sector accounting training needs are eventually catered for at all levels of the BICA qualification and its CPD calendar.

IPSAS 33 - First-time Adoption Of Accrual Basis IPSAS.

By George Kiilu, Director, Rankuke Investment (Pty) Ltd Public Sector organisations the world over are slowly but surely moving away from cash accounting and adopting the accrual basis accounting. The effect of this adoption is to enable comparability of government financial reports within a country and across borders.

In this 5 part article, I will lay out the road map that public sector organisations require to follow to have their financial statements compliant with IPSAS. This road map is clearly set out in IPSAS 33 - First-time adoption of accrual basis accounting. This standard was issued by the International Public Sector Accounting Standards Board (IPSASB) in January 2015 and was expected to be applied to IPSAS financial statements for periods beginning 1st January 2017.

IPSAS 33 is one of the 6 accounting standards that are public sector oriented, meaning that they were not adopted from the commercial oriented International Financial Reporting Standards (IFRS) or the International Accounting Standards (IAS).

IPSAS 33 has a total of 154 paragraphs which essentially can be grouped into 4 viz Paragraphs 1 -32 dealing with objectives, definitions, initial recognition and measurement, retrospective application of the standard and fair presentation concepts.

Paragraphs 33 - 62 dealing with exemptions that affect fair presentation and compliance with IPSAS. Paragraphs 63 - 134 dealing with exemptions that do not affect fair presentation and compliance with IPSAS. Paragraphs 135 - 154 dealing with disclosures in financial statements.

In this article we look at the first 32 paragraphs that set base to the operation of the standard. The standard's objectives are stated as being to provide guidance to first time adopters to enable them present high quality information that will provide a) Transparent reporting about a first-time adopter’s transition to IPSAS accrual basis.

b) An entry point into IPSAS's accrual basis irrespective of the adopters previous basis of accounting. c) Greater benefits than the expected costs The Standard is applicable to all public sector organisations and is primarily permitted to be used either a) on first-time adoption of IPSAS accrual basis or b) during the transition period which is given as 3 years from date of adoption.

Government Business Enterprises (GBEs) and organisations that have previously presented their financial statements indicating explicit and unreserved statement of compliance with accrual basis IPSASs are not permitted to apply this standard.

Readers are encouraged to obtain a copy of the standard to be able to appreciate some of the key definitions provided in paragraphs 9 - 14 of the standard and which I have deliberately omitted.

Recognition and Measurement The Standard requires a first time adopter to prepare opening statements of financial position as at the date of adoption. The statements shall a) Recognize all assets and liabilities as required by IPSASs b) Not recognise items as assets or liabilities if not permitted by IPSASs c) Reclassify items that were differently classified under previous basis of accounting in accordance with IPSASs d) Apply IPSAS in measuring all recognized assets and liabilities

Accounting Policies First-time adopters are required to apply accounting policies a) Retrospectively except if required or permitted otherwise by IPSAS 33 b) Consistently apply accounting policies used in the opening statement of financial position and comply with each IPSAS effective at the date of adoption of accrual basis IPSAS except as specified in the exemption clauses. c) Where the exemptions clauses are applied the entity must ensure that either its i. accounting policies are amended and comply with IPSASs upon the expiry of the relief and/or

ii. that the relevant items are recognised and measured and/or iii. that the relevant information is presented and/or iv. disclosed in the financial statements in accordance with the applicable IPSASs whichever is earlier. d) mandatory application of versions of accrual basis IPSASs effective at the date of adoption and any new IPSASs that become effective during the period of transition. e) accounting policies applicable in the transitional exemptions and provisions in this IPSAS are to be applied by first time adopters only. f) If accounting policies used for comparative figures differ with those applied to the IPSAS financials, the resultant adjustments arising from transactions, other events or conditions before date of adoption shall be recognized in the opening balance of accumulated surplus or deficit in the period in which the items are recognised and/or measured (or if appropriate, another category of net assets/equity). Such adjustments shall be recognised in the earliest period presented.

Exceptions to the retrospective application of IPSASs Since IPSAS 33 permits a first-time adopter's estimates to be consistent with estimates made in accordance with the previous basis of accounting unless there is objective evidence of

inconsistencies with the requirements in IPSASs the retrospective application may be exempted under the following conditions: a) An entity receives new information after date of adoption about the estimates it had made under its previous basis of accounting. Such information should be treat in the same way as non-adjusting events after the reporting period in accordance with IPSAS 14, Events after the Reporting Period b) Where an entity is required to make estimates at the date of adoption or during the transition period that were not required under the previous basis of accounting, such estimates shall be made to reflect the conditions prevailing at the date of adoption or at a date during the transition period.

The purpose of this clause is to create consistency with IPSAS 14.

Fair presentation and compliance with IPSAS IPSAS 33 requires that a first time adopter's first IPSAS financial statement shall fairly present the financial position, financial performance and cash flows of the entity.

It must be understood that a first time adopter will only claim compliance if all the requirements of applicable IPSAS are met. Once this is done an entity whose financial statements comply with IPSASs shall make an explicit and unreserved statement of such compliance in the notes.