PPSAS 23 - Revenue From Non-Exchange Trans Oct - 18 2013

Revenue from Non-Exchange Transactions (Taxes and Transfers)

Philippine Public Sector Accounting Standards 23 Revenue from Non-Exchange Transactions (Taxes and Transfers) Table of Contents PAG Number BACKGROUND INTRODUCTION TO THE IPSAS 23 PHILIPPINE APPLICATION GUIDANCE TO IPSAS 23 Scope

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Taxes

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Services In-Kind

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Effective Date

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PPSAS 23 – Revenue from Non-Exchange Transactions January 2014

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Revenue from Non-Exchange Transactions (Taxes and Transfers)

Philippine Public Sector Accounting Standards 23 Revenue from Non-Exchange Transactions (Taxes and Transfers) Background This Philippine Public Sector Accounting Standard (PPSAS) 23 consists of International Public Sector Accounting Standard (IPSAS) 23, “Revenue from Non-Exchange Transactions (Taxes and Transfers)”, and the Philippine Application Guidance (PAG) prepared to suit the Philippine public sector situation. The IPSAS 23 was issued in December 2006 by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC). This includes amendments resulting from IPSASs issued up to January 15, 2012. The PAG (in italics) provides supplementary guidance on the proper implementation of IPSAS 23 and also the reason for not adopting some paragraphs of the IPSAS 23. Introduction to the IPSAS 23 This IPSAS was developed by the IPSASB because: (a) Non-exchange revenues (taxes and transfers) form the majority of revenue for most public sector entities; and (b) Until now there has been no generally accepted international financial reporting standard that addresses the recognition and measurement of taxation revenue. The objective of this Standard is to prescribe requirements for the financial reporting of revenue arising from non-exchange transactions, other than non-exchange transactions that give rise to an entity combination. This Standard deals with issues that need to be considered in recognizing and measuring revenue from non-exchange transactions, including the identification of contributions from owners. Philippine Application Guidance to IPSAS 23 Scope PAG1.Paragraph 3 deals with the applicability of this Standard to all public sector entities other than Government Business Enterprises (GBEs). GBE is an entity that has all the following characteristics: (a) Is an entity with the power to contract in its own name; (b) Has been assigned the financial and operational authority to carry on a PPSAS 23 – Revenue from Non-Exchange Transactions January 2014

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Revenue from Non-Exchange Transactions (Taxes and Transfers)

business; (c) Sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery; (d) Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm’s length); and (e) Is controlled by a public sector entity. This standard shall be applied to all National Government Agencies (NGAs), Local Government Units (LGUs) and Government-Owned and/or Controlled Corporations (GOCCs) not considered as GBEs. Taxes PAG2.Paragraph 59 and 60 provide that an entity shall recognize an asset in respect of taxes when the taxable event occurs and the asset recognition criteria are met. Resources arising from taxes satisfy the criteria for recognition as an asset when it is probable that the inflow of resources will occur and their fair value can be reliably measured. The degree of probability attached to the inflow of resources is determined on the basis of evidence available at the time of initial recognition, which includes, but is not limited to, disclosure of the taxable event by the taxpayer. The aforestated provisions shall not be adopted. Instead, taxes and the related fines and penalties shall be recognized when collected or when these are measurable and legally collectible. The related refunds, including those that are measurable and legally collectible, shall be deducted from the recognized tax revenue. Services In-kind PAG3.Paragraph 98 provides that an entity may, but is not required, to recognize services in-kind as revenue and as an asset. While paragraphs 99 to 101 define and give examples of services-in kind. Paragraph 99 also provides that since these assets are immediately consumed, an expense is simultaneously recognized with a corresponding reduction of the asset. Considering the complexity of the determination and recognition of an asset and income and the eventual recognition of expenses, the provisions of these paragraphs shall not be adopted. However, these shall be disclosed in accordance with paragraph 108. Effective Date PAG4.This PPSAS shall apply for annual financial statements covering periods beginning January 1, 2014. PPSAS 23 – Revenue from Non-Exchange Transactions January 2014

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