ThinkTWENTY20

Very recently, the International Public Sector Accounting Standards Board^® (IPSASB^®) released a Consultation Paper (CP), Natural Resources, which considers the issues relating to the recognition, measurement and presentation of natural resources by public sector entities.

According to the press release issued May 16, 2022, “natural resources are generally understood to be resources such as sunlight, air, water and land that exist without the actions of humankind. They account for a significant proportion of the economic resources in many jurisdictions. However, governments often lack sufficient information on the monetary value of natural resources, and as a result, grant rights to these resources without regard to financial and environmental sustainability, or intergenerational fairness.”

Currently, there is no explicit International Public Sector Accounting Standard (IPSAS™) guidance on accounting for natural resources in their original state. The IPSASB is now working to address this gap. The first phase of its work focuses on the financial reporting of tangible, naturally occurring resources, including subsoil resources, water, and living resources, which are in their natural state. IPSASB says that “this consultation paper is the first project output, and considers whether natural resources can be recognized as assets in general purpose financial statements or should be disclosed in broader financial reports.

“The issue of accounting for natural resources is important for the public sector in most jurisdictions. The recognition and measurement of natural resources impacts not only on financial reporting, but also potentially for many governments on policy decisions and public financial management.” said IPSASB Chair Ian Carruthers. “This consultation paper is the IPSASB’s first step in developing guidance for this important area.”

The IPSASB welcomes comments on all the matters discussed in this Consultation Paper by October 17, 2022. To access the Consultation Paper, Natural Resources, or to submit a comment, visit the IPSASB website.