UN IPSAS Corporate Guidance Provisions, Contingent Liabilities and Contingent...

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  • UN IPSAS Corporate Guidance – Provisions, Contingent Liabilities and Contingent Assets

    Content table

    UN IPSAS Implementation Project

    OPPBA, DM Page 1 of 70

    United Nations

    Corporate Guidance

    for

    International Public Sector Accounting

    Standards

    Provisions, Contingent Liabilities and

    Contingent Assets

    December 2016

    Final Version

  • UN IPSAS Corporate Guidance – Provisions, Contingent Liabilities and Contingent Assets

    Content table

    UN IPSAS Implementation Project

    OPPBA, DM Page 2 of 70

    Content table

    1 Introduction .................................................................................................................................... 5

    2 Definitions ...................................................................................................................................... 8

    2.1 UNSAS definitions and the transition to IPSAS .................................................................................. 9

    3 Differentiation between payables, accruals, provisions and contingent liabilities ........................... 11

    4 Recognition ................................................................................................................................... 13

    4.1 Present obligation from a past event ............................................................................................... 13

    4.1.1 Legal obligations ........................................................................................................................ 14

    4.1.2 Constructive obligations ........................................................................................................... 15

    4.2 Probable outflow of resources embodying economic benefits or service potential ....................... 20

    4.3 Reliable estimate .............................................................................................................................. 20

    4.4 Contingent liabilities ......................................................................................................................... 21

    4.5 Contingent assets ............................................................................................................................. 22

    4.6 Summary of recognition of provisions and contingent liabilities .................................................... 25

    4.7 Summary of recognition of assets and contingent assets ............................................................... 25

    5 Measurement ................................................................................................................................ 26

    5.1 Best estimate .................................................................................................................................... 26

    5.2 Risk and uncertainty ......................................................................................................................... 29

    5.3 Present value – discounting ............................................................................................................. 29

    5.4 Future events .................................................................................................................................... 31

    5.5 Disposal of assets ............................................................................................................................. 32

    5.6 Reimbursements related to provisions ............................................................................................ 32

    6 Changes in provisions .................................................................................................................... 34

    6.1 Changes in recognition and reversal of provisions .......................................................................... 34

    6.2 Changes in measurement ................................................................................................................. 35

    6.3 Utilisation of provisions .................................................................................................................... 35

    7 Presentation considerations .......................................................................................................... 38

    8 Disclosure requirements ................................................................................................................ 39

  • UN IPSAS Corporate Guidance – Provisions, Contingent Liabilities and Contingent Assets

    Content table

    UN IPSAS Implementation Project

    OPPBA, DM Page 3 of 70

    8.1 Disclosures for provisions ................................................................................................................. 39

    8.2 Disclosures for contingent liabilities ................................................................................................ 41

    8.3 Disclosures for contingent assets ..................................................................................................... 43

    9 Specific scenarios .......................................................................................................................... 44

    9.1 Litigation and legal claims ................................................................................................................ 44

    9.2 Third party claims ............................................................................................................................. 45

    9.3 The UN internal justice system for accounting reporting purposes ................................................ 45

    9.4 Restoration costs and other contractual obligations ....................................................................... 47

    9.4.1 Restoration costs ....................................................................................................................... 47

    9.4.2 Other contractual obligations – onerous contracts .................................................................. 48

    9.5 Restructuring .................................................................................................................................... 51

    9.5.1 Recognition of restructuring plans ............................................................................................ 52

    9.5.1.1 Requirement for formal plan ............................................................................................. 52

    9.5.1.2 Valid expectation raised .................................................................................................... 52

    9.5.1.3 Sale or transfer of operations ............................................................................................ 54

    9.5.2 Measurement of restructuring provisions ................................................................................ 54

    9.6 Death and disability claims ............................................................................................................... 55

    9.6.1 Claims relating to United Nations staff ..................................................................................... 56

    9.6.2 Claims relating to troops and police ......................................................................................... 56

    9.6.2.1 Death of troops and police ................................................................................................ 56

    9.6.2.2 Disability of troops and police ........................................................................................... 57

    9.7 Claims under defacto lease arrangements ....................................................................................... 58

    9.8 Insurance claims ............................................................................................................................... 59

    9.9 Guarantees and warranties .............................................................................................................. 59

    9.9.1 Guarantees ................................................................................................................................ 59

    9.9.2 Warranties ................................................................................................................................. 60

    10 Case study – Serious incident in United Nations depot ................................................................... 62

    10.1 Background ....................................................................................................................................... 62

    10.2 Accounting treatment for year ended 30 June 20X4 ....................................................................... 63

  • UN IPSAS Corporate Guidance – Provisions, Contingent Liabilities and Contingent Assets

    Content table

    UN IPSAS Implementation Project

    OPPBA, DM Page 4 of 70

    10.3 Accounting treatment for year ended 30 June 20X5 ....................................................................... 65

    10.4 Accounting treatment for year ended 30 June 20X6 ....................................................................... 67

  • UN IPSAS Corporate Guidance – Provisions, Contingent Liabilities and Contingent Assets

    Introduction

    UN IPSAS Imp