Accountancy Europe has been a supporter of the International Public Sector Accounting Standards Board (IPSASB)’s Natural Resources project. However, with the proposal contained in ED 92 that it should be a residual standard we have doubts as to whether a separate standard is required.
Whilst it is possible to envisage assets that could be included in tangible natural resources line item on the statement of financial position, we see significant issues relating to their valuation. This is particularly the case where the resource has been controlled by the public sector for a long time or is acquired as via a non-exchange transaction.
We are concerned that this could lead to the disclosure of tangible natural resources in the financial statements for which no corresponding value is present on the statement of financial position. Whilst such disclosure could potentially improve stewardship of such resources, we are not convinced that the financial statements are the best vehicle to achieve this objective.
We also wonder whether there is a value to recognising many of the assets that could be subject to the draft standard if they are not at significant risk from depredation and degradation and have been under public sector control for a significant length of time.
Consequently, we have doubts whether a separate standard is required for potentially in-scope resources and ask the IPSASB to consider whether it would be more appropriate to deal with natural resources in IPSAS 45, Property, Plant and Equipment.
This is the only class of asset specifically addressed in ED 92. Whilst we accept that conserving certain tangible natural resources is very important for several societal purposes, again we are not convinced that including them in general purpose financial statements is the best way of doing so.
A key issue is valuing such assets, particularly if based on the current operational value method. Excess non-conservation related service potential, like entrance fees, would prevent recognising resources as tangible natural resources held for conservation. Assigning financial value to such resources using current financial accounting principles and practice is therefore difficult.
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