IPSAS 28
Active
Financial Instruments: Presentation
Establishes principles for presenting financial instruments – classifying and measuring a financial instrument as a liability or as net assets/equity, accounting for puttable instruments and pro rata liquidation-only instruments, the accounting for compound financial instruments and treasury shares, and the offsetting of a financial asset with a financial liability. Effective 1 January 2013. (IAS 32 equivalent, adapted for the public sector.) Complements IPSAS 41 (recognition/measurement) and IPSAS 30 (disclosure).
Active Standard
IPSAS 28 Financial Instruments: Presentation is the current, active standard issued by the IPSASB for classifying and measuring financial instruments as liabilities or net assets/equity and for offsetting. Effective for periods beginning on or after 1 January 2013. The current Standard comprises paras. 1–55.
IPSAS 28 is the IPSASB's adaptation of IAS 32 Financial Instruments: Presentation for the public sector – replacing 'equity' with 'net assets', adapting the puttable-instrument guidance, and aligning the offset criteria for public-sector control. It complements IPSAS 41 (recognition/measurement) and IPSAS 30 (disclosure).
1
Objective, Scope & Definitions (paras. 1–12)
Objective & scope
Establishes principles for classifying and measuring a financial instrument as a LIABILITY or as NET ASSETS/EQUITY (not 'equity', per the public-sector frame), and for OFFSETTING a financial asset with a financial liability. Applied from the ISSUER's perspective.
Key definitions
Financial instrument
A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another.
Puttable instrument
A financial liability with the option to require the entity to buy back the instrument.
Scope exclusions (para. 5)
ExcludedInstead, see…
Scope of IPSAS 28Paras. 1–55
Recognising/measuring FIIPSAS 41
Disclosing FIIPSAS 30
Insurance contractsIPSAS 44
A 'hybrid' contract (compound instrument) is bifurcated into its liability and net-asset/equity components and each is accounted for separately.
2
Liabilities vs Net Assets/Equity – the Core Test (paras. 13–18)
The classification test (para. 13)
A financial instrument is a LIABILITY unless, and only unless, (a) it is evidenced by a contract to receive/return resources and (b) it does not have the characteristics of a puttable instrument or pro rata liquidation-only instrument (which are liabilities regardless). All else → net assets/equity.
No contractual obligation → equityPuttable / liquidation-only → liabilitySubsequent changes: equity = equity; liability = P&L
3
Putable Instruments (paras. 19–22)
Puttable = liability (para. 19)
A puttable instrument – one that entitles the holder to require the entity to repurchase the instrument – is classified as a financial LIABILITY even if the repayment is in the entity's own equity instruments.
All-or-nothing putsMeasurement: FVOCI or FVTPL (IPSAS 41)Distributable-profit conditionStill a liability
4
Pro Rata Liquidation-Only Instruments & Reclassification (paras. 23–25)
Liquidation-only = liability (para. 23)
An instrument that is redeemable only on liquidation (and only in proportion to the entity's residual distribution capacity) is a financial LIABILITY. It can NEVER be reclassified to net assets/equity. Changes in fair value go to profit or loss.
Reclassifications are only permitted for instruments that were equity at initial recognition and subsequently settle in a way that is NOT a 'cash settlement' of the equity item.
5
Compound Financial Instruments (paras. 26–28)
Bifurcate debt + equity (para. 26)
A compound financial instrument (e.g. convertible bond) is split at inception: the liability component at fair value (using the market rate for a similar non-convertible instrument) and the equity component as the residual. Interest on the liability is accreted over its life and charged to profit or loss.
Effective interest
The rate that exactly discounts estimated future cash payments through the expected life of the financial liability to its gross carrying amount.
6
Treasury Shares (paras. 29–30)
Own instruments – not income (para. 29)
AcquisitionReduces net assets/equity directly
Held-to-date costNo gain/loss, no recycling
D disposalIncrease net assets/equity directly
7
Interest, Dividends, Losses & Gains (paras. 31–33)
Where changes land (para. 31)
For a financial LIABILITY: interest expense, losses and (some) gains → profit or loss. For an instrument in NET ASSETS/EQUITY: dividends and gains/losses are NOT recycled to profit or loss on later re-measurement.
Equity-classified instruments are a 'closed box' – movements are equity, never P&L.
8
Offsetting a Financial Asset and a Financial Liability (paras. 34–39)
Three conditions (para. 34)
An asset and liability may be OFFSET (net reported) only if, and only if, ALL of: (1) a currently enforceable right to net settle; (2) an unconditional right to set off the amount recognised; and (3) present intention to settle net (or simultaneously). Otherwise they are disclosed gross.
Enforceable right to net settleUnconditional set-off rightPresent intention to settle net
9
Effective Date & Amendment Timeline
Timeline
DateEvent
Dec 2011Issued
1 Jan 2013Effective date
2023Amended (latest)
Published with IPSAS 29 and IPSAS 30 to replace the IAS 39 suite with IPSAS 41-aligned presentation.
10
Relationship to IAS 32
Mapping (para. 48)
IPSAS 28 tracks IAS 32's classification, compound-instrument and offset criteria but re-denominates 'equity' as 'net assets', adds public-sector commentary on the control test, and clarifies treasury-share accounting for not-for-profit entities.
IAS 32 classificationIPSAS 28 same (net assets/equity)IAS 32 offsetIPSAS 28 sameIAS 32 equityIPSAS 28 net assets
11
Statement / Process Mapping
Where it flows
ProcessLedger
Classification decisionDeal Capture → Liability vs Net Assets
Compound splitBond Module → Liability Accretion + Equity
Offset reviewNetting Master → Balance Sheet (gross if not)
12
Related Standards
See also
StandardRelation
IPSAS 41Recognition & measurement of FI
IPSAS 30Disclosure of FI
IAS 32Direct equivalent
13
Glossary
Financial liability
Probable transfer of resources, no equity characteristics.
Puttable instrument
Redeemable at holder's option – always a liability.
Compound instrument
Debt + equity components bifurcated at inception.
Treasury shares
Entity's own instruments – reduce net assets directly.
Offsetting
Netting an asset & liability on the face of the statement.
Net assets/equity
Public-sector term for residual interest (IAS 32 equity).