Government of Ghana exhaustive Accounting Policy - Accounting Policy (IPSAS Implementation)

Public Financial Management Reforms and Legal Framework

Foreword and Strategic Context - The Government of Ghana has implemented strategic reforms to enhance public financial management (PFM) practices. - Ghana Integrated Financial Management Information System (GIFMIS): A key reform visant to computerize PFM processes, including: - Budgeting - Revenue - Expenditure - Procurement - Payroll - Fixed assets - Debt and cash management - Accounting and Auditing Reforms: Adopting the International Public Sector Accounting Standards (IPSAS) to provide a consistent and transparent framework for reporting financial performance, position, and cash flows.
Legal Basis for PFM Reforms - Public Financial Management Act, 2016 (Act 921): Specifically sections 80, 81, and 95, defining financial reporting responsibilities. - PFM Regulations, 2019 (L.I. 2378): Specifically Regulations 207, 208, and 209 regarding accounting standards and policies. - Mandate of the Controller and Accountant-General: In consultation with the Auditor-General, the Controller shall adopt accounting standards and prescribe policies, systems, and procedures for covered entities.
Scope of Application - These policies apply to the three levels of Government in Ghana: - Central Government: Comprising Ministries, Departments, and Agencies (MDAs). - Local Government: Comprising Metropolitan, Municipal, and District Assemblies (MMDAs). - Government Business Entities (SOEs): Comprising State-Owned Enterprises. - These policies must be onboarded as NOTE 1 in the General-Purpose Financial Statements (GPFS) of Covered Entities and the National Accounts of Ghana.

Basis of Preparation and Presentation (IPSAS 1)

Basis of Preparation - Financial statements are prepared on an accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) and IPSAS. - Consideration is given to the 1992 Constitution of the Republic of Ghana, Act 921, and L.I. 2378. - Statements are prepared on a going-concern basis.
Components of Financial Statements - (a) Statement of Financial Position - (b) Statement of Financial Performance - (c) Statement of Cash Flows - (d) Statement of Changes in Net Assets/Equity - (e) Statement of Receipts and Payments - (f) Statement of Comparison of Budget and Actual Amounts - (g) Notes to the financial statements - (h) Comparative information - (i) Special reports (e.g., Statement of financial performance by Classification of Functions of government - COFOG).
Measurement Basis - Financial statements use the historical-cost convention. - Financial assets are recorded at fair values.
Functional and Presentation Currency (IPSAS 4) - The functional and presentation currency is the Ghana Cedi ( $\text{GH}\phi$ ). - Translation Rules: - Revenue: Bank of Ghana buying rates of exchange at the date of the transaction. - Expenditure: Bank of Ghana selling rates of exchange at the date of the transaction. - Monetary Assets/Liabilities (Period-end): Prevailing Bank of Ghana mid-rate of exchange. - Non-monetary items (Fair Value): Bank of Ghana mid-rate at the date fair value was determined. - Non-financial items (Historical Cost): Bank of Ghana mid-rate at the date of measurement. - Foreign Operations: Gains/losses on translation are reported on a net basis in the Statement of Changes in Net Assets/Equity under foreign currency reserve.

Revenue Recognition (IPSAS 9 & 23)

Revenue from Non-Exchange Transactions (IPSAS 23) - Defined as transactions where the entity receives value without directly giving value in exchange. - Direct Taxes: Earned from individuals and organizations, payable to the Ghana Revenue Authority (GRA). Includes income tax, Capital Gains tax, Gift tax, and property tax. Recognized when the taxable event occurs. - Indirect Taxes: Accruing to GRA from consumption of goods/services. Recognized when the taxable event occurs. - Non-tax Revenues: Fees, fines, licenses, and royalties, legally enforceable by legislative instruments. - Grant Revenues: - Condition for Use: Initially recognized as a liability (unearned revenue). Reduced and recognized as revenue only upon fulfillment of conditions. - Restrictions for Use: Recognized immediately as revenue with disclosures (e.g., MP's Common fund). - Trust Moneys: Recognized as a liability; assets disclosed under Cash and Cash Equivalents. - Government Subventions: Recognized when there is a probable commitment of funding.
Revenue from Exchange Transactions (IPSAS 9) - Transactions where the entity receives assets/services and gives approximately equal value (cash, goods, etc.). - Sale of Goods Criteria: - Transfer of significant risks/rewards of ownership. - No continuing managerial involvement or effective control. - Reliable measurement of revenue amount. - Probable economic benefits flow. - Reliable measurement of costs incurred. - Performance of Services Criteria: - Reliable measurement of revenue and stage of completion at reporting date. - Probable economic benefits flow. - Reliable measurement of costs to complete.

Expenditure Recognition

General Recognition - Recognized when incurred on an accrual basis, regardless of payment terms. - Represents a decrease in economic benefit or service potential through outflows or consumption of assets.
Classification of Expenditure - Compensation of Employees: Wages, salaries, allowances, pensions, and benefits (cash/kind) for current and former employees (pensioners). - Use of Goods and Services: Recurrent expenses for goods received/services rendered. - Interest Expenses: Finance costs on domestic and external debts. - Social Benefits: Expenses for social interventions for specific persons or communities. - Specialised Expenditure: Contributions, professional fees, donations, court expenses, scholarships, and awards.

Property, Plant and Equipment (IPSAS 17)

Recognition and Measurement - Stated at historical cost less accumulated depreciation. - Cost includes: Purchase price (inc. duties/non-refundable taxes), directly attributable costs, and initial estimates of dismantling/restoration costs. - Donated Assets: Fair value at date of acquisition is deemed the cost. - Exchange of Assets: Measured at fair value unless transaction lacks commercial substance.
Depreciation Policy - Method: Straight-line method up to residual value. - Exclusions: Land and Assets under Construction (Work in Progress). - Component Approach: Used for significant components of owned buildings with different useful lives. - Timing: Full year depreciation in the year of acquisition/use; none in the year of disposal.
Detailed Useful Life Schedule (Years) - Buildings and Structures: - Barracks, Bungalows, Flats, Clinics, Day Care Centres, Hospitals, Markets, Museums, Office Buildings, Palaces, School Buildings, Stadiums: $50\,\text{years}$ - Warehouse/Stores: $40\,\text{years}$ - Workshop: $30\,\text{years}$ - Agricultural Building: $40\,\text{years}$ - Transport Equipment: - Airplanes (Commercial, Jet, Single-Engine, Single-Engine Propeller, Non-commercial): $20\,\text{years}$ - Motor Bike, Tri-Cycle: $3\,\text{years}$ - Ambulance, Bus, Saloon Cars, Towed Roadway Equipment, Van: $5\,\text{years}$ - Pickups, Station Wagon (SUV), Utility Vehicles: $7\,\text{years}$ - Tankers, Trucks, Water Tanker: $10\,\text{years}$ - Ships/Vessels (Canoes/Boats): $10\,\text{years}$ ; (Ferries, Pontoons, Rowboats): $30\,\text{years}$ ; (Ships): $35\,\text{years}$ - Trains (Diesel, Petrol, Steam Engines): $25\,\text{years}$ - Furniture, Fixtures and Fittings: - Beds, Bookshelves, Chest of Drawers, Cupboards, Desks, Sofas, Swivel Chairs, Tables: $7\,\text{years}$ - Other Machinery and Equipment: - Accessories, Air Conditioners, Refrigerator/Freezer, Generator Set, Stabilizer/UPS: $5\,\text{years}$ - Communication Equipment (Amplifier, Camera, Multimedia Player, Projector, Radio, Television): $3\,\text{years}$ - Computers and Accessories: $5\,\text{years}$ - Networking (Cabling, Data Storage, Firewalls, Routers, Servers, Switches): $7\,\text{years}$ - Office Equipment (Binding Machines, Filing Cabinets, Safes, Shelves): $8\,\text{years}$ - Photocopier, Printer, Scanner, Typewriter: $5\,\text{years}$ - Plant and Machinery, Laboratory Equipment: $8\,\text{years}$ - Infrastructure Assets: - Bridges, Cemeteries: $50\,\text{years}$ - Highways: $40\,\text{years}$ - Apron/Ramp, Lorry Parks, Dam, Drainage, Fibre Optic, Gas mains, Railway Line, Urban Roads, Utilities: $30\,\text{years}$ - Fire Hydrants, Irrigation, Lighting/Traffic, Sea Walls, Water Lines/Systems: $20\,\text{years}$ - Feeder Roads, Road Signals, Runways: $10\,\text{years}$ - Intangible Assets: - Computer Software: $10\,\text{years}$

Heritage assets (IPSAS 17)

Definition: Assets with cultural, historical, or environmental significance (e.g., artefacts, monuments, nature reserves).
Characteristics: Irreplaceable, value increases over time regardless of physical condition, useful lives may span hundreds of years.
Accounting Treatment: Not depreciable. However, if a heritage building is used for office accommodation, it is recognized and depreciated as PPE.

Inventories (IPSAS 12)

Scope: Materials/supplies for production/service, held for sale (e.g., value books, military inventories, stock of unissued currencies).
Valuation: Weighted Average Cost (WAC) method.
Measurement: - Lower of cost and net realizable value (for sale). - Lower of cost and current replacement cost (for distribution at no charge).
Inventory Count: Periodic approach (quarterly and annual).

Intangible Assets (IPSAS 31)

Recognition: Identifiable non-monetary asset without physical substance. Probable future economic benefit and reliable cost measurement required.
Goodwill: Internally generated goodwill is not recognized.
Costs: Research costs are expensed; development costs are capitalized if future benefits are certain.
Amortization (Finite Life): Straight-line method. - Patent, Trade name, Software, Models: $10\,\text{years}$ - Designs, Newspaper Mastheads, Performance Events: $5\,\text{years}$ - Prototypes: $3\,\text{years}$ - Infinite Life (No Amortization): Trademarks, Broadcasting Spectrum, Airspace, Internet Domain, Goodwill, Recipes, Literary/Musical works.

Financial Instruments (IPSAS 28, 30, 41)

Definition: Any contract giving rise to a financial asset of one entity and a financial liability or equity of another.
Initial Measurement: Measured at fair value (except short-term receivables).
Classification: - Fair Value through Surplus/Deficit: Equity investments in controlled entities/cash pools. - Loans and Receivables (Amortized Cost): Cash, loans, advances, results from effective interest rate method.
Offsetting: Assets and liabilities are offset only if a legal right exists and there is intent to settle on a net basis.
Hedge Accounting: Optional relationship between hedging instruments and hedged items. Requires formal documentation and effectiveness ( $\text{economic relationship}$ , $\text{no dominant credit risk}$ , $\text{consistent hedge ratio}$ ).

Leases (IPSAS 13)

Finance Lease: Substantially all risks/rewards of ownership transferred. Capitalized at lower of fair value or present value of minimum lease payments. Depreciated per PPE policy.
Operating Lease: Risks/rewards not transferred. Rentals charged as expense on a straight-line basis.
Donated Right to Use Arrangements (DRUA): Treated based on control assessment. If ownership criteria (term over $35\,\text{years}$ ) are met, it is a finance lease; otherwise, an operating lease recording annual rental value.

Provisions, Contingent Liabilities and Assets (IPSAS 19)

Provisions: Liabilities of uncertain timing/amount. Recognized if legal/constructive obligation exists and outflow is probable.
Contingent Liability: Possible obligation from past events. Not recognized in the main statement; disclosed in notes unless remote.
Contingent Assets: Possible assets. Disclosed only if inflow is more likely than not.

Events after the Reporting Date (IPSAS 14)

Definition: Material events (favorable/unfavorable) between reporting date and authorization date.
Authorization Deadlines (Ghana Standard): - Covered Entities: Q1-Q3 (15 days after quarter); Q4/Annual (15 Jan / 28 Feb following year). - CAGD (National Account): Q1-Q3 (one month after quarter); Q4/Annual (31 Jan / 31 Mar following year).
Adjusting Events: Provide evidence of conditions at reporting date; accounts adjusted.
Non-Adjusting Events: Indicative of conditions after reporting date; disclosed in notes.

Employee Benefits (IPSAS 39)

Short-Term Benefits: Wages, salaries, medical care, and travel allowances due within $12\,\text{months}$ .
Defined Contribution Plans: Entity pays fixed contributions; has no further obligation.
Defined Benefit Plans: Entity bears actuarial risk (e.g., Ex-gratia, Tier 1 pension, CAP-30 Pension Scheme). Measured via the Projected Unit Credit Method.
CAP-30 Pension: Funded employer defined benefit plan for public service. The government does not run a specific fund, so plan assets are not recognized.

Borrowing Costs (IPSAS 5)

Approach: Allowed Alternative Treatment.
Treatment: Expenses in period incurred except for qualifying assets (take substantial time to prepare). Costs directly attributable to qualifying assets are capitalized.
Capitalization Rate: Used when funds are borrowed for general purposes but used for a qualifying asset.

Construction Contracts (IPSAS 11)

Recognition: Recognized using the percentage of completion method.
Revenue: Initial amount agreed + variations + claims/incentives.
Costs: Direct costs + attributable general activity costs + specifically chargeable costs.
Requirement: Excess of total contract costs over total revenue is recognized as an expense immediately.

Related Party Disclosures (IPSAS 20)

Related Parties: Individuals or entities with control or significant influence (e.g., President, Vice-President, Article 71 holders, Ministers, Chief Directors, and family members).
Remuneration Disclosure: Aggregate remuneration of key management personnel and major classes must be shown.
Loan Disclosure: Loans not widely available to public must be disclosed for each individual member/family member including terms and closing balance.

Impairment of Assets (IPSAS 21 & 26)

Non-Cash Generating Assets: Recoverable service amount is higher of fair value less costs to sell and value in use. Impairment occurs when carrying amount exceeds recoverable service amount.
Cash Generating Assets: Unit (CGU) is the smallest group generating commercial return. Impairment first reduces goodwill, then other assets pro rata.
Indications of Impairment: Internal (obsolescence, idleness, poor performance) and External (market value decline, adverse tech/legal changes, rising interest rates).

Agriculture (IPSAS 27)

Biological Assets: Living animals/plants. Measured at initial recognition and reporting date at fair value less costs to sell.
Cost Model Exception: Used only if fair value cannot be measured reliably.
Bearer Plants: (e.g., cocoa, palm, or fruit trees). Used to produce agricultural produce for more than one period. These are recognized under PPE (IPSAS 17) rather than Agriculture as biological assets for harvest.
Examples: - Sheep $\rightarrow$ Wool $\rightarrow$ Yarn - Dairy Cattle $\rightarrow$ Milk $\rightarrow$ Cheese - Vines $\rightarrow$ Grapes $\rightarrow$ Wine

Social Benefits (IPSAS 42)

Scope: Cash transfers to individuals/households (e.g., LEAP, Capitation Grant, COVID-19 reliefs).
General Approach: Recognizes liability for a social benefit scheme based on a present obligation from a past event. Liability represents the best estimate of the next social benefit payment.
Insurance Approach: Permitted if the scheme is fully funded by contributions and managed like an insurance contract.

Investment Property (IPSAS 16)

Definition: Land or buildings held to earn rentals or for capital appreciation.
Measurement at Recognition: Initially at cost (inc. transaction costs).
Subsequent Measurement: The Government of Ghana has elected to use the fair value model. Disclosures must include whether valuations were supported by market evidence or an independent professional valuer.