IPSAS 23 conditional grants — what ministries get wrong

IPSAS 23 governs revenue from non-exchange transactions — taxes, grants, donations, and transfers. For most ministries, the largest risk area is conditional grants from donor agencies. The standard sets a clear test, but the practical application trips up even experienced preparers.

Condition vs restriction

The single most important distinction in IPSAS 23 is between a condition and a restriction. Both are stipulations attached to a transferred resource, but they have very different accounting consequences.

• Condition: the entity must return the resource (or consume it in a specified way) if the stipulation is not met. A liability is recognised until the condition is fulfilled.
• Restriction: the entity must use the resource in a specified manner, but there is no obligation to return it. Revenue is recognised immediately.

The test is not what the donor intended, it is what the agreement legally requires. If the agreement contains no return obligation, the stipulation is a restriction even if the donor called it a condition in correspondence.

Recognition sequence

• Receive the resource (cash, asset, or service in-kind).
• Classify the transaction — exchange or non-exchange.
• If non-exchange with a condition: recognise an asset and a corresponding liability at the same amount.
• As the condition is fulfilled (milestone, timeline, or usage), reduce the liability and recognise revenue.
• Disclose the unfulfilled balance at each reporting date.

Measurement

Measure the asset at fair value at the date of acquisition. For cash this is straightforward. For services in-kind, fair value is the cost the entity would have paid to procure the service — not the donor's internal cost.

“Most audit findings on IPSAS 23 are not about whether revenue was recognised — they are about whether the condition was documented well enough to survive a three-year look-back.”

Disclosure — the part audits flag

• The amount of revenue recognised during the period, disaggregated by major class.
• The amount of receivables recognised.
• Unfulfilled conditions and other contingencies attaching to resources not yet recognised as revenue.
• Assets subject to restrictions on their use.

The fourth item — restrictions disclosure — is the most commonly missed. If a grant restricts use to a specific programme or time period, that restriction must be disclosed even when the revenue has already been recognised.

IPSAS 47 interaction

From 1 January 2026, IPSAS 47 introduces the binding arrangement model. Contracts that would previously have been assessed under IPSAS 23 may now fall into scope of IPSAS 47 depending on whether the arrangement is binding and whether the entity has performance obligations. For reporting periods on or after the effective date, preparers should apply the IPSAS 47 scope analysis first, and fall back to IPSAS 23 only for transactions outside its scope.

Practical checklist

• Identify the resource and the counterparty.
• Read the agreement — do not rely on correspondence.
• Classify stipulations as conditions or restrictions.
• Recognise liability for conditions; recognise revenue for restrictions.
• Track condition-satisfaction events through the period.
• Disclose unfulfilled conditions and restricted asset use.
• Re-assess under IPSAS 47 for periods on or after 1 January 2026.