IPSAS - The international financial reporting standards...
Transcript of IPSAS - The international financial reporting standards...
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IPSAS - The international
financial reporting standards for
the public sector
Andreas Bergmann, Chair IPSASB
30 May 2013
European Commission
“Towards implementing European
Public Sector Accounting Standards"
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Overview
• IPSASs are the international financial reporting
standards for public sector
• IPSASB
• Why accrual accounting and reporting matters
• Challenges, cost and return of implementation
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IPSASB has created a full suite of standards
• 32 Standards approved (accrual basis) covering all main
areas of government activity, 1 cash basis standard
• The standards are designed for Public Sector entities other
than Government Business Enterprises (which should use
IFRS), i.e. IPSASs are for non-commercial organizations
– International governmental organizations
– National governments, including controlled entities such as
ministries or agencies
– Subnational governments, including controlled entities
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IPSASB has created a full suite of standards
• Direct vs. indirect adoption – Same can be observed
for IFRS
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IPSAS
Legislation refers
to IPSAS
Jurisdictional Standards
based on IPSAS
Legislation refers
to Jurisdictional
Standards
Accounting
Manual
Implementation
Source:
Bergmann, A: Public Sector Financial Management.
FT Prentice Hall, 2009.
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IPSASB has created a full suite of standards
• «Transaction Neutral Approach»: If transaction is the same in private and public sector, the accounting should be the same
– Substantial convergence of all relevant IFRS at December 31, 2009 with IFRSs at December 31, 2008
• Standards include sector specific standards where transactions are specific to the public sector
– Disclosure of Information about the GGS (Financial Statistics)
– Revenues from Non-Exchange Transactions (Transfers and Taxes)
– Presentation of Budget Information
– Service Concession Arrangements: Grantor
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IPSASB has created a full suite of standards
IPSAS
(Public
Sector)
IFRS
(Private Sector)
• Terminology
• Guidance for Public S.
• Issues of the Public S.
• Examples from the PS
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• Volume and Significance of Non-Exchange transactions such as Taxes and Transfers, or the provision of goods and services in a non-market environment
• Importance of Budget
• Nature of PPE: To provide goods/services – not cash generation, often very specific nature
• Responsibility for Heritage
• Longevity of public sector entities
• Regulatory role of government
• Ownership or control of rights to natural resources
• Statistical reporting
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Public sector is different: Key characteristics
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• Public sector assets, liabilities, revenues and expenses need to be accounted for – completely!
• Contingent liabilities need to be disclosed
• Economic value comes through service potential, not cash generation – but there are no «easy and quick» solutions such as bankruptcy, they still need to finance their activities
• GFS Analytic Framework is on accrual basis
• Citizens and other resource providers want accountability
• Decision makers need a reliable basis for their decisions
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Key characteristics require accrual accounting
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And who is IPSAS Board?
• Independent Accounting Standards Setter under IFAC
• Governance is the same as for other independent
standard setters (e.g. IAASB), except for the lack of a
public interest oversight board
• 18 members, thereof 6 from Europe, 14 from Public
Sector, 2 from NPO, 2 from firms
• 10 international organizations with observers status,
including IMF, World Bank, EC DG BUDG, Eurostat
• 8 staff, mainly based in Toronto/Canada
• Diverse funding by IFAC (approx 50 percent) and various
Voluntary Contributions from Governments and Observers
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IPSASB Strategic Themes
• Development of Public Sector Conceptual Framework
• Public Sector Critical Projects (public sector specific, maintenance of alignment with IFRS, alignment with GFS/statistical accounting)
• Communications and promotion including adoption and implementation
Governance not a strategic theme, but an area for discussion, consultation and change
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IPSASB Workplan Consultation
• Result
– Complete current projects, including Conceptual Framework, as quickly as possible
– As for new projects:
• Project on Social Benefits achieves clearly the highest and most global score
• Others with strongly positive feedback include Emissions Trading Schemes – possibly as a joint project with IASB
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Government Financial Reporting is relevant
• IMF-FAD addressing issue of transparency in a
comprehensive paper – Fiscal transparency does matter
– Harmonization of Accounting and Statistics needed
– ROSC initiative should be followed up
• Eurostat Report – IPSASs as undisputable reference for EPSASs
– Alignment with GFS is an emphasis
– Risk of “IPSAS light” and of a backward step for those on IFRS/IPSAS
(e.g. UK, Spain, Czech Rep., Slovakia, Austria, Baltic countries, Malta)
• G20 Finance Ministers press release February 2013 – Strengthening government balance sheet looking at financial
reporting to improve debt management
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Government Financial Reporting is relevant
• Less debt and lower interest rates
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• Significant correlation between PEFA indicator
(PI25) and overall PEFA performance (Vany,
2010)
• Main advantages:
– Financial planning
– Financial control, debt, investment and
liquidity management
– Reliable base for audit
Government Financial Reporting is relevant
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• Implementation of IPSASs require
– Normative change: Legislative basis, endorsement of
standards, development of operational guidance
(«manual»)
– Configuration of IT/ERP-Systems
– Collection and verification of data, especially in areas
not accounted for previously (e.g. asset register)
– Verification/audit
But implementation cost is substantial
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Urgent need for an integrated system
Budgeting Accounting Audit Governmental
Financial Statistics
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• Project cost depends largely on package (i.e.
with/without IT, coming from pure cash, modified …)
• Projects unavoidably takes several years
• Project cost is several million EUR
• Example: Federal government of Switzerland
– coming from modified cash and replacing entire IT
– ~40m EUR over 7 years in total (~0.01% of annual budget
spread over 7 years)
Urgent need for an integrated system
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• Direct returns to projects: Assets «found», risks identified
– easily add up to about half of the project cost
• Returns from accrual reporting:
– Debt management policy can identify non-bond types of debt
more easily and limit/reduce that; debt «shifting» is effectively
prevented
– Assets are more actively managed, leading to disinvestment or
better usage
– Lower interest rates (e.g. State of Geneva -0.5%/Hiler 2012)
– Accrual accounting (A) assists debt breaks/fiscal rules (F) as it
keeps track and helps to prevent «workarounds», especially
Financial Instruments
But return is easily higher than cost
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But return is easily higher than cost
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Confederation Cantons Cummunes Social security funds Debt ratio
Switzerland: Gross dept of general government (“Maastricht”), 1990-2012, 2016E
in CHF bn in % of GDP
F A
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• IPSASs are a full suite of standards, designed for the
public sector
• They are set by an independent, international standard
setter with substantial European membership
• They can implemented directly or – more likely –
indirectly through standards set at jurisdictional level,
e.g. EPSAS
• Time and cost required for implementation are
substantial – but returns are higher
Conclusion
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Questions Discussion & Further Information
• Visit our webpage http://www.ipsasb.org/
• Or contact us by e-mail : Chair IPSASB: [email protected] Technical Director: [email protected]