Docstoc

WSE

Document Sample
WSE Powered By Docstoc
					SYSTEMS OF ACCOUNTING IN THE PUBLIC
             SECTOR




 Cash/Accrual/Public Sector
  Accounting Standards

  Ian Mackintosh
  2 March 2004



    1
              OVERVIEW

• Weaknesses in current reporting
• International accounting/statistical
  standards
• Harmonization and reconciliation of
  standards
• The reporting entity
• A suggested reporting framework
• The bottom line
• The National Standard Setter
  2
Weaknesses in the Current
System
• Resources reported-allocation of financial
  resources or use of economic resources?

• Reporting entity-what do we want the
  information for?

• Comparability- what comparability?
Movement to Accrual Accounting
• Good cash system first

• Each step to be a useful step

• Part of overall reform-not an end in itself
INTERNATIONAL ACCOUNTING/STATISTICAL STANDARDS
       (Lies, damn lies and standards/statistics)




• International financial reporting standards (IASB)

• International public sector accounting standards
  (PSC)

• Government Finance Statistics (IMF)

• European system of accounts 1995 (Eurostat)



  3
INTERNATIONAL FINANCIAL REPORTING STANDARDS
                     (IFRS)
                (Previously IAS)


• IASB is a full-time adequately resourced board

• An imperative to have an improved and
  increased set of standards by 2005

• These standards used as a basis for IPSASs

• Harmonization of IFRS and IPSASs is of prime
  importance


  4
                  IASB WORK PROGRAM
Projects under way or proposed include:
•   Financial instruments
•   Reporting performance
•   Consolidation and special purpose entities
•   Pension accounting
•   Foreign exchange
•   Small and medium sized entities
•   Revenue recognition
•   Lease accounting
•   Government grants
•   Measurement
•   Impairment of assets
•   Share based payments
•   Insurance contracts
                                                 5
RELEVANCE OF IASB TO PUBLIC SECTOR

• Basic concepts are the same in private/public
  sectors
• Later topic of harmonization
  IFRS/IPSAS/GFS/ESA95
• The IASB is advancing conceptual thinking at a
  rapid rate
• The public sector needs to keep up
• The PSC and IASB are working constructively
  together

  6
       INTERNATIONAL PUBLIC SECTOR
      ACCOUNTING STANDARDS (IPSASs)


• Public Sector Committee (PSC) a
  committee of IFAC

• Funded by ADB, IFAC, IMF, UNDP,
  WB

• Standards program started
  1996/Standards based on IASs
  including notion of control
  7
       PSC OUTPUT TO DATE


• Study on governmental financial
  reporting
• 20 accrual accounting standards
• A standard on cash based accounting
• Guidance on transition to accrual based
  accounting
• Occasional papers on governments’
  financial reporting (including NZ,
  France, UK and Argentina)
• Governance in the public sector


  8
               PSC 2003+ AGENDA
Public sector specific issues
• Accounting for social policies of government
• Non-exchange revenue
• Budget reporting
• Accounting for development assistance
• Heritage assets
Broad issues
• GFS/ESA95/IPSAS harmonization
• Alliance with IMF
• Conceptual framework
Other matters
• Consultative group
• Workshops
• Translations (to date French, Spanish, Italian, Arabic,
  Russian, Bahasa, Portuguese, Mandarin, Mongolian,
  Japanese)
• Adopting new IASB standards
• Care and maintenance
   9
  ACCOUNTING FOR SOCIAL POLICIES OF
           GOVERNMENTS


• Developing an IPSAS on accounting for
  obligations like pensions, health care,
  education

• Members from NZ, Australia, Canada,
  China, FEE, IMF. Pakistan, Sweden, UK

• ITC January 2004


  10
        NON-EXCHANGE REVENUE


• Developing an IPSAS to account for
  revenues like taxes, grants, transfers

• Members from Canada, Australia,
  China, Czech Republic, FEE, France,
  New Zealand, Sweden, South Africa,
  UK, USA

• ITC January 2004

  11
              BUDGET REPORTING

• On the edge of accounting/economics
• Two stage approach
  1. Research report to identify:
     Current best practices
     Whether budget reporting falls under the
  PSC
         mandate
     Any precedent, or argument for, an
  accounting
         standard setter to deal with this topic
     The matters appropriately dealt with in any
         proposed standard
  2. A possible exposure draft
• Steering committee being appointed with very
  wide representation
• Preliminary report March 2004
  12
  GFS/ESA95/IPSAS HARMONIZATION


1. Technical working group
    PSC Chair, IMF, Eurostat, Australia, UK
    Test extent of possible harmonization
    Provide a reconciliation

2. Task Force
    Chaired by IMF-broad membership
    Overviewing changes to IPSASs, GFS and
   SNA
   SNA to be revised in 2008
   13
ACCOUNTING FOR DEVELOPMENT ASSISTANCE


• Stage one dealing with the disclosure of
  information on development assistance
  under the cash basis of accounting

• Stage two dealing with the disclosure
  under the accrual basis of accounting

• Project advisory panel established

• Report on survey March 2004

  14
GOVERNMENT FINANCE STATISTICS (GFS)


• Promulgated by the IMF-latest manual
  issued 2001
• Accrual based, using same concepts as
  IPSASs
• Within over-arching System of National
  Accounts, used to measure movements in a
  national economy
• Concentrates on General Government
  Sector but encourages consolidation of
  whole of government
• There are differences with IPSASs

  16
THE FOUR STATEMENTS OF GFSM 2001


 • Statement of government
   operations (like operating
   statement)
 • Statement of other economic flows
   (deals with revaluations)
 • Balance sheet
 • Statement of sources and uses of
   cash

   17
       DIFFERENCES GFS/IPSASs

• The reporting entity (control vs.
  sector)
• Military platforms
• Require market value
• Debt provisions
• Gains and losses on disposal of
  assets
• Fundamental errors
• Foreign exchange
• Borrowing costs

  18
       POSSIBLE FUTURE CHANGES TO
                IPSASs/GFS

It is possible that future changes may
remove the differences on:

• Military platforms
• Disclosure of GGS information in
  IPSAS
• New performance statement in
  IPSAS
• Current values required
• Public/private sector arrangements
  19
EUROPEAN SYSTEM OF ACCOUNTS 1995
            (ESA95)
• Promulgated by Eurostat, a part of the EU
• It is the requirement for members of the
  EU
• Both GFS and ESA95 are consistent with
  1993 System of National Accounts as
  regards definitions, accounting rules and
  classifications
• ESA95 differs from GFS in the
  presentation of its publication, and its
  concepts are more specific and precise
• ESA95 is more rules based than 1993
  SNA
• The 2002 GFS yearbook maps the
  ESA95 results to GFS
  20
          STANDARDS OVER-KILL?

                                 IPSASs


                                    Public Sector
                                    GAAP




      International Statistics            Private Sector GAAP
GFS                                                             IFRS



                                    European Statistics




                                 ESA 95
HARMONIZATION AND RECONCILIATION
         OF STANDARDS

• PSC, IMF, EU would like to simplify the
  present situation
• We will work to eliminate as many
  differences as possible
• It is inevitable that some differences will
  remain because the purposes of the various
  reports are different
• The best hope in the short term is for a
  simple reconciliation statement to be
  agreed
• Hopefully, in the longer term the standard
  setters will be able to promulgate standards
  jointly
  22
              THE REPORTING ENTITY
Statistical Reports
• GFS and ESA95 need to have the general government
   sector, the financial public corporation sector and the non-
   financial public corporation sector reported separately
• They encourage but do not require consolidations
• These statistical reports are designed to assist statistical
   economic analysis
Financial Reports
• IPSASs are standards for general purpose financial
   reports, which report on the financial performance and
   position of an economic entity
• The economic entity reports all assets, liabilities, revenues
   and expenses it controls
• Thus it requires full consolidation of all entities controlled
• Unless you have full consolidation, the true measure of
   financial position and performance is not shown
• THE TWO SETS OF REPORTS ARE REQUIRED FOR
   SEPARATE, QUITE LEGITIMATE, REASONS
   23
       A SUGGESTED FRAMEWORK

• Consolidated accounts under IPSASs
• Reconciliation to GFS or ESA95
• Segmentation to the three economic
  sectors
• If an accrual budget, prepared under the
  same standards as the ex-post accounts
• If a cash budget, reconciled to the relevant
  cash flow statement
• All statements to be auditable (except as to
  projections)
• The PSC budget project should give some
  answers as to which part of a budget is
  auditable
  24
           WHICH BOTTOM LINE?

The suggested solution potentially would give
  us a
number of bottom lines:
•   Consolidated operating result-GAAP
•   Consolidated operating result-GFS/ESA95
•   GGS operating result
•   Consolidated cash flow
•   GGS cash flow
THE BOTTOM LINE YOU CHOOSE
  DEPENDS
ON WHAT YOU WANT TO KNOW
 WHAT DO YOU WANT TO KNOW?

• If you want to know how the government is
  performing financially, you need the IPSAS
  based full consolidation
• If you want to know the fiscal effects of the
  financial transactions of the general
  government sector on the national
  economy, you need the GFS/ESA95
  general government operating result
• If you are interested in the cash flows, you
  probably need both the consolidated and
  segmented cash flows

  26
THE NATIONAL STANDARD SETTER
      SUGGESTED ROLES

Adopt relevant international standards
Set timing and method for adoption
Set standards for unique national
 situations
Overview introduction of new
 international standards
Participate in international standard
 setting process
  27

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:6
posted:5/7/2010
language:English
pages:28