Topics of this presentation
Japan IMF Sub Acc
• Why use international standards?
• What does it mean to introduce international
standards like IPSAS or IFRS?
• Examples of countries that have introduced
IPSAS or IFRS.
• Lessons from other countries and other
factors to keep in mind during introduction
of IPSAS
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Why use international standards?
(1/2)
• Support transparency and oversight of
public finances and policy decisions :
– Consolidated “whole-of-government” statements
would support policy making through fuller
information on assets, liabilities, revenues,
expenses, and cash controlled by government
– Reporting assets more fully would improve
transparency and provide basis for investment
policies
– Reports more credible, readily understood, and
comparable world-wide
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Why use international standards?
(2/2)
• Savings from avoidance of need to
issue and maintain own standards
• Benefits from international expertise
• Synergies in the preparation, audit, and
analysis of financial reports
– accounting professionals from private sector
can be used to help with transition
– Mobility between private and public sector
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What does it mean to introduce
IPSAS?
• IPSAS provides standards for financial
statements, including for specific
transactions or assets and liabilities:
– Tax revenues, PPPs, government guarantees etc
• Implementation of IPSAS would involve
– GAP analysis - “where we are?” Vs “where do we
wish to be?”
– Preparing a plan to implement
– Management of implementation including change
management
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IPSAS implementation:
Some issues to be aware of ….
• International Vs national
– Some IPSAS activities may be seen to driven by
issues that are not a concern in a particular country
– Issues that may be important for a country may not be
a global priority
• To address these issues, countries
(standard setters, MoF) should actively
participate in IPSASB deliberations
– attend meetings, review and comment on papers etc.
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Costs of IPSAS implementation – data
should be interpreted with caution
• Cost information often includes costs of other reforms besides
accrual accounting
Country
Cost
Remarks
Switzerland
€40m
Accrual budgeting and
accounting; 80% of costs re IT
system
Austria
€30m
Accrual budgeting and
accounting, MTEF and PB
reforms
EU
Up to
€50m
For a medium-sized EU country
• Cost estimates for EU Member States fall within the range of
0.02-0.1 percent of GDP
• Likely to vary according to the state of existing framework
Examples of countries that have
introduced IPSAS or IFRS
• Switzerland and Austria introduced
IPSAS with some exceptions
• U.K., Australia, and New Zealand
adopted IFRS with some
exceptions
– New Zealand decided to adopt IPSAS
from 2014
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Switzerland - IPSAS
• New Accounting Model introduced 2007
• Based on IPSAS
• Budgeting and accounting on the same
basis
• Main exceptions to IPSAS
– Employee pension liabilities not recognized,
but disclosed as contingent liabilities
– Consolidated financial statements of all
controlled entities: phased approach adopted
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Switzerland
Overview of financial statements
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Austria: IPSAS
• IPSAS mentioned in Organic BL (2009)
– Part of comprehensive reform of budget
framework
• Budgeting and accounting on same basis
• Main exceptions to IPSAS
– Pension liabilities not recognized, but disclosed
– Consolidated financial statements for controlled
entities intended to be done in future
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The United Kingdom: IFRS
• Adopted IFRS from 2009-10
– IPSAS also used where appropriate.
• Produces whole-of government consolidated
financial statements; consolidates
– Bank of England
– some 1500 entities, including sub-national
government entities
• Main departure from IFRS
– State-owned banks not consolidated
– Network Rail not consolidated – in line with statistical,
but not accounting standards
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The U.K: Reconciliation of WGA and
National Accounts - Public Sector Net Debt
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The U.K.: Reconciliation between the WGA
and National Accounts: Current Deficit
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Australia: IFRS (plus govt.-specific
enhancements)
• Whole of government accounts
– Consolidates all controlled entities including
“independent” entities (e.g., central bank,
courts)
– Harmonization of accounting and statistics:
reduces confusion
• Enhancements where IFRS does not
deal with not-for-profit entity issues
– non- exchange income (Tax) recognition
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Australia: GFS sector information in
Financial Statements
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Australia: Cash reporting is integral to
accrual accounting
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The U.S. example
• Uses highly developed FASAB
standards
• Cash budgeting and accrual
financial statements
• Innovative and simplified
presentation to improve
communication of complex
information
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USA: Nation by the numbers
A Snapshot of the Government's Financial
Position & Condition
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U.S.A: Cash Budget and Accrual
Accounts
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U.S.A.: Reconciliation of Cash
Budget and Accrual Accounts
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Lessons from international experience: A
phased approach to implementation (1/2)
• May adopt some IPSAS during first phase, others
during subsequent phases; for example
– Financial assets and liabilities may be done in
Phase 1, nonfinancial assets in Phase 2
• Financial assets and liabilities can also be recognized
progressively in phases
• For example, tax revenue recognition may pose some
challenges – therefore can defer it to Phase 2
– Consolidated financial statements may be
implemented in phases
• Separate financial statements of central government can
be done in Phase 1, partial consolidation can be done in
Phase 2, and full consolidated statements can be done in
Phase 3
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Lessons from international experience: A
phased approach to implementation (2/2)
• Pilot implementation with some
agencies may be considered
– Helps identify issues and challenges before
launching intro full implementation
• IPSAS based financial statements may
initially be produced on a trial basis
– SAI can review but not audit trial statements;
– Full audit during a subsequent “official” phase
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Lessons from international experience:
Change management is important
• Need a well thought out strategy,
including objectives, conceptual
framework, implementation phases
• Communication with key stakeholders,
including parliament, ministers, and
other key executives/officials.
• Training
• Systems changes
• Detailed plan of implementation
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Thank you!
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