69259
Romania
FINANCIAL REPORTING BY THE GOVERNMENT OF
ROMANIA
THE WAY AHEAD ACCORDING TO IPSAS
Final Report
[Type a quote from the document or the summary of an interesting point.
July
You2011
can position the text box anywhere in the document. Use the Text
Box Tools tab to change the formatting of the pull quote text box.]
[
T
y
p
e
[
T
y
p
e
[
T
y
p
e
[
T
y
p
e
[
T
y
p
e
[
T
y
p
e
a a a a a a
q
u
o
t
e
The World Bank
Europe and Central Asia Region
q
u
o
t
e
q
u
o
t
e
q
u
o
t
e
q
u
o
t
e
q
u
o
t
e
f f f
r r r
o o o
mmm
f
r
o
m
f
r
o
m
f
r
o
m
t t t t t t
h h h h h h
e e e e e e
d d d
o o o
c c c
u u u
mmm
e e e
n n n
t t t
d
o
c
u
m
e
n
t
d
o
c
u
m
e
n
t
d
o
c
u
m
e
n
t
Document of the World Bank
©2011 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org
E-mail: feedback@worldbank.org
All rights reserved
This volume is a product of the staff of the International Bank for Reconstruction and Development /
The World Bank. The findings, interpretations, and conclusions expressed in this volume do not
necessarily reflect the views of the Executive Directors of The World Bank or the governments they
represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries,
colors, denominations, and other information shown on any map in this work do not imply any
judgment on the part of The World Bank concerning the legal status of any territory or the
endorsement or acceptance of such boundaries.
Rights and Permissions
The material in this publication is copyrighted. Copying and/or transmitting portions or all of this
work without permission may be a violation of applicable law. The International Bank for
Reconstruction and Development / The World Bank encourages dissemination of its work and will
normally grant permission to reproduce portions of the work promptly.
For permission to photocopy or reprint any part of this work, please send a request with complete
information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923,
USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com.
All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office
of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-5222422; e-mail: pubrights@worldbank.org
CURRENCY EQUIVALENTS
(June 24, 2011)
Currency Unit
US$
=
=
New Romanian Leu (RON)
2.9523 RON
FISCAL YEAR
January 1 – December 31
Vice President
Country Director
Sector Director
Country Manager
Sector Manager
Team Leader
:
:
:
:
:
:
Philippe H. Le Houerou
Peter Harrold
Gerard A. Byam
Francois Rantrua
A. Moustapha Ndiaye
Bogdan Constantinescu
Table of Contents
EXECUTIVE SUMMARY ...................................................................................................................... ..1
INTRODUCTION .................................................................................................................................... ..4
I. ACCOUNTING VERSUS STATISTICAL REPORTING .................................................................. ..4
II. BACKGROUND ................................................................................................................................. ..4
III. ASSESMENT OF IPSAS ADOPTION IN ROMANIA ................................................................... ..5
A. Recommendations on improved compliance with adopted IPSAS standards ..................................... ..8
IV. CONSOLIDATED FINANCIAL STATEMENTS............................................................................ ..8
A. Reporting entity……… ....................................................................................................................... ..9
B. Scope of consolidation ......................................................................................................................... ..9
Control through the power to appoint members of the governing board ................................................. 10
The purpose of consolidated financial statements .................................................................................... 10
The reporting boundary - why is it important to identify controlled entities?.......................................... 11
Materiality limits in deciding which entities should be consolidated....................................................... 11
C. Identification of controlled entities ...................................................................................................... 12
The concept of control for financial reporting purposes .......................................................................... 12
Control requires both power and benefits ................................................................................................ 12
The ‘Power’ element ................................................................................................................................ 13
The ‘Benefit’ element ............................................................................................................................... 16
Dissimilar activities .................................................................................................................................. 16
Budget-dependency .................................................................................................................................. 16
D. Determine whether central government controls local government .................................................... 17
E. Difference in scope of consolidation of IPSAS and ESA95 ................................................................ 17
F. Recommendations on consolidation..................................................................................................... 18
V. PRESENTATION OF BUDGET INFORMATION IN FINANCIAL STATEMENTS................... 19
A. Comparable basis…............................................................................................................................. 19
B. Four rules……………. ........................................................................................................................ 20
C. Recommendations on budget information in financial statements ...................................................... 21
VI. IPSAS IMPLEMENTATION IN ROMANIA, MEASURED AGAINST OTHER COUNTRIES ... 22
A. Recommendations based on experiences in other countries ................................................................ 25
VII. CONCLUSIONS AND RECOMMENDATIONS ........................................................................... 25
VIII. IMPLEMENTATION PLAN OF RECOMMENDATIONS .......................................................... 26
IX. COMMUNICATION ......................................................................................................................... 26
Appendices
Appendix 1. Power Conditions and Indicators ......................................................................................... 29
Appendix 2. Benefits Conditions and Indicators ...................................................................................... 31
Appendix 3. Background material on reporting entity and consolidation ................................................ 32
Appendix 4. Status of IPSAS adoption and recommendations ................................................................ 33
Appendix 5. Timeline for implementation of IPSAS recommendations .................................................. 34
Acronyms
CFAA
CoA
ESA
GAAP
GBE
GoR
IFRS
IPSAS
IPSASB
MoPF
PEFA
PFM
SOE
Country Financial Accountability Assessment
Court of Accounts (Supreme Audit Institution)
European System of Accounts
Generally Accepted Accounting Principles
Government Business Enterprise (IPSAS terminology)
Government of Romania
International Financial Reporting Standards
International Public Sector Accounting Standards
International Public Sector Accounting Standards Board
Ministry of Public Finance
Public Expenditure Financial Accountability
Public Financial Management
State-Owned Enterprise (GFSM2001 terminology)
PREFACE
The overall objective of this technical assistance is to support the Government of Romania’s efforts to
improve the level of transparency, accountability, efficiency and effectiveness in public finances.
This objective will be achieved through assistance to the Ministry of Public Finance (MoPF) to
continue and strengthen the adoption and implementation of IPSAS.
The report was prepared by a core team led by Bogdan Constantinescu, Senior Financial Management
Specialist and comprising Prof. Dr. Frans van Schaik, an international consultant with extensive
experience in IPSAS implementation, Doina Ilie and Georgeta Alecu from the public accounting
methodology directorate of MoPF, and Anneliese Viorela Voinea, Financial Management Consultant.
Camelia Gusescu, Program Assistant provided logistical support.
The team would like to express its gratitude to government officials of the MoPF for their
constructive collaboration. The team would like to thank Minister Gheorghe Ialomitianu, as well as
State Secretary Gheorghe Gherghina, MoPF, for their effective leadership.
The team worked under the guidance of Mr. Ahmadou Moustapha Ndiaye (Manager, Financial
Management, ECSO3) and benefited from invaluable support from Mr. Peter Harrold (Country
Director, ECCU5), Mr. Francois Rantrua (Country Manager, Romania), Mr. Marius Koen (Lead
Financial Management Specialist, ECSO3) and Mr. Rajeev Swami (Sr Financial Management
Specialist, ECSO3). The report was peer reviewed by Olav Rex Christensen (Senior Public Finance
Specialist, HDNED), and Sanjay N. Vani (Lead Financial Management Specialist, OPCFM).
EXECUTIVE SUMMARY
Recognizing the need for a sound and internationally recognized accounting and financial
reporting framework for Romania, the Government of Romania is in the process of adopting
IPSAS, the International Public Sector Accounting Standards. This is a welcome step in line with
the recommendations by international agencies including World Bank and IMF to prepare financial
statements in accordance with IPSAS. This report discusses the current accounting and reporting
framework of Romania, identifies areas in need of strengthening, and provides several
recommendations.
Accounting versus statistical reporting
Accounting (IPSAS) and statistical bases (most notably ESA95) for reporting financial
information have different objectives, focus on different reporting entities and treat some
transactions and events differently. However, they also have many similarities in treatment, deal
with similar transactions and events and in some cases have a similar type of report structure. The
IPSASB, IMF and the European Commission have recognized the importance of convergence of
accounting and statistical bases for governments and have worked to identify and gradually reduce
the main differences between IPSAS, GFSM 2001, and the European System of Accounts (ESA95).
For an in-depth analysis of the difference between accounting and statistical reporting (IPSAS and
ESA95) we refer to the Research Report called ‘IPSASs and Statistical Bases of Financial Reporting:
An Analysis of Differences and Recommendations for Convergence’, issued by IPSASB and
available on www.ipsasb.org.
Financial statements (whole of government)
The financial statements currently produced by the Government of Romania for the whole of
government meet some of the requirements of the IPSAS, with a number of major omissions.
The team identified the following major gaps:
 Primary financial statements do not reconcile
 Accounting policies and notes are missing in the financial statements
 Transfers between government entities (inter-entity transactions) are not eliminated
 State-owned enterprises are not included
 No explanation is provided of material differences between budget and actual amounts
 Pension liabilities are not shown.
Although the government produces all required primary financial statements under IPSAS,
they do not represent a comprehensive set of financial statements, since they do not reconcile.
The required primary financial statements are the following: a statement of financial position, a
statement of financial performance, a statement of changes in net assets/equity, cash flow statements,
a budget execution statement. The team identified the following areas where these statements do not
reconcile:
1



Borrowings raised according to the cash flow statement amounts to LEI 11 billion, but
according to the statement of financial position the loans increased by LEI 67 billion (from 41
to 108).
Cash at year end amounts to LEI 17 billion according to the cash flow statement, but
according to the statement of financial position LEI 30 billion
Accrual accounting surplus for the year amounted to LEI 60 billion, while the accumulated
surplus according to the statement of changes in net assets/equity decreased by LEI 20 billion
(from 49 to 29) during the year.
Both the accounting policies and most explanatory notes are missing from GoR’s financial
statements causing a lack of clarity about the exact nature of the financial information presented and
a lack of detail on many amounts. For example, the statement of financial performance presents one
aggregated amount ‘revenues from taxation, fees and fines’ without any breakdown. A complete set
of financial statements comprises primary financial statements, accounting policies and explanatory
notes. The primary financial statements should be a concise summary of the major assets, liabilities,
revenues, expenses and cash flows. The primary financial statements should preferably be one page
and should not extend beyond two pages. They are meant to quickly provide headline information to
the user of the financial statements. Details should be relegated to note-disclosures, which should be
linked to the primary financial statements. Notes should be presented in a systematic manner. Each
item on the face of the primary should be cross-referenced to any related information in the notes.
Items on the face of the primary financial statements should be cross-referenced to any related
information in the notes and the amounts should reconcile between primary financial
statements and notes. The team received note-disclosures for property, plant and equipment. The
team identified the following areas where these notes do not reconcile with the primary financial
statements:

Revaluation of the property, plant and equipment according to the note-disclosure amounts to
LEI 58 billion, while the increase in the revaluation reserves only amounts to LEI 4 billion.
In the GoR’s financial statements, the inter-entity transactions have not been eliminated, in
particular transfers between government entities. The statement of financial performance presents
LEI 109 billion in revenues from transfers from other governments and LEI 119 billion in expenses
transfers to other government entities. The majority of these amounts should be eliminated; otherwise
the statement of financial performance grants overstates both revenues and expenses. Furthermore,
the current accounts between government entities should be reconciled and eliminated. Currently, the
financial statements of the government entities are aggregated (i.e., added). To provide information
more useful to the user of the financial statements, the financial statements of the government entities
should be consolidated (i.e. added and inter-entity flows and stocks eliminated). The preparation of
financial statements at whole of government level requires the elimination of all inter-entity
transactions. IPSAS requires that when financial statements are prepared at the government level, the
transactions within all government entities included in the consolidation are eliminated. The current
accounts need to be reconciled and any unexplained differences need to be sorted out.
IPSAS requires one cash flow statement. Currently, the financial statements include two separate
cash flow statements. We recommend presenting one cash flow statement in accordance with IPSAS
2
2 Cash flow statements, and show a breakdown of the line-items ‘receipts’ and ‘payments’ by nature
of the amounts.
The GoR financial statements do not include the state-owned enterprises, neither on a
consolidated basis, nor as a note disclosure. For financial reporting purposes, IPSAS requires
consolidation of all entities controlled by the GoR. Control of another entity is defined as the power
to govern the financial and operating policies of another entity so as to benefit from its activities.
Notably missing from GoR’s financial statements are all state-owned enterprises (SOEs). Although
the Government of Romania and its state-owned enterprises prepare their own financial statements,
individually those statements provide only a partial view of the overall activities of the government.
Without consolidated financial statements, it is impossible to get a complete picture of the
Government’s overall activity, whether for decision making purposes or for demonstrating
accountability for the resources provided by, and managed on behalf of, the resource providers. In
order to comply with the reporting entity definition in IPSAS, the GoR needs to extend the reporting
entity by including state-owned enterprises. The team recommends adopting IPSAS 6 Consolidated
and Separate Financial Statements, IPSAS 7 Investments in Associates, IPSAS 8 Interests in Joint
Ventures and IPSAS 22 Disclosure of Financial Information About the General Government Sector.
The SOEs prepare accrual accounting financial statements in accordance with either IFRS or
Romanian GAAP (Generally Accepted Accounting Principles, which are in accordance with
European Directives). These financial statements can be used to produce the government consolidated
financial statements under IPSAS. SOEs are required to produce financial statements within 120 days
after year end. The GoR is required to produce separate financial statements (i.e. for government
entities only) within 50 days after year end. Consolidated financial statements could therefore be
produced after 120 days after year end.
The financial statements do not include an explanation of material differences between the
budget and actual amounts. Such explanation is also not included in other public documents issued
in conjunction with the financial statements. IPSAS requires such an explanation.
IPSAS requires a comparison of budget and actual amounts. In compliance with IPSAS, GoR
presents a comparison of the budget amounts and actual amounts as a column in the statement of
revenue, financing and expenditure. This statement includes the original and final budget amounts
and the actual amounts on a comparable basis. However, the reconciliation between budget deficit
and accrual deficit is missing. The team recommends fully adopting IPSAS 24 Presentation of budget
information in the financial statements.
The team supports the authorities in their intention to adopt and implement some additional
IPSAS standards, and in addition, recommends adopting and implementing the standard on
employee benefits. The statement of financial position of the government currently paints a rather
rosy picture: net assets/equity amount to LEI 442 billion. In fact, however, liabilities including the
pension liabilities of civil servants far exceed assets. Showing the full extent of the government’s
liabilities towards its employees provokes a better informed discussion about retirement age, level of
pension premium, pension payments and funding of state pensions. Ignoring the government pension
liability stimulates borrowing from future generations.
3
INTRODUCTION
Recognizing the need for a sound and internationally recognized accounting and financial
reporting framework, the Government of Romania is in the process of adopting IPSAS, the
International Public Sector Accounting Standards. This is a welcome step in line with the
recommendations by international agencies including World Bank and IMF to prepare financial
statements in accordance with IPSAS. This report discusses the current accounting and reporting
framework of Romania, identifies areas in need of strengthening, and provides several
recommendations, based on the 2009 financial statements of the Government of Romania.
I. ACCOUNTING VERSUS STATISTICAL REPORTING
Accounting (IPSAS) and statistical bases (most notably ESA95) for reporting financial
information have different objectives, focus on different reporting entities and treat some
transactions and events differently. However, they also have many similarities in treatment, deal
with similar transactions and events and in some cases have a similar type of report structure. The
IPSASB, IMF and the European Commission have recognized the importance of convergence of
accounting and statistical bases for governments and have worked to identify and gradually reduce
the main differences between IPSAS, GFSM 2001, and the European System of Accounts (ESA95).
The objectives of IPSAS financial statements and ESA95 financial information are different. The
objectives of IPSAS financial statements are to provide information useful for decision making, and
to demonstrate the accountability of the entity for the resources which it controls. The purpose of
ESA95 financial information is to provide information suitable for analyzing and evaluating fiscal
policy, especially the performance of the general government sector (GGS) and the broader public
sector.
II. BACKGROUND
The Government of Romania (GOR) has continued to make good progress in the Public Financial
Management (PFM) reform areas since the first Country Financial Accountability Assessment
(CFAA) was prepared in 2003, which deemed the overall PFM risk as moderate, and highlighted
several strong PFM dimensions, including: the progress on program budgeting, the reliable cash
management and distribution facilities provided by the Treasury system, and the Court of Accounts
(CoA - Supreme Audit Institution) capacity.
The Government has taken action to improve coordination and management of PFM reform and
strengthen internal control, financial reporting and internal auditing systems. An Inter-Ministerial
Committee, headed by a State Secretary of the Ministry of Public Finance endorsed a PFM Strategic
Development Plan (SDP) in 2005 and has since monitored its implementation. A large number of the
CFAA recommendations have been addressed by the Government, including in the areas of treasury
management, harmonization of public accounting standards and practices, decentralization and
rationalization of ex-ante financial control and strengthening of internal audit functions. The
organization and effectiveness of the Court of Accounts has further improved. Overall, steady
progress has been made in the development of PFM systems and institutions. As a result of these
efforts, the quality of financial control and oversight in the country has improved substantially.
4
The GoR made the transition to the accruals basis of accounting in 2006 by adopting a number of
IPSAS standards, listed in Appendix 4. A major fixed assets valuation exercise was carried out in
2006 as part of the opening balance sheet preparation. The objective of this cash to accrual transition
was to improve the quality of financial information and financial statements and to provide relevant,
credible and comparable information. Additional information on the adoption of IPSAS to date and
public sector accounting regulations are posted on the MoPF website.
Since 2007, when Romania became member of the European Union, little progress has been made in
introducing additional IPSAS standards and currently no time bound action plan is in place to adopt
additional IPSAS standards. GoR does not have a strategy to ultimately achieve full compliance with
IPSAS.
The adoption of IPSAS has been a very complex process, as it involved the development of detailed
methodological norms and training sessions for the users. This has been further affected by the recent
constraints on the public sector payroll, with a severe limitation of hiring in the MoPF public
accounting methodology directorate, which had been already understaffed before the austerity
measures.
The Functional Review of the Public Finance Sector (report dated October 15, 2010) acknowledges
the progress made to date on IPSAS adoption and recommends the adoption and implementation of
the remaining standards. In the current context of debt stress in several European countries, the GoR
acknowledges the importance of developing robust accounting and reporting procedures and systems
to present in a comprehensive and transparent manner the financial performance and results, as well
the execution of the budget revenues and expenses.
III. ASSESSMENT OF IPSAS ADOPTION IN ROMANIA
This section provides an assessment of the IPSAS implementation in Romania to date.
The financial statements currently produced by the Government of Romania for the whole of
government meet some of the requirements of the IPSAS, with a number of major omissions.
The team identified the following major gaps.






Primary financial statements do not reconcile;
Accounting policies and explanatory notes are missing in the financial statements;
Inter-entity transactions have not been eliminated, in particular transfers between government
entities;
IPSAS requires one cash flow statement;
GoR’s financial statements would be more understandable by presenting information in
millions of LEI;
Pension liabilities are not shown.
The following sections provide an explanation of these deviations, including a reference to the
applicable IPSAS standard.
5
This list is not exhaustive. A detailed comparison of the norms and IPSAS may reveal more
deviations. The norms are issued in Romanian and IPSAS 1-26 have been translated into Romanian.
Also, an audit of compliance of the financial statements with the norms may reveal more instances of
a lack of compliance. The team did not carry out such an audit. This audit is within the remit of the
internal audit departments of the ministries and the Court of Accounts. The internal audit departments
and the Court of Accounts therefore need a thorough knowledge of both the norms and the IPSAS
standards on which they are based. The team recommends such training for the internal audit
departments of the ministries as well as the Court of Accounts.
Primary financial statements do not reconcile. Although the government produces all required
primary financial statements under IPSAS, they do not represent a comprehensive set of financial
statements, since they do not reconcile. This is a deviation from IPSAS 1 Presentation of Financial
Statements. The required primary financial statements are the following: a statement of financial
position, a statement of financial performance, a statement of changes in net assets/equity, cash flow
statements, a budget execution statement. The team identified the following areas where these
statements do not reconcile:
 Borrowings raised according to the cash flow statement amounts to LEI 11 billion, but
according to the statement of financial position the loans increased by LEI 67 billion (from 41
to 108);
 Cash at year end amounts to LEI 17 billion according to the cash flow statement, but
according to the statement of financial position LEI 30 billion
 Accrual accounting surplus for the year amounted to LEI 60 billion, while the accumulated
surplus according to the statement of changes in net assets/equity decreased by LEI 20 billion
(from 49 to 29) during the year.
Accounting policies and explanatory notes are missing in the financial statements causing a lack
of clarity about the exact nature of the financial information presented and a lack of detail on many
amounts. This is a deviation from IPSAS 1 Presentation of Financial Statements. A complete set of
financial statements comprises primary financial statements, accounting policies and explanatory
notes. The primary financial statements should be a concise summary of the major assets, liabilities,
revenues, expenses and cash flows. The primary financial statements should preferably be one page
and should not extend beyond two pages. They are meant to quickly provide headline information to
the user of the financial statements. Details should be relegated to note-disclosures, which should be
linked to the primary financial statements. Notes should be presented in a systematic manner. Each
item on the face of the primary should be cross-referenced to any related information in the notes.
Items on the face of the primary financial statements should be cross-referenced to any related
information in the notes and the amounts should reconcile between primary financial statements and
notes.
The team received note-disclosures for property, plant and equipment. The team identified the
following areas where these notes do not reconcile with the primary financial statements:

Revaluation of the property, plant and equipment according to the note-disclosure amounts to
LEI 58 billion, while the increase in the revaluation reserves only amounts to LEI 4 billion.
This is a deviation from IPSAS 17 Property, Plant and Equipment. Other deviations from IPSAS 17
are caused by Ordinance No. 81/2003. This ordinance forbids depreciation of all military equipment
6
and a large group of other property, plant and equipment, irrespective of their useful life, while
IPSAS requires capitalization of these assets and depreciation over the expected useful life. Changing
an ordinance requires approval of the government and the parliament.
One example of a missing note disclosure is revenues from taxation, fees and fines. The statement of
financial performance presents one aggregated amount ‘revenues from taxation, fees and fines’
without any breakdown. This is a deviation from IPSAS 23 Revenue from Non-Exchange
Transactions (Taxes and Transfers) which requires disclosure either on the face of, or in the notes to,
the financial statements of the amount of revenue from non-exchange transactions recognized during
the period by major classes showing separately major classes of taxes.
A similar note disclosure is missing for revenues from the sales of goods and services. This is a
deviation from IPSAS 9 Revenue from Exchange Transactions, which requires disclosure of the
amount of each significant category of revenue recognized during the period, including revenue
arising from the rendering of services and the sale of goods.
Another example of a missing note disclosure is inventories. This is a deviation from IPSAS 12
Inventories which requires disclosure of the accounting policies adopted in measuring inventories,
including the cost formula used, the carrying amount in classifications appropriate to the entity and
the amount of inventories recognized as an expense during the period.
Other missing note disclosure relate to IPSAS 4 The Effects of Changes in Foreign Exchange Rates,
IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets and IPSAS 5 Borrowings Costs.
A note disclosure about borrowing costs should explain whether borrowings costs are expensed
immediately or capitalized if borrowing costs are directly attributable to the acquisition, construction,
or production of a qualifying asset.
Inter-entity transactions have not been eliminated, in particular transfers between government
entities such as ministries and local government. This is a deviation from IPSAS 6 Consolidated and
separate financial statements. The statement of financial performance presents LEI 109 billion in
revenues from transfers from other governments and LEI 119 billion in expenses transfers to other
government entities. The majority of these amounts should be eliminated; otherwise the statement of
financial performance grants overstates both revenues and expenses. Furthermore, the current
accounts between government entities should be reconciled and eliminated. Currently, the financial
statements of the government entities are aggregated (i.e., added). To provide information more
useful to the user of the financial statements, the financial statements of the government entities
should be consolidated (i.e. added and inter-entity flows and stocks eliminated). The preparation of
financial statements of financial statements at whole of government level requires the elimination of
all inter-entity transactions. IPSAS requires that when financial statements are prepared at the
government level, the transactions within all government entities included in the consolidation are
eliminated. The current accounts need to be reconciled and any unexplained differences need to be
sorted out.
IPSAS requires one cash flow statement. Currently, the financial statements include two separate
cash flow statements. This is a deviation from IPSAS 2 Cash flow statements. We recommend
7
presenting one cash flow statement, and showing a breakdown of the line-items ‘receipts’ and
‘payments’ by nature of the amounts.
GoR’s financial statements would be more understandable by presenting information in
millions of LEI. This is a deviation from IPSAS 1 Presentation of Financial Statements. The amounts
presented in LEI are too detailed and are not helpful for the user of the financial statements. IPSAS
allows presentation in millions as long as the level of rounding in presentation is disclosed and
material information is not omitted.
The process of financial statements preparation might be improved by so-called soft close. This
involves a number of preparatory tasks, such as the reconciliations mentioned above, to be carried out
well ahead of year-end, e.g. by 30 September, as a practicing round for the year-end (the hard close).
This allows the entities to sort out discrepancies among each other between 30 September and 31
December. According to IPSAS, an entity should be in a position to issue its financial statements
within six months of the reporting date, although a timeframe of no more than three months is
strongly encouraged. The usefulness of the financial statements are impaired if they are not made
available to users within a reasonable period after the reporting date. Currently, the GoR is required to
produce financial statements for government entities within 50 days after year end, recently reduced
from 60 days after year end. Although timely submission is closely monitored and in general
achieved on time, such a short timeframe may jeopardize reliability of the information produced.
Good timing is important, but it should not be considered an end in itself. In order to achieve this
ambitious timeframe the team encourages the Ministry of Public Finance to organize a soft close.
The team recommends developing checklists to be filled in by the preparers of the financial
statements before submitting the financial statements to the Ministry of Public Finance. These
checklists should aim to certify that the figures have been verified, cross referenced and they
reconcile. This would ensure that the ministry of public finance receives reliable figures from the line
ministries
A. Recommendations on improved compliance with adopted IPSAS standards







Make primary financial statements reconcile
Include accounting policies and explanatory notes in the financial statements
Eliminate inter-entity transactions, in particular transfers between government entities
Include one cash flow statement rather than two in the financial statements
Presenting information in millions of LEI in GoR’s financial statements
Organize a so-called soft close as part of the process of financial statements preparation
Developing checklists to be filled in by the preparers of the financial statements.
IV. CONSOLIDATED FINANCIAL STATEMENTS
State-owned enterprises are not included in the GoR financial statements, neither on a
consolidated basis, neither as a note disclosure. This is a deviation from IPSAS 6 Consolidated and
separate financial statements. For financial reporting purposes, IPSAS requires consolidation of all
entities controlled by the GoR. Control of another entity is defined as the power to govern the
financial and operating policies of another entity so as to benefit from its activities. Notably missing
8
from GoR’s financial statements are all state-owned enterprises (SOEs). Although the Government of
Romania and its state-owned enterprises prepare their own financial statements, individually those
statements provide only a partial view of the overall activities of the government. Without
consolidated financial statements, it is impossible to get a complete picture of the Government’s
overall activity, whether for decision making purposes or for demonstrating accountability for the
resources provided by, and managed on behalf of, the resource providers. In order to comply with the
reporting entity definition in IPSAS, the GoR needs to extend the reporting entity by including stateowned enterprises. The team recommends adopting IPSAS 6 Consolidated and Separate Financial
Statements, IPSAS 7 Investments in Associates, IPSAS 8 Interests in Joint Ventures and IPSAS 22
Disclosure of Financial Information about the General Government Sector.
The SOEs prepare accrual accounting financial statements in accordance with either IFRS or
Romanian GAAP (Generally Accepted Accounting Principles, which are in accordance with
European Directives). These financial statements can be used to produce the government consolidated
financial statements under IPSAS. SOEs are required to produce financial statements within 120 days
after year end. The GoR is required to produce separate financial statements (i.e. for government
entities only) within 50 days after year end. Consolidated financial statements could therefore be
produced after 120 days after year end.
A. Reporting entity
For financial reporting purposes, IPSAS requires recognition of all cash receipts, cash payments and
cash balances controlled by the GoR. Control of another entity is defined as the power to govern the
financial and operating policies of another entity so as to benefit from its activities (IPSAS 6
Consolidated and Separate Financial Statements).
In order to comply with the reporting entity definition in IPSAS, the Romanian Government
needs to extend the reporting entity.
These agencies generally prepare accrual accounting financial statements, including cash flow
information, which can be used to produce the government consolidated financial statements under
IPSAS.
The preparation of consolidated financial statements requires the elimination of all inter-entity
transactions. IPSAS 6 requires that when accounts are prepared at the government level, the
transactions within departments of the government included in the consolidation are eliminated. The
current accounts need to be reconciled and any unexplained differences need to be sorted out.
B. Scope of consolidation
This guidance interprets the guidance in the IPSAS 6 relating to the reporting entity and applies it to a
Romania setting. The standard was reviewed to see its application by firstly using theoretical
examples and then through applying the guidance to the Romanian government with authorities with
which the government has links.
9
This section provides guidance, including illustrative examples, on applying IPSAS’s definition of
‘control’ to relationships between the Government of Romania and its related parties in order to
determine whether or not control exists for reporting purposes.
Appendix 4 lists background material that is relevant to the subject; the users of this guidance might
refer to this appendix for a list of relevant literature.
The Government of Romania is preparing to adopt IPSAS as its financial reporting standards. This
report aims to provide guidance to the Government of Romania on what related or linked
organizations should be consolidated into the financial statements of its own.
IPSAS defines control as:
‘the power to govern the financial and operating policies of another entity so as to benefit from its
activities’.
IPSAS provides guidance on what factors are demonstrative of the power to govern the financial and
operational policies of another entity and the benefits that can accrue from the relationship with the
other entity.
Control through the power to appoint members of the governing board
This analysis shows that the boundaries between control under an IPSAS definition, and the absence
of control, in many instances comes down to the power of the GoR to be able to appoint or remove
the majority of the governing board of another entity; it is this power which allows the government to
align the strategy of another entity towards its own purposes that is demonstrative of control. The
term governing board has been used throughout this guidance. However, it is a generic term to use to
note those charged with governance of the organization. Those charged with the governance of the
organization could also be known as a governing body, executive council or board of directors.
While the government may not obtain any financial benefits from the other entity, it does benefit from
its ability to direct the other entity to work with it to achieve its objectives; it is therefore the
following question which is decisive:
‘is the government able to (even if it actually does not) direct the other entity to co-operate with it in
achieving its objectives’
It is the potential to control the other entity rather than actual control of the other entity that is critical.
The purpose of consolidated financial statements
Although the Government of Romania, its state-owned enterprises (such as government commercial
companies, commercial statutory authorities and majority owned companies) and other related
authorities prepare their own financial statements, individually those statements provide only a partial
view of the overall activities of the government. Without consolidated financial statements, it is
impossible to get a complete picture of the Government’s overall activity, whether for decision
making purposes or for demonstrating accountability for the resources provided by, and managed on
behalf of, the resource providers.
Consolidated financial statements provide an accounting of the full nature and extent of the financial
affairs and resources of the government, including those of its controlled entities. Consolidated
financial statements are a key element of financial reporting by the Government of Romania because
they serve to report on how it managed its affairs and resources at a consolidated level. Consolidated
financial statements recognize that, even though the government and its controlled entities may be
10
separate legal or organizational entities, together they make up a single economic entity. Providing
consolidated information helps users gain an overall understanding of the government’s assets and
liabilities, revenues and expenses and cash flows.
The reporting boundary - why is it important to identify controlled entities?
The issue of what should be included when a government prepares its consolidated financial
statements is critical because choosing to include or exclude certain organizations can have an
enormous impact on the financial statements and the picture they provide about an organization’s
finances. IPSAS refers to the purpose and general objectives of financial statements in the public
sector. No issue has a greater impact on a public sector entity’s financial reporting than establishing
the boundaries of its financial statements.
Consolidated financial statements are supposed to tell users what the financial position and results are
for the reporting entity (the entity that issues financial statements), as a whole. And so the rules for
deciding what is part of a reporting entity – what a reporting entity is responsible for and what it is
not – need to be clear.
IPSAS 6 helps to draw a circle around the activities an organization should report in its consolidated
financial statements. The standard looks at the substance of the relationship between the government
and other organizations to determine what organizations should be included in the financial
statements. Having clear boundaries for including or excluding organizations helps users understand
and assess the magnitude of the financial affairs and resources entrusted to an organization. It also
helps the leadership of that organization realize the extent of the financial affairs and resources for
which they are responsible.
For a government issuing consolidated financial statements, determining whether another entity is a
controlled entity, is important because it determines which accounting treatment the government
should use.
Materiality limits in deciding which entities should be consolidated
IPSAS makes it mandatory for any entity (the government) to be a controlling entity to establish
consolidated financial statements based on the concept of economic entity. The identification of the
consolidation perimeter requires an inventory of the entirety of entities (such as organizations, funds,
programs, alliances, initiatives and partnerships) and to evaluate case by case if the control criteria are
met. The nature of relations with these entities needs to be evaluated in terms of power and benefits.
When the government looks at the consolidation requirements in the IPSAS it is recommendable to
consult representatives from various departments such as finance, legal, budget, planning and
operations. The information required to reach a conclusion might be found in the governing structure
of the entity, its statutes, by-laws, a resolution, a memorandum of understanding, or other agreements.
Understanding the governance of each organization is vital in identifying controlled entities. It must
also be noted that the decision to consolidate or not consolidate an entity must be reviewed during
each accounting period to ensure that circumstances have not changed which may lead to a change in
those entities which may need to be consolidated.
The primary aim of producing consolidated accounts is so that stakeholders can see in a transparent
way how their funds have been utilized to meet the outcomes planned. This raises the question of
whether some entities may be so small that the consolidation of their financial position may be
considered immaterial by the users of the financial statements and that their inclusion adds no value.
Whilst this guidance acknowledges the extra work burden that the consolidation may result in, this
guidance also acknowledges that materiality will mean different things to different stakeholders.
11
IPSAS requires that all controlled entities should be consolidated, however the decision on whether
an entity should consolidate another entity can only be taken by the government.
Although ultimately the decision on whether to consolidate an entity or not is a decision for the
controlling entity (the government), this guidance advises that where uncertainty exists, consensus
should be sought between the government and the management of the potentially controlled entities.
It may be the case that legal advice will need to be sought to determine the legal framework and
relationships between the government and the other entities. In most cases finance, legal, budget,
planning and operations as well as the management of the potentially controlled entity will need to
determine the legal framework and relationships between them and the government and to discuss the
conclusions with and to obtain the agreement of any governing bodies as appropriate.
C. Identification of controlled entities
The concept of control for financial reporting purposes
One of the key features of IPSAS is the element of control. IPSAS adopts the concept of control to
determine the boundaries of the reporting entity. Under this approach the controlling entity includes
in its financial statements all those entities which it controls.
Whether an entity controls another entity for financial reporting purposes is a matter of judgment
based on the definition of control in IPSAS and the particular circumstances of each specific
situation. IPSAS defines control as:
‘the power to govern the financial and operating policies of another entity so as to benefit from
its activities’.
This means that consideration must be given to the specific nature and substance of the relationship
between the identified entities.
The definition implies strategic control and it is at the level of being able to decide the strategy of
another organization that is essential for control rather than having control over the routine daily
processes through which a strategy is implemented.
Control requires both power and benefits
Both the power aspect and the benefit aspect are required to be present for control to exist. The
controlling entity must be able to govern the decision making of the controlled entity so as to be able
to benefit from its activities, e.g. by obliging, if it wishes, the other entity to operate with it in
pursuing its objectives.
Power element: The power to appoint or dismiss a majority of voting members in the governing
board.
Benefit element: The reporting entity may benefit from the activities of the other entity in terms
of distribution of its surpluses and is exposed to the risk (negative benefit) of a potential loss. In
other situations, the reporting entity may not obtain any financial benefits from the reporting
entity, but may benefit from its ability to direct the other entity to work with it to achieve its
objectives.
12
The ‘Power’ element
Power to govern financial and operating policies
Financial and operating policies are principles and practices that determine how an organization
carries out its activities to meet its strategic aims. The ability to govern these policies is an important
element of control because, together, these policies establish the fundamental basis for how the
organization operates and achieves its mission and mandate. The financial and operating policies may
be governed in different ways, e.g.:



The government may establish the other entity’s fundamental purpose and, by predetermining
its financial and operating policies, eliminate or significantly limit the ability of the other
entity to make future decisions.
The government may direct the other entity’s financial and operating policies on an ongoing
basis.
The government may veto, overrule or modify the other entity’s financial and operating
policies. The government does not need to manage the other entity’s activities on a day-today basis to control it. It is the government’s authority to determine the policies governing
those activities that is important.
Power must be ‘presently exercisable’
The power to govern must be presently exercisable. In other words, the entity must already have had
its power conferred upon it by either legislation or some formal agreement. Whether the entity is
likely or unlikely to actually exercise control is not relevant to the determination of whether the
power to govern exists. The power to govern is not presently exercisable if it requires changing
legislation or renegotiating agreements in order to be effective. This should be distinguished from the
fact that the existence of the power to govern another entity is not dependent upon the probability or
likelihood of that power being exercised.
‘Existence of power’, not the ‘exercise of power’
In the context of the Government of Romania it will often be the ability to appoint or influence the
governing board of another entity that is the key criterion of power. Without the ability to appoint the
majority of voting board members it will typically not be possible to have control. An exception may
be if the entity has the power to cast a majority of the votes at a meeting of the other entity, e.g. by
virtue of an agreement.
The government can have control over another entity, without actually exercising that control.
Control exists because the power to control is sufficient even though the controlling entity may
choose not to exercise that power. Decisive is whether the government has power to govern the
financial and operating policies of another entity to direct its strategy so as to benefit from its
activities.
Whether the government actually uses this power is irrelevant. If the government has granted the
other entity a financial and operational authority, that entity must operate within the parameters
established by the government and, as long as the other entity is doing what it is supposed to, there is
no need for intervention by the government. If the other does not operate within the parameters
established by the government, however, the government has the power to re-direct the operations of
the other entity.
Example: Control through the power to appoint the majority of Board members
Facts: The government appoints 3 out of 5 members of the board of the other entity. The government
appoints professors from university as members of the board of the other entity. The government does
not give clear instructions to these 3 board members on how to vote in the other entity’s board.
13
Analysis: The government has the power to appoint a majority of the members of the board of
directors of the other entity and therefore one of the power conditions is present. Giving instructions
on how to vote is not relevant for meeting this condition. The existence of this power condition, as
well as the other factors described in IPSAS 6, are considered and it is determined that the
government controls the other entity.
Power conditions and indicators
In investigating the relationship between the government and the other entity, control for financial
reporting purposes is presumed to exist when at least one of the identified power conditions in
appendix 1 and at least one of the identified benefits conditions in appendix 2 exists, unless there is
clear evidence of control being held by another entity. These power and benefit conditions serve as
presumptions, which may be rebutted but in the absence of any evidence to the contrary will indicate
the existence of control. Also, even where a given situation does not apparently match one or more of
the presumptions, both a power indicator in appendix 1 and a benefits indicator in appendix 2 may be
sufficient to establish the existence of control.
For each identified indicator that applies in a particular circumstance, the degree of influence by the
government on the other entity would determine its importance as evidence of control. In weighing
the evidence to conclude on the existence of control over the other entity, it would be necessary to
consider the indicators collectively as well as individually. The degree of importance of the indicators
of control further depends on the particular circumstances in each case. In some situations, a
particular indicator may provide a high degree of evidence of control whereas, in other situations, the
importance of the same indicator may not be as significant.
Whether the government controls another entity requires professional judgment based on the
definition of control and the substance of the relationship in each case. This guidance should also be
applied in the context of the definition of control and the particular circumstances of each case. It is
the preponderance of evidence that should be considered in assessing whether a government controls
another entity.
In some circumstances, it will be easy to determine the existence of control. For example, whether the
government has the power to appoint a majority of the other entity’s governing board is generally a
question of fact – it either exists or it does not.
Example: Control through majority shareholding
Facts: Entity A (the government) is the sole shareholder of B Limited (the other entity). A appoints
all B’s three directors.
Analysis: The government has the power to appoint a majority of the members of the board of
directors of the other entity and therefore one of the power conditions is met. The existence of this
power condition, as well as the other factors described in IPSAS 6, are considered and it is
determined that the government controls the other entity.
Example: Inability to elect majority of the Board means that control is not present
Facts: The government A elects 18 members of the 36-member executive board of entity C (the other
entity). Entity B also elects 18 members.
14
Analysis: The government A does not have the power to appoint or dismiss a majority of voting
members in B’s executive board. Assuming none of the other power conditions and none of the power
indicators is present, the government does not have control over the other entity, i.e. the government
does not have the power to govern the financial and operating policies of that other entity so as to
benefit from its activities.
In other cases, it will be more difficult to determine the existence of control and the degree of
professional judgment required will be higher.
Financial dependence does not constitute control
Another entity’s financial dependence on the government, in and of itself, does not constitute control.
While financial dependence would usually give rise to a relationship based on influence, it is unlikely
that financial dependence alone would enable the government to control the other entity. Also shared
office locations alone are not an indicator of control.
Example: The ability to reject another entities funding means it is not controlled
Facts: An entity receives funding from the government. The entity is required to demonstrate
compliance with the imposed terms and conditions of that funding. The governing body of the other
entity retains its discretion as to whether it will take funding from, or do business with, the
government.
Analysis: The government requires the other entity to submit reports to account for compliance with
the terms and conditions of funding. The issued reports of the other entity are not considered to
evidence the existence of control of the reporting entity over the other entity, because the
government’s interest in the other entity is limited to the funding of the operations of the other entity.
The governing body of the other entity has the power to govern its own financial and operating
policies. Assuming no other power conditions are satisfied, the government does not have control
over the other entity.
Having established the other entity does not mean the government has control
The government may establish another entity and subsequently transfer the control over that other
entity to third parties. From the moment that the government has effectively transferred the control
over the other entity to third parties, the other entity is not a controlled entity of the government
anymore.
Example: Transfer of control means loss of control
Facts: The government’s constitution states that the government) may establish other institutions as it
may consider desirable. The government decided to establish another entity B ‘which shall carry on
its functions in accordance with the provisions of its statute.’ According to this statute, entity B’s
governing board will be composed of a selection of its members. Amendments to B’s statute will
come into force when adopted by B’s governing board by a two-thirds majority of its members. The
statute grants all power to govern its financial and operating policies to B’s governing board.
Analysis: Since the government transferred the power to govern B’s financial and operating policies
to B’s governing board and the government cannot revert to that decision, the government does not
have control over B.
15
The ‘Benefit’ element
Benefit conditions and indicators
IPSAS requires that control comes from the power to gain benefits. It provides two benefit conditions
which are financial and relate to the ability to receive economic benefits or to be liable for obligations
during the life of an organization or at dissolution. The combination of a power and a benefit
condition leads to the presumption of control. In the absence of the combination of either one, or
both, power and benefit conditions, IPSAS deals with situations where power and benefit indicators
can be used to assess whether there is an indication of, rather than a presumption, of control.
Whilst IPSAS tends to focus on benefit being of a financial nature it also reflects the possibility that
benefit could be of an operational nature. The standard provides four benefit indicators of which three
are financial and one is non-financial. The non-financial benefit indicator states, ‘The entity is able to
direct the other entity to cooperate with it in achieving its objectives’. Hence, in a Romanian
government context benefit will often mean the delivery of services; for example, the government
may create another entity to carry out an activity on its behalf; while the government which created
the other entity may not benefit financially from the arrangement it does benefit from the delivery of a
service performed by the other entity. The financial conditions and indicators may be less relevant for
the government.
Example: Ability to direct the strategy of another entity indicates control
Facts: The government has the power to appoint and remove a majority of the members of the board
of directors of the other entity. The government is not able to extract distributions from the other
entity and is not liable for the other entity’s obligations. The government is not able to obtain the
residual economic benefits and does not have to bear any obligations in case the other entity is
dissolved. The government is able to direct the other entity to co-operate with it in achieving its
objectives.
Analysis: The government has the power to appoint a majority of the members of the board of
directors of the other entity and therefore one of the power conditions is met. None of the benefits
conditions is present. However, one of the benefit indicators is present. The existence of this benefit
indicator, as well as the other factors described in IPSAS, are considered and it is determined that the
reporting entity controls the other entity.
While often the government benefits from having similar objectives to a related entity, it is the ability
to direct that entity to co-operate that is the key benefit factor that indicates control; it is not simply
the fact that the entity shares similar objectives.
It is for this reason that the power and benefit are linked; the power to appoint the majority of the
Board gives the government the ability to benefit from the other organization by directing the other
entity to strategically co-operate with it in achieving its objectives.
Dissimilar activities
Even if its activities are dissimilar to those of other entities within the economic entity, an entity can
still be classified as a controlled entity. Where reporting entities encompass dissimilar activities, the
nature of these activities can be conveyed in the financial statements by providing disaggregated
information about the various lines of activity, including segment reporting.
Budget-dependency
The boundaries of the reporting entity under IPSAS are wider than the budget sector: not all entities
controlled by the government are dependent on the budget. Examples are self-financing agencies such
16
as a road and motor vehicle regulator that receives revenues from fees and licensing. Such an agency
may not be included in the government budget, but should be included in the consolidated financial
statements according to IPSAS if the government appoints the management and requires that agency
to execute government policies and thus has control over that agency.
D. Determine whether central government controls local government
Review the relationship between central government and local government. Currently, the central
government financial statements include all of local government, even though central government
does not control local government.
Municipalities in Romania are dependent on central government for the majority of their revenues.
The municipality is allowed to spend these funds at its discretion. Another part of the revenues of
municipalities is provided by central government in the form of earmarked subsidies. The
municipality has to spend these resources in a specific area, for example public transport.
Municipalities also levy and collect local taxes.
The municipal council is the authoritative body in a municipality. Mayor and city council are chosen
by the local citizenry in local elections. This local council determines local government’s financial
and operating policies, including the decision-making about the budget.
For the Romanian municipalities, the circumstances of power (table 1) do not exist: the majority of
the municipal council and the municipal executive are not appointed by central government. It may be
argued that municipalities do not fall within the scope of consolidation of central government under
the control principle, because the local councils have a large mandate to make decisions at their
discretion. The fact that the municipal operations are mainly paid from the budget of the central
government, irrelevant in determining whether municipalities should be included in the scope of
consolidation of the central government.
E. Difference in scope of consolidation of IPSAS and ESA95
There is a difference in scope of consolidation under IPSAS and ESA95. ESA95 defines GGS as
consisting of (a) all resident central, state, and local government units, (b) social security funds at
each level of government, and (c) nonmarket nonprofit institutions controlled by government units.
Under ESA95, the GGS encompasses the central operations of government, and typically includes all
those resident nonmarket nonprofit entities that have their operations funded primarily by the
government and government entities. These entities are funded primarily from appropriation or
allocation of the government’s taxes, dividends from state-owned enterprises, other revenues, and
borrowings. IPSAS, however, requires consolidation of all entities controlled by the reporting entity.
GoR does not control its local administration and therefore should not include local administration in
its IPSAS financial statements, although they are included in the ESA95 financial information. GoR
controls its state-owned entities and should therefore include these state-owned entities in its IPSAS
financial statements, although not all of them are included in the ESA95 financial information.
Since GoR prepares financial information in accordance with ESA95, the disclosure of information
about the GGS in financial statements will form a useful link between the IPSAS financial statements
and the ESA95 financial information. This will assist users in reconciling information presented in
17
IPSAS financial statements to ESA95 financial information. IPSAS 22 Disclosure of financial
information about the general government sector provides guidance for governments which elect to
disclose information about the GGS and prepare IPSAS financial statements. The disclosures required
by this IPSAS 22 provide a useful bridge between IPSAS and ESA95 financial information.
The following diagram depicts the entities that are included and excluded by IPSAS and ESA95.
Consolidation according to ESA95 and IPSAS
Government of
Romania
Central
Administration
Government
Business Entities
Social Security
Autonomous
institutions
Local
administration
County Specialised
Directorates
Centres
Public Institutions
Included by IPSAS,
Excluded partially by ESA95
Included by IPSAS
and ESA95
Excluded by IPSAS,
Included by ESA95
F. Recommendations on consolidation


This guidance suggests the Government of Romania reviews all related parties in order to
evaluate whether they are controlled by the government. The government should decide
which entities to include in its whole of government consolidated financial statements.
Looking at which organizations are currently consolidated in the whole of government
financial statements of the Government of Romania might not provide an accurate
representation of the entities that should be consolidated under IPSAS. Currently none of the
state-owned enterprises included in the scope of the whole of government financial
statements, while they apparently are controlled by the government. Furthermore, some
18


statutory authorities may not be included in the scope of the government financial statements,
while they may be controlled by the government. Apparently, all autonomous institutions are
controlled entities and should therefore be included in the scope of consolidation.
In preparation of the elimination of all inter-entity transactions, necessary for consolidated
financial statements, we recommend to reconcile all inter-entity current accounts and sort out
any unexplained differences.
Identify all government-controlled entities and analyze them as to whether they belong to the
General Government Sector or are State-Owned Enterprises, and include all General
Government Sector-entities in the consolidated financial statements.
V. PRESENTATION OF BUDGET INFORMATION IN FINANCIAL STATEMENTS
Accounting standards that provide rules for including budget information in the financial statements
are rare. The International Public Sector Accounting Standards (IPSAS) include such rules because
the budget plays such a prominent role in the planning and oversight of public sector organisations.
We will now explain the rules stated in IPSAS 24 Presentation of Budget Information in the Financial
Statements and discuss their applicability to the GoR.
Presentation of the budget is a specific feature of public sector reporting. A public sector budget is a
parliamentary mandate, and also a report to the public at large. The budget thus plays an important
role in terms of governance in government.
IPSAS 24 Presentation of Budget Information in Financial Statements is meant for entities that
prepare their financial statements according to IPSAS and disclose their budgets, either voluntarily or
pursuant to statutory or other rules. The IPSAS Board requires an entity that prepares financial
statements according to IPSAS and discloses the budget, to include certain budget information in the
financial statements. The IPSAS Board does not impose any obligations on the government regarding
preparation of the budget itself.
GoR prepares a budget for the cash flow statement and not for the statement of financial performance.
Some other public sector entities prepare a budget for the cash flow statement, the statement of
financial performance and the statement of financial position. This is recommended if a government
pursues policies relating to certain balance sheet items, such as a government policy which may limit
government debt to a percentage of its gross national product.
A. Comparable basis
Rules for including budget information in the financial statements are not simple if government
entities do not prepare their budgets and financial statements on a comparable basis, i.e. either both
based on cash accounting or both based on accrual accounting, and they do not apply to the same
entity, period and classification. In practice a comparable basis does not typically happen, as is the
case with GoR. IPSAS stipulates that a comparison between budget and actual figures must only be
made when the basis is comparable. The notes to IPSAS financial statements must disclose whether
the budget has been prepared on the basis of cash accounting or accrual accounting.
19
Preparing financial statements on accrual accounting and budgets on cash accounting is quite
common in the public sector. This usually concerns entities that previously prepared both financial
statements and budget on cash accounting and have implemented accrual accounting for the financial
statements only. In that case, implementation of accrual accounting for the budget is postponed to a
moment ‘to be determined later’. GoR applies accrual accounting (IPSAS similar) for their financial
statements, while maintaining cash accounting for the budget for the time being. GoR does not have
plans to change the budget from a cash budget to accrual budget.
Certain advantages of the accrual accounting over cash accounting will thus not become apparent.
One example of this is a possible improvement of the management control that arises when applying
the statement of financial performance instead of the cash flow statement to compare the actual
figures with the budget.
The fact that GoR’s budget and financial statements cannot be compared is also due to differences in
entity and classification. Differences in period do not arise.
Differences in entity can arise when the budget does not include certain activities and cash flows that
are included in the IPSAS financial statements. IPSAS requires consolidation when the reporting
entity exercises control over another entity. GoR prepares its budget making different choices the
scope of consolidation.
Differences in classification arise when a different layout is applied for preparing the budget than for
preparing IPSAS financial statements. GoR prepares its budget and its accrual accounting financial
statements using a different classification.
Differences in period arise when the period over which the budget is prepared differs from that of the
financial statements. GoR prepares both budget and accrual accounting financial statements for a one
year period, so timing differences do not arise.
B. Four rules
First rule: comparing actual figures to the original and revised budget
The first rule in IPSAS 24 ‘Presentation of Budget Information in the Financial Statements’ states
that IPSAS financial statements must include a comparison of the actual figures with the original
budget and the revised budget. This comparison must be made according to the same basis (cash
accounting or accrual accounting) as the basis applied to prepare the budget, even if the financial
statements have been prepared according to another basis. Therefore, when an entity prepares the
budget according to cash accounting and the financial statements based on accrual accounting, the
comparison of the actual figures with the budget figures must be provided according to cash
accounting. IPSAS 24 offers two alternatives for disclosing the comparison between the actual figures
and the budget: either a separate statement (‘statement of comparison between budget and actual
figures’), or an additional column in the financial statements. The latter alternative is only allowed
when budget and financial statements have been prepared on a comparable basis. GoR complies with
this rule by preparing a separate statement (‘statement of comparison between budget and actual
figures’).
20
Second rule: disclosure of material differences between actual and budget figures
The second rule states that the entity must disclose material differences between the actual figures and
the budget in the financial statements, unless such disclosure is included in another document that is
disclosed in combination with the financial statements, and the notes to the financial statements refer
to such document.
Under IPSAS, such disclosure can be included in the notes to the financial statements or in another
document that is disclosed at the same time as, or in combination with, the financial statements. In
that case, the notes to the financial statements must refer to that other document. GoR substantially
complies with this requirement by presenting the differences between actual and budget figures in a
separate document that is disclosed at the same time as the financial statements, although the notes to
the financial statements do not refer to that document.
Third rule: disclosure of reasons for differences between original and final budgets
The third rule stipulates that the entity must disclose the differences between the original and the final
budget and state whether they are caused by reclassifications within the budget or by other factors.
Without the third rule the required statement of differences between actual figures and budget (second
rule) could be limited if the entity has revised the budget by the end of the budget year, to largely
align it with the estimates of the actual figures. This disclosure must be included in the financial
statements, unless such a statement is included in a report that is disclosed prior to, at the same time
as, or in conjunction with the financial statements, and the notes to the financial statements refer to
such report. GoR only partially complies with this requirement. This is a partial deviation from
IPSAS 24 Presentation of Budget Information in Financial Statements.
Fourth rule: reconciling cash budgets to accruals financial statements
The fourth rule solely applies to entities that prepare financial statements on accrual accounting
budgets on cash accounting, which is the case for Romania. GoR must include in the financial
statements the reconciliation between the actual figures according on cash accounting and the actual
figures on accrual accounting, as presented in the financial statements.
Hence, the GoR, when applying this IPSAS standard, should provide the reconciliation between the
actual figures on accrual accounting and the actual figures on cash accounting. The difference
between these two is solely due to basis differences, since there are no timing differences (for both
the reporting period is the calendar year) and no entity differences. GoR does not comply with this
requirement. This is a deviation from IPSAS 24 Presentation of Budget Information in Financial
Statements.
C. Recommendations on budget information in financial statements
GoR complies with some, but not all IPSAS 24 rules. The team recommends fully adopting IPSAS 24
Presentation of budget information in the financial statements.
21
The note to the differences between the original budget and the revised budget is missing. Lack
of such a note means that anyone reading the financial statements must derive the grounds for the
budget revisions from the minutes of various meetings. This is because a reference to the proposal to
revise the budget or to the minutes of the meeting, in which the budget revision has been adopted, is
missing. More importantly, the financial statements should include the reconciliation between the
actual budget figures according to cash accounting and the actual figures on accrual accounting, as
presented in the financial statements.
The financial statements do not include an explanation of material differences between the
budget and actual amounts. Such explanation is also not included in other public documents issued
in conjunction with the financial statements. IPSAS requires such an explanation. IPSAS requires a
comparison of budget and actual amounts. In compliance with IPSAS, GoR presents a comparison of
the budget amounts and actual amounts in the budgetary execution account. This account includes the
original and final budget amounts and the actual amounts on a comparable basis.
Finally, the reconciliation between budget deficit and accrual deficit is missing.
VI. IPSAS IMPLEMENTATION IN ROMANIA, MEASURED AGAINST OTHER
COUNTRIES
In this section we highlight the main features of IPSAS implementation in Romania, measured against
experiences from other countries in the adoption and implementation of IPSAS.
Double-entry bookkeeping is mandatory for all government entities in Romania. In some other
countries, e.g. Italy, government entities may derive their statement of financial position, statement of
financial performance from their cash-based statements through a complex system of year-end
adjustments. Within the Italian legal framework, Italian government entities have to choose between
two alternative accounting systems. Under one alternative, government entities do not introduce
accrual accounting and derive their statement of financial position, statement of financial performance
from their cash-based statements at year-end. Under the other alternative, government entities record
their transactions using double-entry bookkeeping, thus producing a statement of financial position,
statement of financial performance and cash flow statement directly from the system. Romania’s
choice has been beneficial in that there is no need to translate cash and commitment-based data into
accruals at year-end, allowing for a short period (50 days) of producing financial statements.
Military assets are capitalized, but not depreciated in Romania. Ordinance No. 81/2003 treats
military assets as ‘assets in the public domain’ and requires them to be valued at historic costs without
depreciation until derecognition. The international direction is clearly in favor of their recognition as
any other asset and to depreciate them over the expected useful life. The United States have recently
decided – as other OECD member countries generally have – that all military property, plant and
equipment should be capitalized and depreciated. This change is conceptually correct and assists
management in the calculation of the full cost of producing outputs. Valuing military assets at historic
costs without depreciation is not considered an appropriate accounting treatment since they are prone
to premature destruction either through loss in combat or due to obsolescence if an enemy could
develop counter-measures that render them useless. The team therefore recommends to comply with
the international best practice, being depreciating them on a normal basis and then to write them off
as a loss if they are destroyed or become obsolete early.
22
Many categories of infrastructure assets are capitalized, but not depreciated in Romania. This
includes roads, railroads, waterways, electric power transport networks, telecommunications network,
and airport runways. There are examples of other OECD member countries that do not depreciate
these assets but rather certify that the assets are being maintained to such an extent that they have
infinite life-spans. However, this accounting treatment is not in accordance with international best
practice and constitutes a deviation from IPSAS. The selection of valuation methods (fair value, in the
case of Romania) has an exceptionally high impact on the book value of these assets. According to
Ordinance No. 81/2003, fixed assets ‘revaluation of fixed assets is made with the purpose of
establishing fair value, taking into consideration the inflation, utility of goods, their status and the
market price’. The revaluation of the government’s property, plant and equipment during 2009
amounted to LEI 58 billion, which is unexpected in a real estate market showing a general downward
trend. If the 2010 financial statements will show a similar upward revaluation, the team recommends
a high level review of revaluation practices applied.
The Government of Romania’s net assets/equity as presented in the financial statements is large
as compared to other countries that adopted accrual accounting. According to the financial
statements GoR’s net assets/equity is a whopping LEI 442 billion as per 31 December 2009, up from
LEI 377 billion a year before. Most other countries that adopted all accrual accounting standards
show negative net assets/equity, i.e. liabilities usually exceed assets. GoR’s positive net assets/equity
is due to, inter alia, the revaluations of fixed assets at fair value and the failure to recognize unfunded
pension liabilities. In order to achieve a better comparability of Romania’s financial statements with
other countries, in particular emerging countries, the team recommends adopting the accounting
standards described in section VI – implementation plan of recommendations of this report.
Romania has chosen for the indirect method of adopting IPSAS, i.e. national accounting
standards (the so-called norms) are developed, based on IPSAS. Some emerging countries with
limited accounting expertise (e.g. Slovak Republic) choose for the direct method of adopting IPSAS,
i.e. they adopt IPSAS as is, with limited or no amendments. Other countries choose for the direct
method of adopting IPSAS in order to achieve the highest level of credibility (Switzerland). The
Government of Romania might likewise choose for the direct method going forward in order to
reduce the efforts needed to develop ‘home-made’ accounting standards.
Knowledge about IPSAS is limited to very few people in Romania. The consequence of
Romania’s choice for the indirect method of adopting IPSAS standards is that, although many people
in the country know the norms, only few people have actually read the IPSAS standards themselves.
This is in spite of the IPSAS standards (except for the most recent ones) being available in the
Romanian language. Other countries have invested more heavily in training of accountants in
government accounting. The Slovak Republic trained approximately 3000 persons in using the new
financial reporting framework, and consolidation package. There is a need to improve the skill levels
of many accountants in government who have been trained in the norms, but not in wider public
sector accounting. This limited knowledge of IPSAS in Romania hampers full compliance with the
now only partially implemented standards and adoption of additional standards. The team therefore
recommends additional training efforts and capacity building in the area of public sector accounting.
A shortage of skilled technical personnel may otherwise impose a constraint on the improvement of
government accounting in Romania. The GoR may also achieve major gains by leveraging off IFRS
accounting expertise available in the country because of IFRS’s similarity to IPSAS. GoR may
consider how to use the pool of accounting skills and expertise available in Romania’s private sector.
IPSAS adoption in Romania follows a centralized approach, different from some other countries
that adopted IPSAS similar accounting standards. The New Zealand ministry of finance (the
23
Treasury), for example, did not provide any training for departmental financial managers. Although
this was in opposition to strong views held by many that centrally-managed training was necessary to
realize the benefits and reduce the risks associated with the new regime. In keeping with the wider
reforms, New Zealand’s approach was intended to promote self-reliance among departments. These
different approaches reflect cultural differences between governments and both all their merits.
The nature of IPSAS adoption in Romania is eclectic, i.e. a number of requirements are selected
from a limited number of standards. Other countries, e.g. the Slovak Republic, generally adopt all
IPSAS standards within a shorter timeframe. Given Romania’s selective approach there is a need for
transparency and independence in this selection process. Romania’s government accounting standards
are effectively set by the Ministry of Public Finance with subsequent approval of government and
parliament. Whenever governments adopt accrual accounting it is crucial to determine how the
accounting standards are developed and their application monitored (governance). Some countries
have a national standard setting board that advises the government (United Kingdom) or even has the
mandate to issue accounting standards for the public sector (Canada, Australia, New Zealand). In
Romania there might for example be a significant role for the accounting profession as the
‘guardians’ of accounting standards. Without any independent involvement the effect is that the
government could be seen as setting its own accounting standards and applying them in a manner that
suited the circumstances of the moment. That might damage not only the credibility of the process but
in the end might mean that the discipline that accrual accounting is meant to achieve will not be
established. Independence of the standards adopted with a critical appraisal process is essential. The
team therefore recommends a more open due process of standard-setting in public sector accounting
in Romania, involving a wider range of constituents.
IPSAS adoption by the Government of Romania lacks a proper project management structure.
The Government did not assign responsibility for the improvement of government reporting to a
steering committee, unlike other governments such as the government of the Slovak Republic. The
team therefore recommends to set up an inter-departmental IPSAS project steering committee or
equivalent body tasked with ensuring that senior management understand the goals and vision driving
the transition to IPSAS and obtaining a widespread support from key ministries. The committee
should have a multi-year mandate and include staff specialized in accounting and the design and
implementation of ERP systems. Working groups should report to the steering committee. In Slovak
Republic external consultants from accounting firms played a key role in project management and
provided subject-matter expertise as part of the IPSAS implementation project.
Support of Romania’s Court of Accounts in the implementation of IPSAS has been limited as
compared to supreme audit institutions in other countries, most notably the NAO (National Audit
Office) in the United Kingdom. The countries that first moved to accrual accounting generally cite the
need for more and better communications as the single biggest factor that was underestimated during
implementation. Close communication with the supreme audit institution is essential. The supreme
audit institution should reinforce the reform process and assist entities in implementation. Successful
implementation of accrual accounting does depend heavily upon the understanding of and willingness
to support the implementation by the supreme audit institution. As accrual accounting requires not
only more complex systems but also a range of new judgments (e.g. about asset values and lives,
matching issues, prudence, and materiality), the responsibilities and expectations of the auditor
increases considerably. Therefore, the Court of Accounts should be involved in the process from the
outset. That may require that the organization, career structure and training of auditor staff should be
significantly enhanced. Auditors will need a thorough understanding of IPSAS and how those
standards can be maintained under the pressure of day-to-day administrative decisions. The team fully
supports the efforts that are being made to strengthen the Court of Accounts and recommends an indepth training program in IPSAS.
24
Recommendations based on experiences in other countries







Review the policy of not depreciating military assets and many other fixed assets currently
recognized on the balance sheet of the government
Review the revaluation method of fixed assets at fair value
Recognize unfunded pension liabilities on the GoR’s balance sheet
Consider choosing for the direct method of implementing IPSAS standards
Provide additional training and capacity building in the area of public sector accounting
Implement a more open due process of standard-setting in public sector accounting in Romania,
involving a wider range of constituents.
Involve the Romania’s Court of Accounts in the implementation of IPSAS and provide an indepth training program in IPSAS to the Court of Accounts.
VII. CONCLUSIONS AND RECOMMENDATIONS
The team supports the authorities in their intention to adopt and implement some additional
IPSAS standards, and in addition, recommends adopting and implementing the standard on
employee benefits. The statement of financial position of the government currently paints a rather
rosy picture: net assets/equity amount to LEI 442 billion. In fact, however, liabilities including the
pension liabilities of civil servants far exceed assets. Showing the full extent of the government’s
liabilities towards its employees provokes a better informed discussion about retirement age, level of
pension premium, pension payments and funding of state pensions. Ignoring the government pension
liability stimulates borrowing from future generations.
Appendix 5 contains an overview of the status of IPSAS adoption by the Government of Romania
and team recommendations. Appendix 6 presents a timeline for the implementation of the
recommendations.
The team furthermore encourages the GoR to request an assessment of Public Financial Management
based (PFM) on the Public Expenditure and Financial Accountability (PEFA) methodology. This
methodology allows measurement of the government’s PFM performance over time, and provides an
important impetus a strengthened approach to PFM reforms. This approach developed jointly by
development partners and governments, recognizes the need for strong government ownership of any
assessment or reform program. It can also help guide the government in the preparation or revision of
its PFM reform strategy and action plan. Accounting, recording and reporting is one of the areas
covered by PEFA.
25
VIII. IMPLEMENTATION PLAN OF RECOMMENDATIONS
The team recommends to apply proven project planning and implementation methodologies,
including clearly defined strategic objectives, deliverables, timelines, milestones and monitoring
procedures.
Appendix 6 presents a timeline for the implementation of the recommendations. A distinction is made
between short term priorities (next 6-9 months), medium term priorities (next 12-18 months) and
longer term priorities (next 2-3-4 years).
The short term priorities (next 6-9 months) include providing the required disclosures in the financial
statements and ensuring reconciliation between amounts in the primary financial statements and the
notes.
The medium term priorities (next 12-18 months) include the elimination of all major omissions
indicated as deviations from IPSAS in this report (i.e. improvement of the implementation of
standards already adopted and adoption of critically needed additional standards. Some of the changes
needed for compliance with IPSAS 17 will require approval of the government and the parliament,
most notably the Ordinance No. 81/2003, which requires military equipment to be expensed and
forbids the depreciation of large groups of property. A realistic timeframe calls for amendment of the
Ordinance and completion of these changes within 18 months.
The longer term priorities (next 2-3-4 years) including the implementation of the remaining standards.
Some of these standards are currently not relevant and may not require any amendments whatsoever,
such as IPSAS 10 Financial Reporting in Hyperinflationary Economies and IPSAS 11 Construction
Contracts. Some of the standards, however, that are currently not relevant may become relevant in the
short term, e.g. the financial instruments standards IPSAS 28, 29 and 30. The General Directorate
Treasury and Public Debt is considering issuing derivative financial instruments.
The authorities are of the opinion that further improvement of the financial reporting by the GoR,
including the implementation of the remaining IPSAS standards, requires additional accounting staff
at the Ministry of Public Finance (General directorate of public accounting methodology for public
institutions) and line ministries (accounting departments), and technical assistance in the coming
period.
IX. COMMUNICATION
The team recommends the main recommendations from this report to be communicated with all
parties concerned within the Ministry of Public Finance, including:






Minister of Public Finance
Secretaries of State
General Directorate Accounting Methodology for Public Institutions
General Directorate of Budget Synthesis
General Directorate of Treasury and Public Accounting
General Directorate of Treasury and Public Debt
26




Directorate of Budget and Accounting
General Directorate of Information Technology (IT)
Internal Audit Department
National Agency for Fiscal Administration.
The team recommends communicating awareness on the full adoption of IPSAS to a wider
audience through all available means of communication, training and documentation. This can be
achieved through personal contact, presentations, and testimonies from persons involved in successful
cases outside the Government of Romania, retreats, practical exercises and other training materials
comparing present and new accounting policies.
27
APPENDICES
Appendices 1 and 2 contain interpretations of IPSAS 6 Consolidated and separate financial
statements. For the original text, please refer to the IPSAS Handbook.
28
Appendix 1. Power Conditions and Indicators
Please refer to this guidance for an explanation of the terms, conditions and indicators.
Power Conditions
1.1
Does the government have, directly or indirectly (e.g., through controlled entities),
ownership of a majority voting interest in the other entity?
1.2
If the answer 1.1 is YES
Is the ownership of these voting interests solely allocated to the government and no
other entity or organized group has a significant interest in this entity?
1.3
Does the government have the power, either granted by or exercised within existing
legislation, to appoint or remove a majority of the members of the board of
directors/partners or equivalent governing body and control of the entity is by that
board or body?
1.4
Does the government have the power to cast, or regulate the casting of, a majority of
the votes that are likely to be cast at a general meeting of the other entity?
1.5
Does the government have the power to cast the majority of votes at meetings of the
board of directors/partners or equivalent governing body, and control of the entity is by
the board or body?
29
Power Indicators
2.1
Does the government have the ability to veto operating and capital budgets of the
other entity?
2.2
Does the budget of the other entity have to be approved by the governing body of the
government?
2.3
Does the government have the ability to veto, overrule or modify governing body
decisions of the other entity?
2.4
Does the government have the ability to approve the hiring, reassignment and
removal of key personnel of the other entity?
2.5
Is the mandate of the other entity established and limited by e.g., a treaty, a
resolution (e.g., Security Council, General Assembly, World Health Assembly) or
legislation?
Does the government hold a superior voting right (‘Golden share’ or equivalent) in
the other entity that confers it rights to govern the financial and operating policies of
the other entity?
2.6
Note: Golden share refers to a class of voting rights (share) that entitles the holder to
specified powers or rights generally exceeding those normally associated with the
holder’s ownership interest or representation on the governing body (also referred to
as super majority voting).
2.7
Does the government have the ability to establish or amend the mission or mandate
of the other entity?
2.8
Does the government have the ability to establish borrowing limits or establish
investment limits or restrict the other entity’s investments?
2.9
Does the government have the ability to restrict the revenue-generating capacity of
the other entity, notably the sources of funding?
2.10
If the answer 2.9 is YES
Could the other entity stop supporting the aims of the government (without gaining
permission from the government)?
30
Appendix 2. Benefits Conditions and Indicators
Benefit Conditions
3.1
3.2
Does the government have the power to dissolve the other entity and obtain a
significant level of the residual economic benefits or bear significant obligations?
Does the government have the power to extract distributions of assets from the other
entity, and/or may be liable for certain obligations of the other entity?
Benefit Indicators
4.1
Does the government hold direct title to the net assets of the other entity with an
ongoing right to access these?
4.2
Does the government hold indirect title to the net assets of the other entity with an
ongoing right to access these?
4.3
Does the government have a right to a significant level of the net assets in case the
other entity is wound up?
4.4
Do the members of the governing body of the government have a right to a
significant level of the net assets in case the other entity is wound up?
4.5
No other entity has a right to a significant level of the net assets in case the other
entity is wound up?
Is the government able to direct the other entity to co-operate with it in achieving its
objectives?
4.7
Note: The ultimate authority to direct is what matters for this question, rather than
the ability to direct day-to-day operations.
4.8
Is the government exposed to risks such as residual liabilities?
4.9
Does the government have ongoing access to the assets of the other entity?
4.10
If the answer 4.9 is YES
Does the government have the ability to direct the ongoing use of those assets?
4.11
Does the government have ongoing responsibility for deficits of the other entity?
31
Appendix 3. Background material on reporting entity and consolidation

IPSASB (International Public Sector Accounting Standards Board), Financial Reporting under
the Cash Basis of Accounting, Part 1 Requirements, and Part 2 Encouraged additional
disclosures. [to be attached as annex]

IFAC PSC (International Federation of Accountants, Public Sector Committee), Study 08 The
Government Financial Reporting Entity, July 1996.

IFAC PSC (International Federation of Accountants, Public Sector Committee), Study 14,
Transition to the Accrual Basis of Accounting: Guidance for Governments and Government
Entities (Second Edition), Chapter 5. Reporting Entity Issues, December 2003.

PSAB (Public Sector Accounting Standards Board). The Canadian Institute of Chartered
Accountants (CICA), 20 Questions About the Government Reporting Entity, 2003.

Ian Lienert, Fiscal Affairs Department, IMF. Where Does the Public Sector End and the Private
Sector Begin? Working Paper WP/09/122, June 2009.
32
Appendix 4. Status of IPSAS adoption and team recommendations
IPSAS
IPSAS 1
IPSAS 2
IPSAS 4
IPSAS 5
IPSAS 9
IPSAS 12
IPSAS 17
IPSAS 19
IPSAS 23
IPSAS 24
Standard
Basis
Adopted, although with major omissions. The team recommends to
eliminate these omissions as a short term priority (within 12 months):
Presentation of Financial Statements
IAS 1
Cash Flow Statements
IAS 7
The Effects of Changes in Foreign Exchange Rates
IAS 21
Borrowing Costs
IAS 23
Revenue from Exchange Transactions
IAS 18
Inventories
IAS 2
Property, Plant and Equipment
IAS 16
Provisions, Contingent Liabilities and Contingent Assets
IAS 37
Revenue from Non-Exchange Transactions (Taxes and Transfers)
N/A
Presentation of Budget Information in Financial Statements
N/A
IPSAS 6
IPSAS 7
IPSAS 8
IPSAS 22
IPSAS 25
The team recommends to implement the following standards as a medium
term priority (12-24 months):
Consolidated and Separate Financial Statements
Investments in Associates
Interests in Joint Ventures
Disclosure of Financial Information About the General Government Sector
Employee Benefits
IPSAS 3
IPSAS 10
IPSAS 11
IPSAS 13
IPSAS 14
IPSAS 16
IPSAS 18
IPSAS 20
IPSAS 21
IPSAS 25
IPSAS 26
IPSAS 27
IPSAS 28
IPSAS 29
IPSAS 30
IPSAS 31
The team recommends to implement the following standards as a longer
term priority (2-4 years):
Accounting Policies, Changes in Accounting Estimates and Errors
IAS 8
Financial Reporting in Hyperinflationary Economies
IAS 29
Construction Contracts
IAS 11
Leases
IAS 17
Events After the Reporting Date
IAS 10
Investment Property
IAS 40
Segment Reporting
IAS 14
Related Party Disclosures
IAS 24
Impairment of Non-Cash-Generating Assets
IAS 36
Employee Benefits
IAS 19
Impairment of Cash-Generating Assets
IAS 36
Agriculture
IAS 41
Financial Instruments: Presentation
IAS 32
Financial Instruments: Recognition and Measurement
IAS 39
Financial Instruments: Disclosures
IFRS 7
Intangible Assets
IAS 38
33
IAS 27
IAS 28
IAS 31
N/A
IAS 19
Appendix 5. Timeline for implementation of IPSAS recommendations
34