EUROPEAN COMMISSION
EUROSTAT
Directorate C: National accounts, prices and key indicators
Task Force EPSAS
13 June 2014 in Luxembourg
JEAN MONNET Building, Room M1
DRAFT
1. Introduction/ approval of the agenda
The agenda was approved with no changes.
Eurostat thanked those participants who had provided contributions on the Action
Points from the previous Task Forces EPSAS Standards and Governance meetings.
Regarding the issue of Smaller and Less Risky Entities, only one comment had been received from the Task Force participants and therefore this point was not taken-up on the agenda of the present meeting but the discussion would continue in future meetings.
2. Note of the main points of the first meeting of the Task Force
The note of the main points from the TF meeting held on 12 February was approved with no amendments.
Participants were also invited to provide comments on the note of the main points from the TF EPSAS Governance meeting held on 27 March, to be approved in the next meeting of the TF EPSAS Governance.
3. State of play on EPSAS - Commission Communication and Impact Assessment
Eurostat gave an update on the state of play of the preparation of the Commission
Communication. Eurostat was currently drafting the Commission Communication.
Since the beginning of the year, some changes had however been made to the work planning. The original planning had been to have the Commission Communication accompanied by a Staff Working Document, but in February Eurostat had been requested to prepare instead a “light” Impact Assessment (IA) to accompany the
Communication, taking into account that a further IA would be required with the eventual EPSAS legislative proposal. Moreover the Commission decided to put back the planned date of adoption of the Communication to October.
Shortly before the meeting, Eurostat had received feedback from the Impact
Assessment Board (IAB) to whom the draft of the IA had been formally addressed.
Many of the IAB’s recommendations would improve and clarify the IA, but the recommendations were wide-ranging and would mean that Eurostat would need to
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include in the report much of the work that was being undertaken by its external contractor (PwC); and will need to integrate to some extent the positions and substantial amount of information included already in the first report on the suitability of IPSAS.
Consequently, timing issues may arise for completing the IA and issuing the
Communication.
4. Analysis of IPSAS standards
PwC presented an overview of its on-going analysis of the IPSAS standards. The analysis was based on the inputs provided through questionnaires (60 had been received from 28 Member States), and the interviews conducted during the EPSAS visits to a sample of Member States. In their analysis they proposed a three-way classification into standards that might be implemented with minor or no adaptation; topics for which no standard exists yet but for which a standard or implementation guidance is needed; standards that (may) need (some) amendments or for which implementation guidance is desirable before they are implemented.
One participant asked whether removing options within IPSAS might change the analysis. PwC was of the view that IPSAS did not contain very many options in practice, it was more that it was possible to interpret some IPSASs in different ways.
One participant asked whether the focus should be put on to liabilities rather than assets, reflecting statistics needs, but Eurostat noted that the statistical objective was only one aim of EPSAS so this should not be the case. A small number of participants stressed that the issue of consolidation was both potentially sensitive and important, particularly, in the first instance, the scope of consolidation by EPSAS.
Eurostat concluded that this analysis largely reinforced the earlier analysis within the
IPSAS assessment report and associated documents, while clarifying and sharpening that first analysis. This work would be helpful for informing the follow-up of technical work on EPSAS and for the design of the staged approach.
5. EPSAS costs and benefits
PwC presented an overview of the expected benefits and costs of EPSAS implementation taking IPSAS as proxy for the analysis. After presenting both the macro and entity level benefits, PWC explained in detail the approach they had developed for the cost assessment. They provided the participants with an illustrative example to improve their understanding of the cost calculations and emphasized the many limitations of the approach which would need to be taken into account in order to avoid misinterpretation of the results.
One participant asked whether the formula had been tested on real reform experiences.
PwC confirmed that indeed they had made such verifications and that the results were of the same orders of magnitude as the real cost figures. Another participant asked if it was possible to run budgeting on cash in parallel with accrual accounting. The European
Commission itself was noted as an example where cash based budgeting is accompanied by IPSAS based accounting. It was also asked if the calculations that were being made, and those that would be provided, were at country level. PwC confirmed that calculations were carried out at the Member State level, but that the level of detail that would be included in the final report was not yet decided and would depend on confidentiality as well as the agreement between Eurostat and PwC. PwC also clarified that the report would explicitly mention what types of costs are and are not included in the calculations. One participant suggested that information on benefits should be presented in a similar way (general and specific benefits) as it was done in the previous
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presentation on IPSAS standards. PwC confirmed that in their final report the presentation would follow a similar structure. The importance of the availability of cash information was also mentioned by one participant where PwC added the comment that cash information is not lost under accrual accounting but rather complemented.
Another participant asked whether the costs of audit were included in the calculations because the auditing of accrual based accounts probably requires more effort from auditors than that of cash based accounts. PwC said that the audit cost was excluded from their calculations. Eurostat added the view that the cost of audit should not be included as that is in principle a self-standing existing requirement of the Budgetary
Frameworks Directive.
Eurostat concluded that the work being carried out under the EPSAS project was indeed unique in the field of public accounting and the objective is to put as much information in the public domain as possible taking into account the limitations mentioned earlier.
6. Staged approach to EPSAS
Eurostat briefly presented the outline of the staged approach for EPSAS standard setting and implementation which had already been presented earlier at the Task Force
EPSAS Governance in March, as subsequently modified for the FEE roundtable held in
Brussels on 1 April.
The Chair of FEE Public Sector Committee gave a further presentation elaborating on
Eurostat’s outline proposal and analysing it with respect to IPSAS. A staged approach may be seen as a staged approach for standard-setting or a staged approach in terms of the overall process and implementation. In comparison with the IPSAS environment, the main differences are that EPSAS, after due consideration to the specific European context, did not need to start from scratch and could make use of the full set of IPSAS and of IPSASB’s Conceptual Framework. Analysing the staged approach to EPSAS standard setting, three potential criteria for the definition of the batches of standards were discussed (i) thinking backwards and according to implementation needs; (ii) in line with serving the objectives of financial accounting; and (iii) according to practicalities of standard setting. During the presentation there was also a reflection on which were the areas where harmonization is most important and, based on a
“transaction approach” how could the projects be grouped by type of transaction.
Some concerns were raised by participants regarding the standards for consolidation and the definition of the perimeter of the public sector. FEE considered that, although important to discuss, consolidation should not constitute the first focus of EPSAS.
Concerning the control criteria for consolidation, the UK illustrated that consolidation can be carried out provided there is a legal basis to require entities to provide the financial statements. The UK clarified that they proceed with a consolidation of the public sector as a whole, even if in the UK there is a constitutional split and central government does not control local government.
It was also concluded that the sequence of standard-setting needed to be done in a careful and coordinated way, so as to ensure that standards did not go in inconsistent directions.
Eurostat recalled that the translation of EPSAS standards into all the official languages of the Member States is part of the European legislative procedure at the time they would be endorsed.
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One participant asked whether EPSAS would entail a common and general chart of accounts. Eurostat explained that there is no intention to harmonise the chart of accounts. Nevertheless, because of the important statistical dimension of the project, if necessary Eurostat would like to have the possibility to address specific issues with a view to secure the quality of the GFS reporting.
The
Comissão de Normalização Contabílistica (CNC),
the Portuguese public sector standard-setter presented their ongoing accruals accounting reform based on IPSAS.
Their timeframe seemed more ambitious than the Eurostat proposal but they also wanted to draw conclusions from pilot exercises, in principle from entities already with experience in accrual accounting. The timetable presented by Portugal was the target, but the deadline would be used flexibly and might be reviewed if the planning needed to be adjusted to react to circumstances.
Eurostat thanked the Task Force participants who had previously contributed in writing on this topic and concluded that further discussion/and reflection would be needed. Both the helpful work done by FEE and the comments received since the previous EPSAS TF meetings would be taken in consideration by Eurostat to further elaborate on the staged approach proposal. Nevertheless at this stage this was still only an outline of the milestones towards the target - a sort of a road map to try to reduce the complexity of the work and define priorities - and was not a development or implementation plan. The staged approach topic would be on the agenda of the next meeting and Eurostat referred that would like to maintain the block of standards on public sector specific issues as a self-standing block of issues. This would be discussed further at the next meeting, taking into account as much as possible the ideas presented by FEE and the Task Force participants.
7. IPSAS conceptual framework
IPSAS Board gave a presentation on its work to develop the IPSAS Conceptual
Framework, which will establish the concepts that are to be applied in developing
IPSAS. The preface of the project, which identifies the key characteristics of the Public
Sector, is divided in four phases: Phase 1 identifies the role and authority of the
Framework, its objective and users, its qualitative characteristics and constraints on information included on General Purpose Financial Reports, and the Reporting Entity;
Phase 2 deals with Elements and Recognition; whilst Phase 3 identifies the measurement concepts; Phase 4 refers to the presentation decisions and objectives. The
IPSAS Board would consider the final chapters at its meeting in June, and these were for approval at the IPSASB meeting in September.
One participant strongly supported the need to have in place a conceptual basis before developing individual EPSAS standards and would be in favour of adapting the IPSAS framework for use by EPSAS. Furthermore, the same participant referred to the discussion paper of IASB, which was working on its own conceptual framework, and asked whether IPSASB will adapt their framework to the IASB one. IPSASB replied that their work had referred to the work of the IASB, and whilst wishing to remain consistent with IASB, they had decided to move ahead with issuing their own conceptual framework. It was important to have the public sector focus, especially as regards the definitions of assets and liabilities. Another participant asked about the convergence with IFRS, and whether any IPSAS standards had been identified which would need to be modified because of the conceptual framework. IPSASB replied that their aim was to keep in step with the IASB. Not many standards would need significant modification, but some changes were to be expected with regard to measurement and
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fair value, and timing. Another participant asked about the characteristic of prudence, and the definition of elements especially on the liability side with regard to off balance sheet commitments. IPSASB considered that the term prudence could be misused and the term faithful representation was preferred. It was agreed that the issue of liabilities and obligations is important. In response to another participant's comments on the conceptual framework, IPSASB referred to the differences in terms of objectives between IPSAS and GFS, but also mentioned the similarities. Measurement was a particularly difficult area, and it was an important issue and needed interpretation of standards based on principles. Eurostat asked if there was any impact from the conceptual framework on IPSAS. IPSASB stressed that the framework should be taken as a guideline for future work, but it was not meant to be mandatory. Eurostat added that, from an EPSAS perspective, there was support for this initiative and it was intended to further discuss the use of the IPSAS Conceptual Framework as a reference and basis for future EPSAS accounting principles. Eurostat concluded that EPSAP
1 could be viewed as a conceptual framework light and that the IPSAS conceptual framework could be considered as a basis for that.
8. Next Meetings:
EPSAS TF Governance, 25-26 September 2014, BECH-Ampere (provisional)
EPSAS Working Group, 20-21 November 2014, BECH-Quetelet (provisional)
1 European Public Sector Accounting Principles
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- Eurostat invited Task-Force participants to send their further feedback on the analysis of IPSAS standards by PwC as soon as possible and preferably within the week following the meeting.
- Eurostat asked those countries who provided data to PwC for the cost calculations to validate their figures as soon as possible. Participants were also invited to go through the information made available and to work through the model and provide comments on the illustrative example presented by PwC.
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Austria: Bernhard Schatz (Ministry of Finance)
Belgium: Marc De Spiegeleire (Ministry of Finance)
Croatia: Ivana Jakir Bajo (Ministry of Finance)
Denmark: Erik Hammer (Agency for the Modernisation of Public Administration)
Finland: Juha Halonen (Ministry of Finance), Niko IJÄS (Ministry of Finance), Riitta
Pirhonen (Ministry of Finance), Jaako Eskola (Court of Auditors)
France: Danièle Lajoumard (Ministry of Finance), Fabienne Colignon (Ministry of
Finance), Stéphanie Ledoux (Ministry of Finance), Lionel Vareille (Court of Auditors)
Germany: William Brunton (Central Statistical Agency of the State Finance
Ministers), Christian Meissmer (Ministry of Finance), Frank Holzhauer (Ministry of
Finance), Juta Kalabuch (Ministry of Finance), Jens Hamer (Court of Auditors)
Hesse (German Federal State): Dr. Anja Ranscht-Ostwald (Hessian Court of
Auditors), Andreas Glöckner (Hessian Court of Auditors)
Italy: Marcello Bessone (Ministry of Economy and Finance), PierPaolo Italia
(Ministry of Economy and Finance), Giovanna Dabbicco (ISTAT)
Latvia: Gunta Medne (Ministry of Finance)
Lithuania: Ingrida Mukute (Ministry of Finance), Daiva Zibutiene (Ministry of
Finance)
Malta: Michael Zammit-Munro (Ministry of Finance)
The Netherlands: Hans Van der Wielen (Ministry of Finance), Paul Neelissen (Court of Auditors), Patrick Lubach (Court of Auditors)
Poland: Michał Bareja (Ministry of Finance); Jacek Koscielniak (Court of Auditors)
Portugal: Luís Viana (Ministry of Finance), Óscar Figueiredo (Ministry of Finance -
Comissão de Normalização Contabilística), Telmo Mendes (Court of Auditors)
Romania: Georgeta Alecu (Ministry of Finance), Lidia Baros (Ministry of Finance),
Carmen Bragadireanu (Court of Auditors)
Slovak Republic: Ladislav Zhakar (Ministry of Finance);
Slovenia: Vesna Milanovic (Ministry of Finance);
Sweden: Maria Olsson (Swedish National Financial Management Authority), Curt
Johansson (Swedish National Financial Management Authority), Karl Gutberg
(Ministry of Finance)
United Kingdom: Philip Trotter (HM Treasury), Ross Campbell (HM Treasury), Steve
Milton (ONS), Maggie McGhee (NAO)
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FEE (observers): Thomas Müller-Marqués Berger
IPSAS Board (observers): Andreas Bergmann, Ian Carruthers
European Court of Auditors (observers): Ralph Otte, Elisa Gomez
European Central Bank (observers): Robert Gadsby
PwC: Patrice Schumesch, Anton De Greef, Leigh Ellen Walsh, Marion Lacourty
European Commission, Eurostat: Alexandre Makaronidis, Keith Hayes, Norbert
Gaspar, Anabela Rodrigues, Graham Lock, Istvan Varjas
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