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International Federation of Accountants. Government Financial Reporting World Bank January 2005. International Federation of Accountants. Worldwide body for professional accountants 163 Member Bodies in 119 countries International Public Sector Accounting Standards Board

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International Federation of Accountants

Government Financial Reporting

World Bank

January 2005

International federation of accountants
International Federation of Accountants

  • Worldwide body for professional accountants

  • 163 Member Bodies in 119 countries

    • International Public Sector Accounting Standards Board

    • International Auditing and Assurance Standards Board

    • Education Committee

    • Ethics Committee

    • Professional Accountants in Business

    • Small/Medium Practice Permanent Task Force

    • Compliance Advisory Panel

International public sector accounting standards board
International Public Sector Accounting Standards Board

  • Established 1986 as Public Sector Committee, renamed 2004

  • Members 2005: France (Chair), UK (Deputy Chair), Australia, Argentina, Canada, Germany, India, Israel, Japan, Malaysia, Mexico, New Zealand, Norway, South Africa, USA

  • Observers: ADB, EU, IASB, IMF, INTOSAI, OECD, World Bank, UN, UNDP

Ipsas setting program
IPSAS Setting Program

  • Established late 1996 to develop a comprehensive set of financial reporting standards for public sector

  • Funded by World Bank, IFAC, ADB, UNDP, IMF

  • IPSASs set appropriate minimum benchmarks

    • For discharge of accountability, transparency, complete and relevant financial reporting

  • IPSASs provide a framework against which audit is undertaken

  • IPSASs are a resource for national standard-setters

Ipsasb s approach
IPSASB’s Approach

  • Develop standards that can be applied by any public sector entity, including the whole of government

  • Promote the adoption of the Accrual Basis

  • Acknowledge wide use of cash basis

    • Cash Basis IPSAS

  • Study 14 “Transition to the Accrual Basis of Accounting”.

Purpose of financial reporting
Purpose of Financial Reporting

  • Provide information about the the financial position, performance and cash flows of an entity useful to a wide range of users.

  • Accountability, transparency, compliance with budget,

  • Financial statements should be understandable, relevant, reliable, comparable

  • Contraints: timeliness, cost/benefit,

Necessity for financial reporting
Necessity for Financial Reporting

  • If information is not collated for external reporting purposes it is unlikely to be collated for management purposes.

  • Good information is necessary for good decision making

  • Financial reporting reform is part of a broader public sector financial management improvement process.

  • Managing public sector assets and liabilities is essential if public sector cash flows are to be managed

Cash basis ipsas
Cash Basis IPSAS

  • Issued in January 2003 after extended development and consultation

  • Requires the presentation of Statement of Cash Receipts and Payments

    • Includes cash payments made by 3rd parties on behalf of entity

    • Includes disclosure of accounting policies

  • Encourages additional disclosure of assets/liabilities

Advantages of cash basis
Advantages of Cash Basis

  • Comprehensive presentation of cash information

  • Relatively straightforward

  • Usually easily reconciled with Budget Information

    • Provided budget covers whole of government

  • Verifiable

  • Less prone to subjective decisions on accounting policy

Disadvantages of cash basis
Disadvantages of Cash Basis

  • Does not report assets and liabilities

    • If not reported, can users have confidence that they’re being appropriately managed?

  • End of year “gaming” quite common

  • Most governments report at least the outstanding government debt – moving to some accrual concepts

Accrual basis ipsass
Accrual Basis IPSASs

  • 21 IPSASs currently on issue

  • Require presentation of:

    • Statement of Financial Position (net assets)

    • Statement of Financial Performance (net surplus/deficit)

    • Statement of Cash Flows (increase/decrease in cash held)

    • Statement of Changes in Net Assets/Equity

    • Notes to the above statements

Advantages of accrual basis
Advantages of Accrual Basis

  • In addition to the cash flow information, users have additional information about assets and liabilities.

  • If assets and liabilities are reported, there is a greater probability that they will be appropriately managed.

  • Comparable to the financial reporting governments require of corporate entities.

  • More information available to capital markets should lead to better pricing of government debt securities.

Disadvantages of accrual basis
Disadvantages of Accrual Basis

  • Relatively complex.

  • Can provide information overload, particularly for small entities.

  • Few governments report on this basis – not easy to compare one government to another (cash flows can be compared)

Modified bases of accounting
Modified Bases of Accounting

  • Modified cash – closer to cash than accrual, includes limited accrual information

  • Modified accrual – closer to accrual than cash, includes more extensive accrual information, excludes some assets and liabilities

  • Most governments report on some modified basis

  • IPSASB’s constituents recommended against developing IPSASs for modified bases

Who is on accrual
Who is on Accrual?

  • New Zealand – National and Local

  • Australia – National, most states/territories, local

  • USA – Federal, State, Local

  • UK – National and Local

  • Switzerland – local, Cantons and Federal moving

  • Canada – moving toward accrual

  • Netherlands – moving to accrual

  • IFAC, NATO, OECD and Cayman Is use IPSASs

Questions for discussion
Questions for Discussion

  • Is financial reporting an end in itself?

  • Would you invest your life savings in a company that only produced a cash flow statement? What if that cash flow statement was unaudited or received a qualified audit opinion?

  • Is there evidence that improved financial reporting leads to improved financial management?

Questions for discussion1
Questions for Discussion

  • What resources are available to assist governments in the financial reform process?

  • Can non-accountants understand financial reports?

  • Can non-accountants prepare financial reports?

  • What about countries with low education levels?

  • How can IFAC and IPSASB assist the World Bank in its mission?


  • Cash and Accrual IPSASs

  • Financial Reporting reform and financial management reform complement each other

  • An independent audit opinion provides assurance that financial statements are reliable

  • An entity that does not report appropriately is not accountable or transparent

  • They’re your tax dollars they’re playing with

Visit ifac online
Visit IFAC Online



  • All IPSASB and most IFAC publications can be downloaded free of charge.

  • Printed copies of IPSASB Handbooks, standards and Study 14 are available free of charge, shipping costs are recovered.