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IPSAS IMPLEMENTATION: an operational view. CIPFA Annual seminar Miguel Gracia on behalf of Brian Gray Miguel.Graciaec

Page 2. Agenda. IPSAS Implementation project descriptionEC Accounting rulesIPSAS Impact on EC accountsMost material impacts on the accountsQuestions. Page 3. IPSAS Implementation project description (I) . The European Commission decided to provide the administration with a modern accounting sy

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IPSAS IMPLEMENTATION: an operational view. CIPFA Annual seminar Miguel Gracia on behalf of Brian Gray Miguel.Graciaec

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    1. IPSAS IMPLEMENTATION: an operational view. CIPFA Annual seminar Miguel Gracia on behalf of Brian Gray Miguel.Gracia@ec.europa.eu

    2. Page 2 Agenda IPSAS Implementation project description EC Accounting rules IPSAS Impact on EC accounts Most material impacts on the accounts Questions

    3. Page 3 IPSAS Implementation project description (I) The European Commission decided to provide the administration with a modern accounting system in December 17, 2002 The European Commission adopts an ambitious plan to implement full accrual accounting by 2005. "Today's action plan is the latest step in this long term strategy of modernisation: it maps the Commission's progress towards the wholesale implementation of the most up-to-date public sector accounting standards by 2005, taking into account all the constraints and necessary detailed changes. With these measures the Commission will be far ahead of most administrations in the world." Commissioner Michaele Schreyer Basis: Financial Regulation of June 2002, art. 133 (Council Regulation 1605/2002) 1. The Commission's accounting officer shall, after consulting the accounting officers of the other institutions and bodies, adopt the accounting rules and methods and the harmonised chart of accounts to be applied by all the EU institutions and bodies. 2. When adopting the rules and methods, the Commission's accounting officer shall be guided by the internationally accepted accounting standards for the public sector but may depart from them where justified by the specific nature of the Communities' activities. TRANSITIONAL PROVISION: 2005 first application.

    4. Page 4 IPSAS Implementation project description (II) Two types of accounts : Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005 Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005

    5. Page 5 IPSAS Implementation project description (III) The 3 levels of the ABAC Project

    6. Page 6 IPSAS Implementation project description (IV) Actors involved

    7. Page 7 EC Accounting rules (I) Difficulties involved in the adoption of the accounting framework based on IPSAS IPSAS are not very detailed (general principles rather than detailed rules). For instance: debts/expenses for grants pre-financing Cut-off transactions and materiality Double contradiction: some EC transactions not covered (non-exchange revenue, employee benefits, financial assets and liabilities..etc) some IPSAS guidelines are not relevant in EC context (service concessions, heritage assets, leaseback transactions…etc) DECISION: To apply IAS when IPSAS were not available To draft EC accounting rules which customise IPSAS / IAS to EC environment To draft EC "operational" accounting manual that gives detailed explanations on how to apply the corresponding accounting rules via the chart of accounts

    8. Page 8 EC Accounting rules (II) EC accounting rules adoption proccess Analysis of EC transactions to list the areas where accounting standards are needed. Analysis of corresponding IPSAS. IAS if IPSAS are not available. DG Budget – General Accounting department drafts an EC accounting rule EC accounting draft submitted to the advisory accounting standards committee. Accounting draft submitted to the accounting officers of all the institutions Final decision of the Accounting Officer of the Commission

    9. Page 9 EC Accounting rules (III) : Acccounting rules advisory Committee Members of other institutions (CoJ, EP), and Agencies IAS and CoA as observers 2 independent accounting experts: Prof Montesinos, which study was the basis of the project Mr. Hathorn, vice-president IPSASB

    10. Page 10 EC Accounting rules (IV): Accounting Rules of the Commission

    11. Page 11 EC Accounting rules (V): Implementation. Objective: The Financial Statements Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005 Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005

    12. Page 12 EC Accounting rules (VI): ABAC High Level Programme Approach

    13. Page 13 IPSAS impact on EC accounts (I)

    14. Page 14 IPSAS impact on EC accounts (II)

    15. Page 15 IPSAS impact on EC accounts (III)

    16. Page 16 IPSAS impact on EC accounts (IV)

    17. Page 17 IPSAS impact on EC accounts (V)

    18. Page 18 IPSAS impact on EC accounts (VI)

    19. Page 19 IPSAS impact on EC accounts (VII)

    20. Page 20 IPSAS impact on EC accounts (VIII)

    21. Page 21

    22. Page 22 Most material impacts on the accounts (I) More information for readers – Economic Outturn Account added (segment reporting), plus cash flow table, statement of changes in net assets and more detailed disclosures in the notes Pre-financing of EUR 29.3 billion included for first time – DGs have thus a better view of the amounts paid out not yet eligible Amounts receivable from Member States to fund pensions no longer meets accounting criteria to be recognised as an asset (normally would be EUR 32 billion) Liabilities: year-end accruals (cut-off) introduced (EUR 64 billion) reflecting charges incurred under EAGGF (EUR 49 billion) and Structural Funds (EUR 14 billion)

    23. Page 23 Most material impacts on the accounts (II) Negative net assets figure of EUR 58.8 billion – resulting from removal of pension receivable and inclusion of accruals. It needs to be clearly explained – the EC is not bankrupt nor does it need to request more money from MS. The net liabilities figure simply highlights the difference between cash and accrual accounting. IAS 32 & 39 requires lerge volume of financial activities disclosures. It could give a misleading picture of the significance.

    24. Page 24 Questions? Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005 Obligation inscrite dans le Règlement Financier : présentation d'états financiers conformes aux principes de la comptabilité d'exercice pour 2005

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