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Arief Rahman

  The public sector has been undertaking broad reforms in the
public sector accounting – not only since the global finance

  Cash basis accounting is still common in the public sector

  IPSAS is the only international accepted standard for public

sector accounting

International Public Sector Accounting Standards (IPSAS) are high-
quality global financial reporting standards for application by public
What are sector entities other than government business enterprises (GBEs).
IPSAS? Accrual-based IPSAS set out recognition, measurement, presentation
and disclosure requirements dealing with transactions and events in
general purpose financial statements.

The IPSAS Board (IPSASB) is the responsible body formed to develop

and issue IPSAS under its own authority. IPSASB is a board under the
What is the auspices of the International Federation of Accountants (IFAC).
IPSASB? IPSASB develops standards that apply to an accrual- based and to the
cash basis of accounting.

More and more governments and other public sector entities around
the world are adopting the accrual-based IPSAS as a basis for their
Who is accounting and financial reporting. In total, more than 40 countries
adopting have adopted or are adopting IPSAS or comparable standards. The
European Commission is currently considering using accrual-based
IPSAS? IPSAS as a basis for the European Public Sector Accounting Standards

IPSAS represent a global standard for best-practice accounting in the

What are the public sector. The main benefits of IPSAS are their worldwide
acceptance and the increased transparency they provide over an
benefits of
entity’s finances. Furthermore, IPSAS require that more information is
implementing provided and disclosed in an organization’s financial statements, as
IPSAS? compared to cash accounting, leading to better information
availability and more transparency for decision- making.

The IPSAS Board is an accounting standard-setter
that is dedicated to enhancing the quality of the
accounts of public sector entities. Its goal is to
§  standards that are convergent with international
private sector standards
§  specific standards for the public sector where
there is no equivalent in the body of private
sector standards

Countries which plan or already

adopted IPSAS
  Austria   Ghana   Morocco   South Africa

  Brazil   Indonesia   Nigeria   Spain

  Chile   Israel   Pakistan   Switzerland

  Costa Rica Kenia   Peru   Tanzania

  Cyprus   Latvia   Portugal   Uruguay

  Czech Rep.   Lithuania   Romania   Vietnam

  France   Malaysia   Russia

National standards are broadly
consistent with IPSAS


  New Zealand

  United Kingdom


Supranational organizations
using IPSAS
  Commonwealth   NATO
  European Commission
  United Nations

  European Space Agency




Scope of IPSAS
  applied to all general purpose financial statements
prepared and presented under the accrual basis of
accounting in accordance with IPSASs.

  does not apply to condensed interim financial


  applies to all public sector entities other than

Government Business Enterprises (GBEs)

Government Business Enterprise

Government Business Enterprise means an entity that has all the
following characteristics:

§  Is an entity with the power to contract in its own name;

§  Has been assigned the financial and operational authority to carry on

a business;

§  Sells goods and services, in the normal course of its business, to other
entities at a profit or full cost recovery;

§  Is not reliant on continuing government funding to be a going

concern (other than purchases of outputs at arm’s length); and

§  Is controlled by a public sector entity.

Purpose of Financial Statements

  Financial statements are a structured representation of the financial

position and financial performance of an entity.
  The objectives to provide information about the financial position,
financial performance and cash flows of an entity that is useful to a
wide range of users in making and evaluating decisions about the
allocation of resources.
  the objectives of general purpose financial reporting in the public
sector should be to provide information useful for decision-making,
and to demonstrate the accountability of the entity for the resources
entrusted to it
  Supplementary information, including non-financial statements, may
be reported alongside the financial statements in order to provide a
more comprehensive picture of the entity’s activities during the period

Components of FS
a.  A statement of financial position;

b.  A statement of financial performance;

c.  A statement of changes in net assets/equity;

d.  A cash flow statement;

e.  When the entity makes publicly available its approved budget, a
comparison of budget and actual amounts either as a separate
additional financial statement or as a budget column in the
financial statements; and

f.  Notes, comprising a summary of significant accounting policies

and other explanatory notes.

  The usefulness of financial statements is impaired if they are
not made available to users within a reasonable period after the
reporting date.

  An entity should be in a position to issue its financial statements

within six months of the reporting date.

  Ongoing factors such as the complexity of an entity’s

operations are not sufficient reason for failing to report on a
timely basis.

  More specific deadlines are dealt with by legislation and

regulations in many jurisdictions.

Implications of Accrual Acctg

  IPSAS/accrual accounting will not solve financial problems of a
jurisdiction, but it contributes to and promotes better financial
management in the future

  Clearer financial picture in the first years of implementation need

to be seen as incentive for improvement and stimulus to further

  Accrual accounting information needs to get embedded in

decision-making and made use of by decision makers

  Scope of information increases significantly; key is to make use of

these information

  Finally, accrual accounting requires a change of mind

Challenges in adopting IPSAS

Cost and time The time and costs associated with an IPSAS conversion are always
expected to be substantial, but they often remain unclear. This
efforts uncertainty is a major challenge for promoters of accounting reforms
needed in political discussions.

In many cases, a detailed time line for the conversion project is either
Detailed time not available or not specific enough. A lack of experience with such
line missing projects often means the sequencing of the necessary transition steps
is not clear.

Many areas of In many cases, a detailed time line for the conversion project is either
not available or not specific enough. A lack of experience with such
organization projects often means the sequencing of the necessary transition steps
affected is not clear.

Challenges in adopting IPSAS

Comprehensive IPSAS requirements demand entities to conduct an

Comprehensive inventory of all assets and liabilities, as well as apply new
IPSAS measurement provisions. Furthermore, IPSAS requires notes
requirements disclosures that make new processes necessary to capture the
required information.

Finance staff members may not have experience in leading a

Required skills conversion. Therefore, capacity building and personnel development
programs should be high on the agenda of every conversion project.