04 June 2012

FEE commented on the Eurostat's public consultation on the suitability of the IPSAS for EU Member States

The sovereign debt crisis and the related government fiscal crisis emphasised the need for better transparency, accountability, adequate financial management, quality financial reporting and auditing in the public sector. There is a genuine need for reliable and relevant financial reporting to protect the interest of the public and foster stewardship in the public sector.

High-quality, accrual-based accounting has a beneficial role to play to restore and contribute to an efficient and sustainable EU economy. It creates the necessary transparency to identify matters, thus enabling their resolution.

While cash-based accounting is still a widespread practice in the public sector, it only represents a stepping stone to full and complete disclosures, and does not come close to reflecting the complexity of the government’s and other related public sector organisations’ operation. Accrual-based accounting provides more reliable information which is more suited to supporting decision-making and fostering stewardship in the public sector.

On that basis, FEE supports the implementation of the IPSASs. Although, it is on the understanding that they will be completed on public sector specific issues and become a stabilised referential point for public sector accounting.

After having finalised the core set of IPSASs and the convergence programme with IFRSs, the IPSASB should continue to focus on public sector specific standards in the short term. The time that is needed for the IPSASB to complete its work plan would need to be taken into account while deciding their implementation.

FEE also recognises that there are major challenges and other practical issues (e.g. limited existing capabilities or accounting systems) in implementing IPSASs in many countries in the short term. Countries are at different stages of implementing accrual accounting and those countries that are still using cash-based accounting would need more time to adopt IPSASs. All the different challenges present in the European countries should be factored into the decision on the timetable for implementation.

It would also be important to reassess the current governance arrangements for the IPSASB, with specific consideration to the public sector, to enable it to gain wider acceptance of the standards. FEE is aware of the ongoing assessment by IFAC and various governments, therefore FEE recommends the European Commission to engage with these stakeholders.

In addition, other important matters such as endorsement process, implementation and enforcement of the standards, audit, internal control system and education of the public sector accountants should also be considered in the context of the implementation process of the IPSASs.

In summary, FEE believes that once IPSASs fully become a stable platform for public sector accounting, their implementation will certainly enhance transparency, comparability, accountability and provide a basis for improved governance in the public sector. In FEE's view, the implementation may be costly depending on the circumstances but it is expected that the (partly intangible) benefits would still outweigh costs in medium and long term.

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