Introduction to IPSAS. EPSAS Seminar Thomas Müller-Marqués Berger Brussels, 19 May 2015

Transcription

1 Introduction to IPSAS EPSAS Seminar Thomas Müller-Marqués Berger Brussels, 19 May 2015

2 Agenda Introduction IPSAS and the IPSASB IPSASB s current and future work program Adopting IPSAS IPSAS conversion diagnostic services Page 2 Agenda

3 Introduction Page 3

4 Introduction The public sector has been undertaking broad reforms in the public sector accounting not only since the global finance crisis Cash basis accounting is still common in the public sector IPSAS is the only international accepted standard for public sector accounting EPSAS as the current development in Europe Page 4 Introduction

5 IPSAS and the IPSASB Page 5

6 IPSAS: Background information What are IPSAS? International Public Sector Accounting Standards (IPSAS) are high-quality global financial reporting standards for application by public sector entities other than government business enterprises (GBEs). Accrual-based IPSAS set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events in general purpose financial statements. What is the IPSASB? The IPSAS Board (IPSASB) is the responsible body formed to develop and issue IPSAS under its own authority. IPSASB is a board under the auspices of the International Federation of Accountants (IFAC). IPSASB develops standards that apply to an accrualbased and to the cash basis of accounting. Who is adopting IPSAS? More and more governments and other public sector entities around the world are adopting the accrual-based IPSAS as a basis for their accounting and financial reporting. In total, more than 40 countries have adopted or are adopting IPSAS or comparable standards. The European Commission is currently considering using accrual-based IPSAS as a basis for the European Public Sector Accounting Standards (EPSAS). What are the benefits of implementing IPSAS? IPSAS represent a global standard for best-practice accounting in the public sector. The main benefits of IPSAS are their worldwide acceptance and the increased transparency they provide over an entity s finances. Furthermore, IPSAS require that more information is provided and disclosed in an organization s financial statements, as compared to cash accounting, leading to better information availability and more transparency for decisionmaking. Page 6 IPSAS and the IPSASB

7 IPSASB members (May 2015) 15 Members Australia Japan Panama Brazil Malaysia Romania Canada Morocco South Africa China New Zealand UK France Pakistan USA In addition, the board comprises 3 public members (Canada, Italy, Switzerland) Current IPSASB Chair, Prof. Dr. Andreas Bergmann, is a public member from Switzerland Members are appointed by the IFAC Board Page 7 IPSAS and the IPSASB

8 Publications of IPSASB Conceptual Framework IPSASs Accrual (38) / Cash Accounting (1) Recommended Practice Guideline (3) Exposure Drafts (EDs) and Consultation Papers (CPs) As part of IPSASB s due process Studies, Research or Special Reports, Invitations To Comment (ITC) Focus on accounting related topics such as the Transition to the Accrual Basis of Accounting (Study 14), Governance (Study 13), Budgeting or the Statistical Basis of Financial Reporting Developed, usually with input from a steering committee or project advisory panel Occasional Papers All agendas, agenda papers, responses to CPs and EDs as well as summarized minutes to the meetings (3-4 times per year) are available at the IPSASB website Source: Page 8 IPSAS and the IPSASB

9 IPSASB s current and future work program Page 9

10 Overview of the development of IPSASB s work program Phase 1 ( ) Phase 2 ( ) Phase 3 (since 2010) Through financial support of international institutions development of a first set of accounting standards ( Core Set : IPSAS 1 IPSAS 20) Where relevant for the public sector, convergence with IAS/IFRS as of was achieved Issuance of first standards to specific issues of the public sector (IPSAS 21 IPSAS 24) Development of a Conceptual Framework for the public sector Focus on specific issues of the public sector as well as further development of existing standards (IFRSs convergence) Current work program of the IPSASB Page 10 IPSASB s current and future work program

11 Relevant issues and work program of the IPSASB Page 11 IPSASB s current and future work program

12 IPSASB s Conceptual Framework Project Page 12 IPSASB s current and future work program

13 Adopting IPSAS Page 13

14 Overview of countries which plan or already adopted IPSAS (1) 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 Page 14 Adopting IPSAS

15 Overview of countries which plan or already adopted IPSAS (2) Countries which national public sector accounting standards are broadly consistent with IPSAS requirements: Australia Canada New Zealand * United Kingdom USA * On 1 July 2014 New Zealand moved its public sector accounting system form IFRS to IPSAS Page 15 Adopting IPSAS

16 Overview of supranational organizations using IPSAS Commonwealth Secretariat European Commission EUMETSAT European Space Agency (ESA) IFAC INTERPOL NATO OECD United Nations (UN) Page 16 Adopting IPSAS

17 Implications of Accrual Accounting 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 reforms 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 Page 17 Adopting IPSAS

18 IPSAS conversion diagnostic services Page 18

19 Major steps of an IPSAS conversion The following diagram describes the eight major phases in an IPSAS conversion project: 1 Sensitivity 3 Legal foundation 5 IT and processes 7 Audit readiness Gap analysis and feasibility 4 Capacity building 6 First-time adoption, opening balance sheet 8 Consolidation EY professionals provide clients with a full range of IPSAS conversion services, from assisting in the development of diagnostic reviews and conversion implementation plans (road maps) to delivering comprehensive conversion projects. EY s IPSAS conversion diagnostic services are an essential building block of the gap analysis and feasibility phase (see graph above). Page 19 IPSAS conversion diagnostic services

20 Challenges public entities are facing when converting to the IPSAS framework Cost and time efforts needed The time and costs associated with an IPSAS conversion are always expected to be substantial, but they often remain unclear. This uncertainty is a major challenge for promoters of accounting reforms in political discussions. Detailed time line missing 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 projects often means the sequencing of the necessary transition steps is not clear. Many areas of organization affected Comprehensive IPSAS requirements A conversion project is not limited to the finance function of a public sector entity. IPSAS reporting reflects the operations of the whole entity, meaning that many areas of the organization without accounting background are affected. Clear and understandable messages about the why and the how of the conversion are needed. Comprehensive IPSAS requirements demand entities to conduct an inventory of all assets and liabilities, as well as apply new measurement provisions. Furthermore, IPSAS requires notes disclosures that make new processes necessary to capture the required information. Required skills Finance staff members may not have experience in leading a conversion. Therefore, capacity building and personnel development programs should be high on the agenda of every conversion project. Page 20 IPSAS conversion diagnostic services

21 EY s IPSAS conversion methodology Diagnose phase is crucial for subsequent phases Identify Diagnose Design Deliver Sustain Close Validate IPSAS requirements Identify specific IPSAS conversion issues Jointly perform engagementspecific planning Conduct assessment of existing GAAP, IT and capacity Evaluate impact of accrual-based IPSAS on current state Generate and prioritize observations and next steps Analyze capacities Set up a road map Draft accrualbased IPSAS accounting policies Design IPSAScompliant processes Develop a capacitybuilding strategy Capture and measure all assets and liabilities Perform training and briefings Assist entity with IPSAScompliant financial statements Support continuous improvement React and adapt to any new IPSAS requirements Close out conversion project Review the success and learning points from the project Deliver Kick off IPSAS conversion project Execute project plan Monitor conversion progress Complete execution of the project plan Page 21 IPSAS conversion diagnostic services

22 EY s IPSAS conversion methodology Diagnose phase is crucial for subsequent phases Identify Diagnose Current accounting system Gaps IPSAS requirements Sustain Human resources and organizational structure Design Diagnostic report Deliver The main objective of EY s IPSAS conversion diagnostic services is to provide an IPSAS impact assessment. This assists in identifying the gaps between an entity s current accounting system and the accrual-based IPSAS reporting framework. The results of the gap analysis build the basis for: The design of the conversion road map An assessment of the efforts needed Page 22 IPSAS conversion diagnostic services

23 Your contact Thomas Müller-Marqués Berger Wirtschaftsprüfer Steuerberater Partner Global Leader International Public Sector Accounting Phone: Mobil: Fax: ey.com Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Mittlerer Pfad Stuttgart Page 23

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