1. Klaus Lüder/CIRAMAP 12/20031 State and Perspectives of Governmental Accounting Reform in Germany 1. Traditional Governmental Accounting 2. Reform at Federal and State Government Level Legal Amendments Legal Amendments State of Reform State of Reform 3. Reform at Local Government Level Legal Amendments Legal Amendments State of Reform State of Reform 4. Perspectives

2. Klaus Lüder/CIRAMAP 12/20032 Traditional Governmental Accounting   Law based   Unified for all levels of government   Cash and commitment based budgetary accounts   Compliance orientation of accounts Most entities of the outer budget sector and the non-budget sector use commercial accounting

3. Klaus Lüder/CIRAMAP 12/20033 Federal and State Government Accounting - Legal Amendments -   Increased budget flexibility   Cost accounting where appropriate   Optional accrual accounting (in addition to the traditional cash and commitment based accounts) Amendment of the Budgetary Principles Act of 22 December 1997:

4. Klaus Lüder/CIRAMAP 12/20034 Federal and State Government Accounting - State of Reform - Federal government and most state governments:   Minimal changes of accounting practice, mainly experimentation with cost accounting   Federal Court of Auditors calls for complete balance sheet State of Hessen:   Government-wide implementation of an accruals based financial accounting (and budgeting) system to be completed in 2008 Signals that other States (primarily Hamburg and Bremen) might follow the Hessian example

5. Klaus Lüder/CIRAMAP 12/20035 Local Government Accounting - Legal Amendments -  1998: Sub-Committee of the Standing Conference of the Interior Ministers on reforming local government budgeting and accounting  November 2003: Sub-Committee submitted and Conference passed guidelines for amending state law on local government accounting (and budgeting)  Sub-Committee suggests two alternative accounting models: accrual and “extended cameralistics”  From 2004 on: States will amend law. New law will either stipulate accrual accounting or provide for an optional approach

6. Klaus Lüder/CIRAMAP 12/20036 Local Government Accounting - State of Reform -  Pilot projects in several States completed  Accrual accounting systems in pilot cities in regular operation  New systems include Double-entry bookkeeping Double-entry bookkeeping Accruals based financial accounting Accruals based financial accounting Accruals based financial reporting comprising individual and consolidated statements of financial position, operating statements and cash flow statements Accruals based financial reporting comprising individual and consolidated statements of financial position, operating statements and cash flow statements Accruals and output based budgets Accruals and output based budgets

7. Klaus Lüder/CIRAMAP 12/20037 Perspectives Federal government and state governments:   Additional international pressure (IPSAS, EU, international macro-accounting systems) and Hessian example provide momentum for accrual accounting reform Local governments:   Accrual accounting reform seems irreversible   Longer transition period likely   Optional approach will not survive Severe fiscal pressure together with low political priority of accounting reform may stall the process at all government levels

8. Klaus Lüder/CIRAMAP 12/20038 Study on Current Practice and Reform of Accounting and Budgeting in National and Local Governments (eds.) Lüder/Jones (eds.) „Reforming Governmental Accounting and Budgeting in Europe“ „Reforming Governmental Accounting and Budgeting in Europe“ Frankfurt a. M.: Fachverlag Moderne Wirtschaft (PwC Deutsche Revision), 2003