1. Building Competence. Crossing Borders. PEMPAL Workshop Istanbul; Feburary 25, 2008 The Value Added of IPSAS Prof Andreas Bergmann bgma@zhaw.ch Robin Braun bnrn@zhaw.ch

2. PEMPAL; The Value Added of IPSAS 2 The Value Added of IPSAS Content  Overview on IPSAS  Implementation of IPSAS  REPF-Toolkit and Report  Conclusion: Sequencing of Reforms  Appendix: List of Accrual IPSAS

3. PEMPAL; The Value Added of IPSAS 3 Overview on IPSAS Mission  Establish and promote adherence to high quality professional standards  Further the international convergence of such standards  With the intention of the public organizations of the whole world  In the optics of the financial statements of general use  Speak out on public interest issues where the profession’s voice is most relevant

4. PEMPAL; The Value Added of IPSAS 4 Overview on IPSAS (2) Rationale of Accounting Reforms  Accounting = Basis of decisions  Development decisions in particular -Infrastructure -Networks -Public services  Judgment by decision makers requires identical standards  Credibility increase  Education facilitated

5. PEMPAL; The Value Added of IPSAS 5 Overview on IPSAS (3) Value added of Cash based IPSAS  1 Standard Cash Basis Advantages:  Full coverage of all cash transactions  Consolidation Disadvantages:  Too basic for countries which are on modified accrual  Scope of consolidation is controversial

6. PEMPAL; The Value Added of IPSAS 6 Overview on IPSAS (4) Value added of Accrual based IPSAS  26 Standards Accrual Basis Advantages:  Economic situation and flows  Resource allocation  Similar to GFS  Risks Disadvantage:  Leap for many countries

7. PEMPAL; The Value Added of IPSAS 7 Overview on IPSAS (5) Cash based IPSAS Accrual based IPSAS Country B Step 1 Step 2 Step 3 Country A

8. PEMPAL; The Value Added of IPSAS 8 Questionnaire (Russian)

9. PEMPAL; The Value Added of IPSAS 9 Overview on IPSAS (6) Structure of IPSAS  Recognition  Measurement  Disclosure

10. PEMPAL; The Value Added of IPSAS 10 Overview on IPSAS (7) Organization of the IPSAS-Board  18 members  President M. Mike Hathorne (Scottish/GB)  3 meetings of 4 days per year, English language  At least one phase of consultation („Exposure Draft“)  Qualified majorities required (2/3, 3/4)

11. PEMPAL; The Value Added of IPSAS 11 Two ways to implement IPSAS Direct or indirect implementation IPSAS Legislation referring to IPSAS National accounting standards Legislation referring to national accounting standards Accounting Manual Implementation

12. PEMPAL; The Value Added of IPSAS 12 REPF Report on the Enhancement of Public Sector Financial Reporting - Toolkit Diagnostic Tool 1 – Assessment of the Public Sector Accounting Environment Diagnostic Tool 2 – Assessment of the Accounting Standards as Designed Diagnostic Tool 3 – Assessment of Actual Accounting Practices Diagnostic Tool 4 – Assessment of potential in- country value added of adopting the various concepts underlying and specific standards that comprise IPSAS to the extent that they are not already incorporated into the national standards

13. PEMPAL; The Value Added of IPSAS 13 REPF Report on the Enhancement of Public Sector Financial Reporting - Toolkit How to use the tools  Four different, qualitative questionnaires  To be used in interviews conducted by the prepares of the report  Necessary: knowledge of public sector accounting and reporting  Advantage: knowledge of IPSAS  Recommendation: use of local consultant  Interviews with responsible persons

14. PEMPAL; The Value Added of IPSAS 14 REPF - Diagnostic Tool 1 Content Diagnostic Tool 1  I Statutory Framework  II Academic Education, Professional Education, Training  III Setting Accounting Standards  IV Budget System  V Government Financial Statistics (GFS)  VI Monitoring and Enforcement  VII Quality and Availability of Financial Reporting  VIII Information Technology  IX Country Data

15. PEMPAL; The Value Added of IPSAS 15 REPF - Diagnostic Tool 2 Content Diagnostic Tool 2  Comparison of the existing National Standards to the IPSAS  IPSAS as a benchmark

16. PEMPAL; The Value Added of IPSAS 16 REPF - Diagnostic Tool 3 Content Diagnostic Tool 3  No purpose-built questionnaire  Instead, diagnostic tool 2 may be used, if IPSAS like situation is to be assessed Tool based on local standards needs to be devised otherwise  Assessment should include organizations other than the one responsible for public sector financial accounting and reporting  Analysis of financial reports even if they are audited!

17. PEMPAL; The Value Added of IPSAS 17 REPF - Diagnostic Tool 4 Content Diagnostic Tool 4  I Relevant Gaps in Accounting between IPSAS‘ and NPSAS – Value added due to Accounting Effects  II Value Added due to Reputation Effects  III Value Added due to Training Effects

18. PEMPAL; The Value Added of IPSAS 18 REPF Report – Content Content  I Introduction  II Institutional Framework  III Accounting Standards as Designed  IV Accounting Standards as Practiced  V In-country value added  VI Recommendations  A Appendix

19. PEMPAL; The Value Added of IPSAS 19 Conclusion: Sequencing of Reforms  Countries are at different stages of development  There is NO uniform pattern of development  Accrual IPSAS widely accepted as „Gold Standard“, but too challenging in the short run thus  Sequencing of reforms in Public Sector Accounting

20. PEMPAL; The Value Added of IPSAS 20 Conclusion: Sequencing of Reforms Sequencing of reforms in Public Sector Accounting  REPF to analyse gaps and decide on milestones/steps Not just about accounting, enablers (education, IT etc.) also need to be addressed  There is more than one step towards Accrual Basis IPSAS Either from Cash Basis IPSAS, but not necessarily; Or from Modified Accrual.  Tentatively sequencing order Enablers Groups of Standards on similar issues

21. PEMPAL; The Value Added of IPSAS 21 Appendix Overview on IPSAS - Current Standards Accrual Accounting Standards (2007) IPSAS 1 –Presentation of Financial Statements IPSAS 2 – Cash Flow Statements IPSAS 3 – Accounting Policies, Changes in Accounting Estimates and Errors IPSAS 4 – The Effects of Changes in Foreign Exchange Rates IPSAS 5 – Borrowing Costs IPSAS 6 – Consolidated and Separate Financial Statements

22. PEMPAL; The Value Added of IPSAS 22 Appendix Overview on IPSAS - Current Standards (2) IPSAS 7 – Investments in Associates IPSAS 8 – Interests in Joint Ventures IPSAS 9 – Revenue from Exchange Transactions IPSAS 10 –Financial Reporting in Hyperinflationary Economies IPSAS 11 – Construction Contracts IPSAS 12 – Inventories IPSAS 13 – Leases IPSAS 14 – Events After the Reporting Date IPSAS 15 –Financial Instruments: Disclosure and Presentation

23. PEMPAL; The Value Added of IPSAS 23 Appendix Overview on IPSAS - Current Standards (3) IPSAS 16 –Investment Property IPSAS 17 – Property, Plant and Equipment IPSAS 18 – Segment Reporting IPSAS 19 – Provisions, Contingent Liabilities and Contingent Assets IPSAS 20 – Related Party Disclosures IPSAS 21 – Impairment of Non-Cash Generating Assets IPSAS 22 – Disclosure of Information About the General Government Sector IPSAS 23 – Revenue from Non-Exchange Transactions (Taxes and Transfers) IPSAS 24 – Presentation of Budget Information in Financial Statements IPSAS 25 - Employee Benefits IPSAS 26 -Impairment of Cash-generating assets