Download Meeting of the Task Force of the EU CC on EPSAS

Norwegian association for local government auditing
Brussels, 15 January 2015
Towards European Public Sector Accounting
Standards (EPSAS)
Alexandre MAKARONIDIS
Head of Unit Task Force EPSAS, European Commission - Eurostat
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Why harmonised accruals?
From an EU perspective the wide range of public sector accounting
standards result in a lack of:
• transparency, and
• comparability
in the financial reporting due to non-comparable, incomplete and
inconsistent primary accounting data.
This impacts on both General Purpose Financial Statements and
Government Finance Statistics.
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PROBLEM
CONSEQUENCES
At EU level:
At national / entity level:
Lack of access to comprehensive information on financial position and
performance
Economic governance
- Multilateral economic coordination, surveillance and policy advice in
support of economic and financial stability in the EU are based on nontransparent and non-comparable financial reporting
- Efficiency and effectiveness of decision making and public sector
management may be hampered
Internal market
- Capital markets cannot be fully efficient when faced with lack of
comparable and comprehensive information on financial position and
performance on public entitites as compared to private entities
- Accountability of policy makers and public sector managers is limited
Statistics
- Incoherence between MICRO level primary public-sector accounting and
reporting framework and the ESA MACRO level statistical reporting
framework
- Challenges for public auditors who may deal with multiple accounting
standards and IT systems and incomplete accounting data
- Reduced access to financial markets
NON-COMPARABLE
public sector accounting and
reporting practices ACROSS
and WITHIN EU MSs
NON-TRANSPARENT
(incomplete, unreliable and
untimely) accounting data
and financial reporting
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EY Study (2012) public sector accounting standards in the EU
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Background: 2012 to mid-2013
Study on the suitability of IPSAS: Retrospective
Budgetary
Frameworks
Directive
 "… the
Commission shall
assess the
suitability of the
International
Public Sector
Accounting
Standards for the
Member States"
Public
consultation
on IPSAS
Report on
suitability of
IPSAS
 IPSAS cannot easily
be implemented in EU
Member States as it
stands currently
Task Force
IPSAS
EPSAS
Conference
 IPSAS would be a
suitable starting point
for the future
development of a set
of European Public
Sector Accounting
Standards
E&Y study on
public sector
accounting
and auditing
practices
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Public consultation – suitability of IPSAS
Are IPSASs suitable for implementation in the EU Member States?
Yes
No
Partly Uncertain Total
Professional Association/Standard Setter
12
Ministry of Finance/Treasury
3
4
3
10
Private individual
3
1
6
10
8
1
9
2
3
6
Regional Audit Office
National Audit Office
1
Firm of Auditors or Accountants
5
Statistical Office
2
3
1
16
5
1
1
4
Regional association or authority
2
1
3
Social security/Pension Fund
1
2
3
1
1
1
68
International Organisation
National authority
TOTAL
% share
26
38
1
19
28
21
31
2
3
NB: "NO" replies were concentrated - from a small number of MSs (DE, FR, AT, NL, PL)
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Taking forward EPSAS: mid-2013 - onwards
Outputs from:
TF EPSAS Governance
Commission
Communication
TF EPSAS Standards
Public consultation on
EPSAS governance
Impact
Assessment
Legislative
proposal
PwC study on behalf of
Eurostat
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Staged approach to EPSAS – outline (June 2014)
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IPSAS study (2013) - Minor or no adaption
IPSAS 1 – Presentation FS
IPSAS 11 – Construction contracts
IPSAS 2 – Cash flow
IPSAS 12 – Inventories
IPSAS 3 – Fundamental errors and
IPSAS 14 – Events after the reporting date
changes in policies
IPSAS 16 – Investment property
IPSAS 4 – Changes in foreign exchange IPSAS 19 – Provisions, contingent
rates
liabilities, contingent assets
IPSAS 5 – Borrowing costs
IPSAS 27 – Agriculture
IPSAS 9 – Revenue from exchange
IPSAS 32 – Service concessions
transactions
IPSAS 10 – Hyperinflationary economies
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IPSAS study (2013) - Adaption or selective approach
IPSAS 7 – Investments in associates
IPSAS 8 – Interests in joint ventures
IPSAS 13 – Leases
IPSAS 15 – Financial instruments:
Presentation
IPSAS 17 – Property, plant and equipment
IPSAS 18 – Segment reporting
IPSAS 20 – Related party disclosures
IPSAS 21 – Impairment of non-cashgenerating assets
IPSAS 22 – Disclosure general government
sector
IPSAS 23 – Revenue from non-exchange
transactions
IPSAS 24 – Presentation of budget
information
IPSAS 25 – Employee benefits
IPSAS 26 – Impairment of cash-generating
assets
IPSAS 31 – Intangible assets
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IPSAS study (2013) - Needing amendment
IPSAS 6 – Consolidated financial statements
IPSAS 28 – Financial instruments: Presentation
IPSAS 29 – Financial instruments: Recognition and measurement
IPSAS 30 – Financial instruments: Disclosure
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PwC Study on behalf of Eurostat (2014)
Technical analysis of IPSAS confirms:
• The general technical suitability of existing IPSAS
• Classification of IPSASs in 3 categories for the future effective
and efficient work on EPSAS
High level cost estimate of EPSAS implementation
• Potential costs between 0.01% and 0.05 % of GDP
• Benefits would outweigh costs
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PwC Study on behalf of Eurostat (2014)
Extrapolated costs at EU level spread over the reform period
• Scenario 1 – Adaptation of all existing IT systems
between 1.2 billion and 2.1 billion EUR
• Scenario 2 – New IT systems for all entities with low IT maturity
between 1.8 billion and 6.9 billion EUR
IPSAS report (2013):
costs of 0.02-0.1% of GDP
PwC Study (2014):
costs of 0.01-0.05% of GDP
NB: To interpret with due care, taking into account the inherent limitations of such extrapolations.
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European Commission (Eurostat) Task Force EPSAS:
http://ec.europa.eu/eurostat/web/government-financestatistics/government-accounting
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