Occasionally,
students ask me about IPSAS. How are you? What are the advantages? Do you
deserve all this effort?
Well,
I'll explain what is concrete and what I think are its advantages.
The
International Public Sector Accounting Standards (IPSAS) aims to serve the
public interest with high quality standards and standardization of the
preparation of financial statements by public entities around the world.
Countries that converge to IPSAS standards now demonstrate greater transparency
and the real financial and equity situation of the public sector. There is a
significant gain in international credibility.As International Federation of
Accountants (IFAC) senior technical manager Vincent Tophoff said: “IPSAS is an
indispensable element in the financial reporting chain between public entities
and their internal and external stakeholders. Adopting IPSAS is not only the
path to transparency and accountability, it is also the basis for additional
benefits such as better strategic decision making and also planning and
control, given that the figures presented will better reflect economic reality.
”This is another fantastic gain, that is, the quality of information for
decision-making by public managers. Public accounting is effectively becoming an
increasingly reliable information center where accounting information analysis,
evaluation and projections are the main tools for guiding governments.
Governments
of countries with reliable, IPSAS-based financial statements are increasingly
using these reports, including the balance sheet, to make fiscal decisions.
This is the case for New Zealand and the United Kingdom, which use the balance
for fiscal policy decisions. In 2018, the IMF published a study that estimates
the untapped economic potential of government assets on average at 3 percent of
gross domestic product (GDP).
According
to Tophoff, the International Public Sector Financial Responsibility Index,
developed by IFAC, the Chartered Institute of Public Finance and Accountancy
(CIPFA), with the support of the Zurich University of Applied Sciences,
provides a snapshot of the real state of reporting and budgeting. public
financial statements and plans for future reforms, for each jurisdiction, with:
current accounting standards and financial reports used in the preparation of
the financial statements; structure and process of setting financial reporting
standards; current recognition basis for budgets; and financial reports and
budget reform plans.
The
International Public Sector Financial Responsibility Index (IPSFR) will be one
of the key indicators by which countries, multinational entities, companies and
investors will assess the conditions of governments for development and
investment possibilities.
IPSAS
adopting countries should choose between direct and indirect methods. The
direct method makes direct reference to international standards, while the
indirect method establishes national standards based on international
standards. The vast majority of countries, including those in South America,
have chosen the indirect method as it allows for adaptation to the country's
legal framework and adaptation to specific local terminology, which may differ
even between countries with the same language as, for example, Brazil and
Portugal. In this sense, the indirect method more clearly respects the autonomy
or sovereignty of each country. However, this method has a risk of diverging
from international standards. It is therefore important that expert
professionals are involved in the process.The advantages are numerous, in
particular the requirement for a better organization of public sector
management and the obligation to follow international accounting standards
rather than local standards that mask the reality of the public sector. It will
be a kind of Government Seal of Quality.
