HOW ARE IPSAS?

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.