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New Public Sector Accounting Standards and Rights of Citizenship
by Idésio S. Coelho, Senior Partner,EY & President, IBRACON | October 31, 2016 |
Brazil’s convergence with International Public Sector Accounting Standards, which is in progress, is absolutely in synergy with the growing anxiety in society as to fairness and transparency.
With this advancement, our country aligns with the 25 nations that have already adopted the new model, among them New Zealand, France, Portugal, Spain, Chile, and Peru.
Our transition process started in 2015, and, in accordance with National Treasury Secretariat’s Administrative Rule 548/2015, the deadline for the implementation of procedures related to the migration to accrual-based accounting standards has been extended until 2024.
It will be a revolution in the way public sector accounting is done.
The changes are quite significant and positive.
Today, the Federal Government, States, and municipalities are not recording all their assets and liabilities. Roads, parks, land, infrastructure assets, and debts may not be recorded in the statement of financial position.
The new standards establish more solidity and transparency to public sector accounting practices, providing more transparency about public sector assets, which, strictly speaking, belong to the population. The accounting will be a support tool to the compliance with the Fiscal Responsibility Law.
The adoption of the accrual basis of accounting will allow public sector entities and their stakeholders (citizens, investors, and administrators, among others) to have clear visibility of the actual economic and financial situation, and thus make better decisions.
It is a procedure that could have contributed to mitigating many problems that have occurred in the country.
The international standards will also allow the financial health of entities in the Federation to be compared to public sector entities in other countries.
Mainly, they will foster transparency in the financial management of public affairs.
Transcending government accountability, they will raise public accounting to the proper dimension of the State, in its essential and constitutional function to serve society.
Given the importance of the topic, Brazil has a member and a technical advisor at the entity that issues, revises, and publishes the standards, the International Public Sector Accounting Standards Board, which is supported by the International Federation of Accountants.
This participation of our country that, as a signatory of the entity, contributes to the development of the standards and the dissemination of the concept of more compliance inherent to them, is important.
The lack of visibility is coming to an end. The new accrual basis of accounting will ensure that the public sector’s financial statements more consistently reflect budget execution, assets, and the economic impact of political decisions.
Brazilians will have more awareness of the management of public sector entities and the State’s fiscal health.
Without a doubt, this is a practice that responds to democratic precepts and the rights attached to citizenship.
*This article originally appeared in Folha D.Spaulo on October 11, 2016.
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