The financial and sovereign debt crises have brought to light the need for better financial reporting by governments worldwide, and the need for improvements in the management of public sector resources.
Many governments operate on a cash-basis and do not account for many significant items, such as liabilities for public sector pensions and financial instruments. Accrual accounting is a fundamental tenet of strong accounting and reporting for public companies, and so it should be for governments as well. IFAC advocates the adoption of accrual accounting in the public interest—which will result in a more comprehensive and accurate view of financial position, and help ensure that governments and other public sector entities are transparent and accountable.
A fundamental way to protect the public interest is to develop, promote, and enforce internationally recognized standards as a means of ensuring the credibility of information upon which investors and other stakeholders depend. The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board supported by IFAC, has developed and issued a suite of 32 accrual standards, and a cash-basis standard for countries moving toward full accrual accounting.
In October 2011, IFAC issued ED 46, Recommended Practice Guideline, Reporting on the Long-Term Sustainability of a Public Sector Entity's Finances. There are a number of jurisdictions where governments (and supranational bodies) currently make long-term fiscal sustainability reports publicly available. Such reports vary in length and complexity. Some of these reports at national and supranational levels are provided below. IPSASB does not endorse the content or format of these reports. However, IPSASB Staff considers that, particularly at a time when interest in the long-term fiscal sustainability of governments is unprecedented, the approach to reporting in this area is of considerable interest.
- Australia: Commonwealth Treasury, Intergenerational Report 2010: Australia to 2050
- Netherlands: Central Planning Bureau, Ageing and the Sustainability of the Dutch Public Finances (2006)
- New Zealand: Treasury, Challenges and Choices: New Zealand’s Long-Term Fiscal Statement (2009)
- Norway: Ministry of Finance, Long-Term Perspectives for the Norwegian Economy (2009) (English Summary)
- Switzerland: Federal Department of Finances, Long-term Sustainability of Public Finances in Switzerland (2008) (English Version)
- United Kingdom, Office for Budget Responsibility, Fiscal Sustainability Report (2011)
- United States Treasury, A Citizen’s Guide and Supplemental Information Section of the 2011 Financial Report of the United States Government
- European Commission, Directorate General for Economic and Financial Affairs, Public Finances in EMU, 2011