A report issued jointly by ACCA and IFAC, Is cash still king? Maximising the benefits of accrual information in the public sector, not only confirms that a complete public sector transition to accrual accounting will serve the public interest, but also contains 30 specific recommendations to improve accrual implementation. 

Good decision-making requires the right information. Given that most government decisions have financial implications, understanding the economic reality of a government’s activities improves the quality of decisions made. By 2023, the number of countries reporting their financial position on an accruals basis is expected to increase from 37 to 98, jumping from 25% to 65% among 150 countries surveyed in the International Public Sector Financial Accountability Index.

Cash accounting, which 75 per cent of governments around the world use in some form, does not present the most accurate picture of a government’s financial health, nor does it enable adequately planning for the development, delivery, and maintenance of the services, programmes, and infrastructure on which people rely.  And that, in turn, leads to a breakdown of trust in governments.

The report’s author, ACCA’s Head of Public Sector Policy, Alex Metcalfe, said: ‘Moving to accruals needs to be more than a compliance exercise, it should be about making the best use of financial information.  The range of benefits highlight in this report demonstrates the clear upside to implementing accruals in the public sector.  We need to ask whether cash is still king, when it comes to financial reporting and budgeting.’

‘The accounting profession’s public interest mandate is nowhere more apparent than in the public sector, where high-quality reporting and budgeting is a prerequisite for government transparency and effective delivery of public services,’ said Kevin Dancey, CEO of the International Federation of Accountants (IFAC). ‘To the finance professionals and public sector decision makers who are leading the transition from cash to accrual accounting, we commend you and support you.’

The benefits and complexity arising from accruals varies by types of adoption. The report notes that:

• Cash accounting and budgeting is the simplest basis but provides the least decision-useful information.
• Accrual accounting combined with cash budgeting is the most complex basis, but it generates information that helps achieve value for money, facilitates public scrutiny, and supports sustainable decision-making.
• Accrual accounting and accrual budgeting creates a ‘medium level of complexity’ and creates consistency. In addition to realising the benefits from implementing accrual accounting, this environment also puts finance right at the heart of decision making and allows governments to embed effective performance management.
• New, decision-useful information generated by accrual implementation promotes the achievement of value for money and facilitates effective public scrutiny.
• To produce decision-useful information, governments must set objectives; plan; engage stakeholders; create effective systems; and develop the right skills, including internal training beyond preparers.

This report recommends that governments implementing accruals should be:

• Directing independent fiscal policy institutions to assess contingent liabilities and produce recurring fiscal risk reports.
• Implementing accrual budgeting to put finance at the heart of decision-making, while embedding performance management across government.
• Planning to produce a fully consolidated balance sheet that provides a full financial picture of the resources and risks for the public sector. This must include State-owned Enterprises at the whole-of-government level.
• Building political challenges into the implementation roadmap from the beginning (e.g., through a sunset clause requiring the eventual recognition of employee pension liabilities).
• Including groups that provide a constructive challenge function to the reform, such as auditors and legislative committees (e.g. the UK’s Public Accounts Committee).
• Deploying experts centrally to control consulting costs and support implementation across government.

Kevin Dancey, CEO IFAC, added: ‘IFAC and ACCA are committed to supporting the adoption and implementation of International Public Sector Accounting Standards (IPSAS), which underpin public sector accrual accounting, and to developing a robust profession that implements and manages such systems. With 65 per cent of governments globally set to implement accrual accounting by 2023, we’re encouraged by the positive trend, and strongly support further adoption of accruals and IPSAS.’

- Ends -

For media enquiries, contact:

Nadia Manuelli
E: nadia.manuelli@accaglobal.com
T: +44 (0)20 7059 5661
M: +44 (0)7808 940139
Twitter @ACCANews 
www.accaglobal.com

Geena De Rose
E: geenaderose@ifac.org
T: +1 (646) 277 9390
Twitter @IFAC
www.ifac.org

Notes to editors:

The number of countries reporting on the accruals basis represents 40% of the 150 countries included in the 2018 International Public Sector Financial Accountability Report.  The research evidence was gathered in three ways. Roundtable discussions were held in three countries (UK, Canada and Australia).  Semi-structured expert phone interviews were held with 12 experts in seven countries: Austria, Canada, New Zealand, Slovakia, Switzerland, Tanzania and Zimbabwe.  The face-to-face and telephone evidence was supported by a desk-based literature review.

About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com

About IFAC

The International Federation of Accountants (IFAC) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.

The International Public Sector Accounting Standards Board^® (IPSASB^®) has released Exposure Draft (ED) 70, Revenue with Performance Obligations, ED 71, Revenue without Performance Obligations, and ED 72, Transfer Expenses. The three exposure drafts are published together to highlight for respondents the linkages between the accounting for revenue and transfer expenses. The three EDs pioneer new approaches for some of the most significant transactions of public sector entities, including inter-governmental transfers and grants for the delivery of key government services to the community by introducing:

• A more straight-forward approach to classifying revenue transactions;
• A new model for the recognition and measurement of revenue; and
• Guidance on transfer expenses, which currently does not exist in IPSAS.

“Sound accounting for revenue is crucial for all governments and other public sector bodies. We are confident that the proposed use of the performance obligation approach in ED 70, together with the updates to IPSAS 23 in ED 71, will improve financial reporting for both users and preparers of public sector financial statements,” said IPSASB Chair Ian Carruthers. “ED 72 complements the other two EDs by proposing guidance for the first time on transfer expenses, which are a major area of government expenditure, often recognized as revenue by other public sector bodies.”

ED 70 is aligned with IFRS 15, Revenue from Contracts with Customers, while extending the income recognition approach in that standard to address common public sector transactions which include performance obligations, including those where the ultimate beneficiary is a third party. It is intended to supersede IPSAS 9, Revenue from Exchange Transactions, and IPSAS 11, Construction Contracts.

ED 71 is an update of IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers) that addresses some of the issues encountered in its application. Unlike the current revenue standards, which classify revenue based on an exchange or non-exchange distinction, ED 70 and ED 71 differentiate revenue transactions based on whether or not the transaction has a performance obligation, which is defined as a promise to transfer goods or services to a purchaser or a third-party beneficiary. ED 71 also provides public sector-specific guidance on capital transfers for the first time.

ED 72 proposes guidance for transfer expenses, where a transfer provider provides resources to another entity without receiving anything directly in return. In providing guidance for the first time on the expense side of transactions that may be accounted under the revenue EDs by other public sector organizations, ED 72 includes proposals for transactions with and without performance obligations.

The IPSASB welcomes the views of respondents on the proposed standards and the other matters raised for comment in the three EDs.

How to Comment
To access the Exposure Drafts and their summary At-a-Glance documents, or to submit a comment, visit the IPSASB website, www.ipsasb.org. Comments on the Exposure Drafts are requested by November 1, 2020. The IPSASB encourages IFAC members, associates, and regional accountancy organizations to promote the availability of this Exposure Draft to their members and employees. 

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org. 

About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.

All stakeholders are invited to register and participate

Feb 12, 2020 | New York, New York | English

Today, the International Ethics Standards Board for Accountants^® (IESBA^®) announced the dates for two webinars focused on the recently released Exposure Drafts, with proposals relating to Non-assurance services (NAS) and Fees that further reinforce auditor independence.

Please click below to register and join us for each 60-minute webinar event.

• Tuesday, March 17, 2020 from 8:30 a.m. to 9:30 a.m. EST; Overview of Proposed Revisions to the Non-Assurance Services Provisions of the Code

• Thursday, March 19, 2020 from 10:00 a.m. – 11:00 a.m. EST; Overview of Proposed Revisions to the Fee-Related Provisions of the Code.   

During the March 17 webinar, the NAS Task Force Chair, Mr. Richard Fleck, will explain the key NAS proposals, including:

• A prohibition on providing NAS to an audit client that is a public interest entity (PIE) if a self-review threat to independence will be created;
• Further tightening of the circumstances in which materiality may be considered in determining the permissibility of a NAS;
• Strengthened provisions regarding auditor communication with those charged with governance (TCWG), including, for PIEs, a requirement for NAS pre-approval by TCWG; and
• Stricter requirements regarding the provision of some NAS, including certain tax and corporate finance advice.

During the March 19 webinar, the Fees Task Force Chair Mr. Ian McPhee, will explain the significant aspects of the fee-related proposals which include:

• A prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;
• In the case of PIEs, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and
• Communication of fee-related information to TCWG and to the public to assist their judgments about auditor independence.

Don’t miss out on this unique opportunity to engage with representatives of the IESBA and learn more about the NAS and fee-related proposals.

The IESBA welcomes feedback on the NAS and Fees EDs from all stakeholders, including investors and other users of financial statements, the corporate governance community, the regulatory and audit oversight community, preparers, firms, national standard setters, IFAC member bodies, academics and others.

The comment deadline for the NAS and Fees Exposure Drafts is May 4, 2020.

If you have any questions, please email Szilvia Sramko at szilviasramko@ethicsboard.org.

High-quality audits are the backbone of the global financial system. Each year, thousands of audits – including over 40,000 audits of public listed companies – make organizations more transparent and trustworthy, help attract investor capital, help secure jobs, and help economies thrive.

The International Federation of Accountants (IFAC) and the global accountancy profession are committed to continuous improvement and recognize the negative consequences of any audit failure. As audit reviews unfold in various national jurisdictions, IFAC is setting out its recommendations for achieving high-quality audits.

“Audits contribute meaningfully to the functioning of organizations, financial markets, and economies. While many thousands of audits are conducted each year without any issues, improvements are needed to ensure consistent high quality,” said IFAC CEO Kevin Dancey. “This, however, cannot be achieved in a vacuum – all participants in the audit and assurance ecosystem must work together in striving to achieve high-quality audits 100% of the time. It is a vital part of our profession’s public interest mandate.”

In order to achieve high-quality audits, IFAC identifies five essential factors: the right process, the right people, the right governance, the right regulation, and the right measurement.

IFAC calls on all participants to create an environment that consistently produces high-quality audits. In particular, firms, Professional Accountancy Organizations (PAOs), regulators, audit committees and audit/assurance professionals must work to:

• Approach audits as a value-added service; not as a compliance exercise
• Evolve new assurance services to meet the needs of all stakeholders
• Continue focus on enhancing skills and competencies, adhering to fundamental ethical principles
• Ensure diversity in hiring practices
• Enhance transparency and communication from audit committees, firms, and PAOs
• Adopt a prudential and evidence-based approach to regulation

“As the global voice of the accounting profession, IFAC works in the public interest and focuses on the role of professional accountants in audit and assurance—but always, and necessarily, as partners in a larger ecosystem striving for better outcomes,” said Dancey. “We call on regulators and PAOs to collect, analyze, and publish more and better data—both aggregate and granular—on audit quality with the goal of enhancing transparency and promoting higher audit quality.”

About IFAC
The International Federation of Accountants (IFAC) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.

The International Auditing and Assurance Standards Board’s (IAASB) Auditor Reporting Implementation Working Group (ARIWG) recently published a project update in the form of a Communiqué, which provides an update on the IAASB’s post implementation review (PIR) of the revised auditor reporting standards. The communique also includes other relevant news and information relevant to the IAASB’s PIR.

The Communique does not constitute an authoritative pronouncement of the IAASB, nor does it amend, extend or override the ISAs or other of the IAASB’s International Standards.

for more info, or to view the Communiqué, click here.

The International Public Sector Accounting Standards Board (IPSASB) has issued Collective and Individual Services (Amendments to IPSAS 19), which addresses a wide range of significant government expenditures that directly impact the lives of citizens globally.

Last January, the IPSASB issued IPSAS 42, Social Benefits, providing much-needed guidance on accounting for social benefits expenditure. This new guidance complements IPSAS 42 by providing requirements for accounting for collective services (such as defense at national-levels and street lighting at sub-national levels) and individual services (such as healthcare and education). Collective and Individual Services requires that an expense is recognized at the point of service delivery.

IPSASB Chair, Ian Carruthers, said “I am pleased that, with the publication of Collective and Individual Services (Amendments to IPSAS 19), which complements IPSAS 42, Social Benefits, the IPSASB now has a full set of requirements and guidance on accounting for the most important programs of government.”

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.

IFAC today released the second installment of its Exploring the IESBA Code educational series: The Conceptual Framework – Step 1, Identifying Threats.

Exploring the IESBA Code is a twelve-month series providing an in-depth look at the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). Each installment focuses on a specific aspect of the Code using real-world situations in a manner that is relatable and practical. Readers will gain a better understanding of the thought process behind more complicated areas of the Code through storytelling and expert analysis from professionals involved in developing the standards.

The first installment of the Series looked at the five Fundamental Principles of ethics, which establish the standard of behavior expected of all professional accountants. Compliance with these principles enable accountants to meet their responsibility to act in the public interest. This second installment highlights key aspects of the Code’s Conceptual Framework, which is an approach that all professional accountants are required to apply to comply with the five principles. The installment focuses on identifying threats and will be supplemented by two subsequent installments that will deal with evaluating and addressing threats.

A professional accountant can often come across complex or challenging situations that are not black and white. These challenging situations require ethical considerations, some of which are expressly dealt with in the Code. The unique and informational series was developed by IFAC in collaboration with the International Ethics Standards Board for Accountants (IESBA) to help explain how the Code assists in navigating some of these challenges.

To read and download this and future installments, visit the IFAC website.

The Exploring the IESBA Code was published by IFAC and does not form part of the Code. It is non-authoritative and is not a substitute for reading the Code.

For more information about the Code, please click here.

The International Ethics Standards Board for Accountants (IESBA) today released for public comment the Exposure Draft, Proposed Revision to the Code Addressing the Objectivity of Engagement Quality Reviewers. The proposed limited-scope revision to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) dovetails with the International Auditing and Assurance Standards Board’s (IAASB’s) development of proposed International Standard on Quality Management (ISQM) 2, Engagement Quality Reviews.

The Exposure Draft includes proposed guidance on the application of the conceptual framework in the Code to address the topic of the objectivity of an engagement quality reviewer (EQR), thereby supporting proposed ISQM 2 in addressing the matter of the eligibility of an individual to serve in an EQR role. In particular, the proposed guidance:

• Explains the different types of threat to compliance with the fundamental principle of objectivity that might be created in circumstances where an individual is being considered for appointment as an EQR for a given engagement;
• Sets out factors to consider in evaluating the level of the identified threats; and
• Suggests actions that might be safeguards to address the threats.

The development of the proposal benefited from cooperation with the IAASB within the established coordination framework of the two Boards. The IESBA is proceeding on an accelerated time frame to finalize the proposal in order to align closely with the anticipated finalization of ISQM 2 within 2020.  

Comments on the Exposure Draft are requested by March 16, 2020 from all stakeholders.

About the IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA serves the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards).

The IESBA believes a single set of high-quality ethics standards enhances the quality and consistency of services provided by professional accountants, thus contributing to public trust and confidence in the accountancy profession. The IESBA sets its standards in the public interest with advice from the IESBA Consultative Advisory Group (CAG) and under the oversight of the Public Interest Oversight Board (PIOB).

Today, the International Public Sector Accounting Standards Board (IPSASB) has published Final Pronouncement, Improvements to IPSAS, 2019.

Improvements to IPSAS, 2019 was approved by the International Public Sector Accounting Standards Board (IPSASB) in December 2019. Improvements to IPSAS, 2019 comprises of minor improvements to IPSAS in order to address issues raised by stakeholders.

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.