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The framework of the public sector accounting standard-setting in France

T he Public Sector Accounting Standard-Setting in France : The French Public Sector Accounting Standards Council (CNoCP). The framework of the public sector accounting standard-setting in France.

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The framework of the public sector accounting standard-setting in France

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  1. The Public Sector Accounting Standard-Setting in France :The French Public Sector Accounting Standards Council(CNoCP)

  2. The framework of the public sector accounting standard-setting in France • Regarding the Central Government: under the Constitutional Bylaw of 1st Aug. 2001, there are two main accounting systems: • accounts of budgetary receipts and expenditures • “Budgetary receipts and expenditures shall be recognised on a cash basis” at their date of payment or receipt(article 28) • general purpose accounts for all transactions • « General purpose accounting system is based on the accrual basis principle. Transactions are entered for the financial year to which they apply, regardless of their date of payment or receipt » (article 30) • Regarding other public entities (Local authorities, Public agencies…) : • there is a mix system of accounts (budget on accrual basis with different degrees of complexity according to the nature and the size of the structures)

  3. Creation of an Accounting Standards-Setter for the Central Government The Constitutional Bylaw on Budget Acts (LOLF) requires the Central Government to keep general accounts compliant with standards adopted after considering the opinion of a committee made up of experts from the public and private sectors The Public Sector Accounting Standards Committee is created by the Budget Act 2002 The first Central Government Accounting Standards were issued in 2004 3

  4. Reform of the French Standard-Setting: an Accounting Standards-Setter for all Public Sector • 2007: reform of the French standard-setting: creation of the Authority for Accounting Standards (“ANC”). The ANC is actually responsible only for private sector accounting • 2008: given the scope of responsibility of the ANC, the Michel Prada’s Report recommends the creation of a Public Sector Accounting Standards Council (CNoCP) to take over advisory responsibilities about Accounting Standard Setting for Public Sector (Central Government, and Government-Controlled Organisations, Local Authorities and Local Public Establishments, Social Security Organisations)

  5. Official Texts (1/2) • Creation of a Standard Setter for Public Sector by a Supplementary Budget Act for 2008 (n° 2008-1443 of the 30th December 2008 – Article 115) • A council for public accounting standards is created with the responsibility for expressing an opinion prior to the adoption of general accounting rules applicable to Central Government and, without prejudice to the responsibilities of the Authority for Accounting Standards (“ANC”), to other public and private parties financed mainly by public funds and in particular by compulsory levies. • The Council is an advisory body under the authority of the Minister for the Budget. Its Chair is appointed by the Minister for the budget.

  6. Official Texts (2/2) • Order of the 29th April 2009 relating to the Public Sector Accounting Standards Council • Role and responsibilities of the Council • Organisation of the different bodies making up the Council • Order (2009; 2012) making appointments in the Public Sector Accounting Standards Council (“CNoCP”) • Appointment of the Chair of the Council and of the six expertsof the Board

  7. Composition of the Council The Public Sector Accounting Standards Council is composed of: • A Board • Three Standing Committees • And an Advisory Committee for Orientation. It has a General Secretariat. It has its own by-laws.

  8. The Board • The Board is made up of the Chair of the Council and 18 members: • Nine ex officio members • Nine technical experts. • The Board adopts opinions, recommendations and proposals: • By the majority of members present • Providing at least ten members are present. • In addition, the Board fixes the work plan and approves the annual report. • Opinions, recommendations, proposals and report are public.

  9. Members of the Board The ex officio members are: – the first president of the Government Audit Office or a magistrate appointed by the latter; – the president of the local authority finance committee or his representative; – the general secretary of the social security accounting committee or his representative; – the head of the General Inspectorate of Finance or his representative; – the director general of local authorities or his representative; – the director of Social Security or his representative; – the director general of the Treasury and of Economic Policy or his representative; – the director general of Public Finance or his representative; – the director of the Budget or his representative. The technical experts are: – the Chair of the Authority for Accounting Standards; – two members of the board of the same authority; – three experts in private sector accounting; – three experts in public finance. 9

  10. The Standing Committees (1/2) • Three Standing Committees are responsible for preparing the decisions of the Board: • the “Central Government and Government-Controlled Organisations” Committee • the “Local Authorities and Local Public Establishments” Committee • the “Social Security Organisations” Committee • Each Committee is chaired by a member of the Board, appointed by the Chair.

  11. The Standing Committees (2/2) • The composition of the Committees is fixed by the Council’s by-laws. • Each Committee comprises: • Ex officio members • Technical experts. • It may not exceed 20 members.

  12. The Advisory Committee for Orientation • The Advisory Committee for Orientation is chaired by the Chair of the Council. • It addresses all issues relating to accounting standard-setting strategy and in particular those relating to the nature and extent of convergence of public sector accounting standards with those applicable to companies. • It expresses an opinion on the annual work plan and the annual report of the Council.

  13. The General-Secretariat • The General-Secretariat is under the responsibility of the Chair of the Council. • The organisation of the General-Secretariat is determined by the by-laws.

  14. How does the Council work? (1/2) There are mainly four kind of issues: Referrals made by the producers of accounts; Proposals made by the Council on its own initiative In both cases, the Council puts forward new provisions for public sector entities by issuing opinions to which the Ministers concerned may lend regulatory value; Preliminary opinions on bills or regulatory texts concerning accounting issues; Contributions to International consultations and debates. 14

  15. How does the Council work? (2/2) All issues are first of all analyzed by a Working Group. The General Secretariat asks every member of the standing committee whether he wants to participate in a working group dealing with the matter. The working groups include representatives of ministries, producers of accounts, members of the Government Audit Office , auditors. The working group prepares a proposal which is submitted to the relevant Standing Committee. If the Standing Committee agrees, the draft is submitted to the Board. After discussion, the Board issues an opinion. The opinions regarding the Central Government Accounting Standards are put in force by Orders of the Minister of Finances The opinions regarding other public structures are taken into account according to specific procedures 15

  16. What is the legal framework for the definition of the Accounting Standards? • Under the article 47.2 of the French Constitution: « The accounts of public entities are regular et sincere. They give a true and fair view of the results of their management, their net assets and their financial situation » • The Constitutional Bylaw of 1.8.2001 (L.O.L.F) contains some requirements about Central Government Accounting Standards: • According to the Article 30:« The rules applicable to general public accounting only differ from those applicable to companies in terms of the specific nature of Government action » • So, the standards MUST • be based on private accounting principles • and in the same time take into account specificities of the Central Government • The L.O.L.F. does not specify these standards • By an order of 7.11.2012, this principle has been extended to a large part of other public entities

  17. The approach of central Government accounting standards • The CNoCP elaborates standards with reference to three sets of standards that are converging: • The French Business Accounting Standards (P.C.G) and the Accounting Regulation Committee Rules, in force in France • The IASB standards (IAS/IFRS) • The standards being developed by the IFAC Public Sector Committee (IPSAS) • For each standard, the CNoCP must determine: • If any accounting rules are directly applicable to Central Government • If some rules can be adapted to specific nature of the central government’s activity • If specific rules must be defined • Generally, for each Central Government Accounting Standard designed by the Committee, there is a mix of different references. Some Standards are entirely specific • The CNoCP must explain its choices in the introduction of each standard 17

  18. The results of the accounting Standards-setting (1/2): The Central Government Accounting Standards • The body of Central Government Accounting Standards constitute a complete and consistent system • All the accounting standards that apply to the Central Government is in a same compendium • These Standards were collected in a “Public Accounting Standards Compendium” • The consistency of the system is reflected by the structure of the compendium that has three parts : • The Conceptual Framework for Central Government Financial Statements • It presents the assumptions underlying the accounting standards that apply to the Central Government • It defines the main concepts derived from these assumptions • It explains the scope and the limitations of the financial information's provided by the statements • The Accounting standards with two components : • An introduction that explains the standards, any specific features of the Central Government in the area under consideration, the choices made and how the standard compares to other benchmarks • The standards per se (Only the standards themselves shall be regarded as setting requirements) • The Glossary • These Standards are regularly improved and supplemented

  19. The results of the accounting Standards-setting (2/2):The Council publications 19

  20. Appendix 1 : Set of accounting standards and regulations

  21. Set of accounting standards and regulations (1/5) The models in France • Two models: • The regulation model: law, decree, order, instructions, circulars>governance by public authority • The standard model: conceptual framework, standards, interpretations > standard setting organisation • Mixed situations 21

  22. Set of accounting standards and regulations (2/5) Central Government: Accounting standards for Central Government • A conceptual framework • 17 standards: • STANDARD 1: FINANCIAL STATEMENTS • STANDARD 2: EXPENSES • STANDARD 3: SOVEREIGN REVENUES • STANDARD 4: OPERATING REVENUES, INTERVENTION REVENUES AND FINANCIAL REVENUES • STANDARD 5: INTANGIBLE ASSETS • STANDARD 6: TANGIBLE ASSETS • STANDARD 7: FINANCIAL ASSETS • STANDARD 8: INVENTORIES • STANDARD 9: CLAIMS RELATED TO CURRENT ASSETS • STANDARD 10: CENTRAL GOVERNMENT CASH POSITION COMPONENTS • STANDARD 11: FINANCIAL DEBTS AND DERIVATIVE FINANCIAL INSTRUMENTS • STANDARD 12: PROVISIONS FOR RISKS AND LIABILITIES, NON-FINANCIAL LIABILITIES AND OTHER LIABILITIES • STANDARD 13: COMMITMENTS TO BE DISCLOSED IN THE NOTES TO THE FINANCIAL STATEMENTS • STANDARD 14: ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRRORS • STANDARD 15: EVENTS AFTER THE BALANCE SHEET DATE • STANDARD 16: SEGMENT REPORTING • STANDARD 17:HERITAGE ASSETS

  23. Set of accounting standards and regulations (3/5) International Standards Standards applicable to the privatesector Standards applicable to the public sector IPSAS IPSAS Board IFRS IASB French GAAP (PCG and CRC) CNC Central Government Accounting Standards Transactions specific to Central Government

  24. Set of accounting standards and regulations (4/5) IPSAS IPSAS Board IFRS IASB French GAAP (PCG and CRC) ANC Central Government Accounting Standards CNOCP Reference to Convergence

  25. Set of accounting standards and regulations (5/5) • Public Agencies and Local Authorities • Budgetary and accounting instructions based on the general chart of accounts. • Social security organisations • A single chart of accounts for social security organisations (“PCUOSS”), which stipulates the specific requirements as compared to the general chart of accounts.

  26. Appendix 2 The Council Bodies 26

  27. Members of the Board The ex officio members are: – the first president of the Government Audit Office or a magistrate appointed by the latter; – the president of the local authority finance committee or his representative; – the general secretary of the social security accounting commission or his representative; – the head of the General Inspectorate of Finance or his representative; – the director general of local authorities or his representative; – the director of Social Security or his representative; – the director general of the Treasury and of Economic Policy or his representative; – the director general of Public Finance or his representative; – the director of the Budget or his representative. The technical experts are: – the chair of the Authority for Accounting Standards; – two members of the board of the same authority; – three experts in private sector accounting; – three experts in public finance.

  28. Composition of the Committee for “Central Government and government-controlled organisations” The committee for “Central Government and government-controlled organisations” comprises, in addition to its chair, seventeen members: • A magistrate appointed by the first president of the Government Audit Office • A representative of the department for general economic and financial control • A representative of the Directorate-General of Public Finance • A representative of the Treasury and Economic Policy General Directorate • A representative of the Budget Directorate • A representative of the Ministry of Defence • A representative of the Ministry of Public Works • A representative of the Ministry in charge of social security • Three representatives of government-controlled organisations appointed by the Chair of the Council after consulting the board • Two accountants in civil service appointed by the Chair of the Councilon the basis of proposals made by the Directorate-General of Public Finance • Four experts in finance and accounting for Central Government and government-controlled organisations, appointed by the Chair of the Council after consulting the board

  29. Composition of the Committee for“Social Security Organisations” The committee for “Social security Organisations” comprises, in addition to its chair, twenty members: • A magistrate appointed by the first president of the Government Audit Office • A representative of the National Company of Auditors • A representative of the social security accounting commission • A representative of the General Inspectorate for Social Affairs • A representative of the director of Social Security • A representative of the Directorate-General of Public Finance • A representative of the Budget Directorate • A representative of the Ministry for Agriculture • Seven representatives of social security agencies proposed by the social security directorate • A representative of the organisation responsible for providing unemployment benefits • Four experts in finance and accounting for social security organisations, appointed by the Chair of the Council after consulting the board

  30. Composition of the Committee for“Local authorities and local public establishments” The committee for “Local authorities and local public establishments” comprises, in addition to its chair, nineteen members: • A representative of the local authority finance committee • A magistrate appointed by the first president of the Government Audit Office • A representative of the Directorate-General of Public Finance • A representative of the Treasury and Economic Policy General Directorate • A representative of the Budget Directorate • Two representatives appointed by the association of mayors of France • A representative appointed by the Assembly of French “Départements” • A representative appointed by the association of French regions • A representative of the ministry in charge of local authorities • A representative of the public agencies for inter-communal cooperation appointed by the Chair of the Council after consulting the board • A representative of the medico-social sector appointed by the Chair of the Council on the proposal of the Social Action General Directorate • Two representatives of the hospital sector appointed by the Chair of the Council on the proposal of the General Directorate for Hospitalisation and the organisation of Medical Care • Two accountants in civil service appointed by the Chair of the Council on the basis of proposals made by the Directorate-General of Public Finance • Four experts in finance and accounting for local authorities appointed by the Chair of the Council after consulting the board

  31. Composition of the Advisory Committee for Orientation • The committee includes twenty one members: • Six from the advisory committee of the Authority for Accounting Standards (“ANC”) • Six are proposed by the Superior Council of Chartered Accountants (“CSOEC”) and the National Company of Auditors • Three represent universities • Six are expertsin public finance

  32. Appendix 3 Publications 32

  33. Opinions expressed by the Council in 2010 (1/2) • Opinion n° 2010-01 of the 9th February 2010 relating to the funding of accumulated social security deficits by the “CADES”, the organisation responsible for amortizing France’s social security debt. • Opinion n° 2010-02 of the 30th June 2010 relating to changes in accounting policy, changes in accounting estimates and the correction of errors in national public agencies subject to budgetary, financial and accounting instructions M 9-1 and M 9-3 • Opinion n° 2010-03 of the 30th June 2010 relating to the accounting rules for making provisions applicable to the Additional retirement scheme institution for the civil service (ERAFP)

  34. Opinions expressed by the Council in 2010 (2/2) Opinion n° 2010-004 of the 17th November 2010 relating to improvements to standard 6 on tangible assets of the Central Government Accounting Standards. Opinion n° 2010-005 of the 17th November 2010 relating to improvements to four standards of the Central Government Accounting Standards. 34

  35. Opinions expressed by the Council in 2011 (1/3) Opinion no. 2011-01 of 15 March 2011 relating to the periods of depreciation for subsidies provided by local authorities subject to budgetary and accounting instructions M14, M52, M61 and M71. Opinion no. 2011-02 of 15 March 2011 relating to the elimination of the concept of Government policy operator and to minor changes to Standard 7 “Financial Assets” in the Manual of Central Government Accounting Standards. Opinion no. 2011-03 of 15 March 2011 relating to the accounting treatment of assets with an indeterminable useful life (general-purpose property) and two minor modifications to Standard 6 “Tangible Assets” in the Manual of Central Government Accounting Standards. 35

  36. Opinions expressed by the Council in 2011 (2/3) Opinion no. 2011-04 of 27 May 2011 relating to changes in accounting policy, changes in accounting estimates and the correction of errors in public healthcare establishments subject to budgetary and accounting instruction M21. Opinion no. 2011-05 of 8 July 2012 relating to accounting for financial debts and derivative instruments of public accounting entities within the scope of The General Code of Territorial Authorities, The Code for Social Action and Families, The Code of Public Health and the Code of Construction and Housing. Opinion no. 2011-06 of 8 July 2011 relating to Government segment reporting. 36

  37. Opinions expressed by the Council in 2011 (3/3) Opinion no. 2011-07 8 July 2011 relating to the definition of deferral accounts in the Manual of Central Government Accounting Standards. Opinion no. 2011-09 of 17 October 2011 relating to the definition and the recognition of expenses and two minor changes to Standard 2 "Expenses", Standard 12 renamed "Non-Financial Liabilities" and Standard 13 "Commitments to be disclosed in the Notes to the Financial Statements" of the Manual of Central Government Accounting Standards. Opinion no. 2011-10 of 8 December 2011 relating to the presentation and the assessment of asset funding by public establishments. Opinion no. 2011-11 of 8 December 2011 relating to the treatment of contracts for the provision of public services in the accounts of public entities. 37

  38. Opinions expressed by the Council in 2012 (1/2) Opinion no. 2012-01 of 17 February 2012 relative to the recognition at the reporting date of leave entitlements, time savings accounts, overtime hours and additional hours in public establishments subject to budgetary, financial and accounting instructions M 9-1, M 9-3 and M 9-5 Opinion no. 2012-02 of 4 May 2012 relating to the conditions of initial recognition of tangible assets previously not recognised due to particular situations Opinion no. 2012-03 of 3 July 2012 relating to the provisions of Opinion no. 2011-11 of 8 December 2011 in the Manual of Central Government Accounting Standards and two minor modifications to Standard 6 "Tangible Assets" and to Standard 5 "Intangible Assets" in this manual Opinion no. 2012-04 of 3 July 2012 relating to accounting for financial debts and derivative instruments of public accounting entities within the scope of The General Code of Territorial Authorities, The Code for Social Action and Families, The Code of Public Health and the Code of Construction and Housing 38

  39. Opinions expressed by the Council in 2012 (2/2) Opinion no. 2012-05 of 18 October 2012 relating to changes in accounting policy, changes in accounting estimates and the correction of errors Opinion no. 2012-06 of 18 October 2012 relative to the newly-renamed Standard 14 "Changes in Accounting Policy, Changes in Accounting Estimates and the Correction of Errors" of the Manual of Central Government Accounting Standards Opinion no. 2012-07 of 18 October 2012 relative to heritage assets 39

  40. Opinions expressed by the Council in 2013 (1/2) Opinion n° 2013-01 of 14 January 2013 relating to intervention expenses of public accounting entities within the scope of the General Code of Territorial Authorities, the Code for Social Action and Families, the Code of Public Health and the Code of Building and Housing Opinion n° 2013-02 of 14 January 2013 relating to intangible and tangible assets that are jointly controlled by several entities Opinion n° 2013-03 of 14 January 2013 relating to including the provisions of Opinion n°2012-07 of 18 October 2012 in the Central Government Accounting Standards (new standard 17 on heritage assets) 40

  41. Opinions expressed by the Council in 2013 (2/2) Opinion n° 2013-04 of 12 April 2013 relating to ‘transfers’ of tangible assets between public sector entities Opinion n° 2013-05 of 5 July 2013 relating to intervention expenses of some public establishments 41

  42. Prior opinions of the Council on regulations (1/4) • 7th December 2009: draft decree relating to the financial requirements applicable to health institutions • 9th April 2010: draft decree relating to charges made by institutions accommodating elderly dependent people and to the financial and budgetary regulations of social and medical care institutions • 15 April 2010: clarification of the wording of two articles in the Social Security Code. • 30th June 2010: combined accounts of territorial hospital communities

  43. Prior opinions of the Council on regulations (2/4) 11 July 2011: nomenclature of the budgetary and accounting instruction M9-3 relating to public establishments of a scientific, cultural and professional nature (EPSCP). 17 October 2011: Opinion no. 2011-08 on the draft decree relating to public budgetary and accounting management 13 April 2012: Opinion on the accounting requirements in the draft decree amending certain provisions relating to time savings plans and annual leave in the Hospital Civil Service. 25 October 2012: Opinion relative to the accounting standards of the network of chambers of trade and craft industries. 43

  44. Prior opinions of the Council on regulations (3/4) 25 October 2012: Opinion on the draft order relative to the financial accounts of public health establishments 17 December 2012: Opinion concerning the draft decree introducing a requirement to recognize a liability for each day set aside in the draft decree amending the time savings plan scheme for hospital practitioners. 44

  45. Prior opinions of the Council on regulations (4/4) 5 July 2013 – Opinion on the draft decree relating to provisions for public hospitals auditing 5 July 2013 – Opinion of instruction M9-6 relating to the budgetary and accounting framework for local public educational institutions (EPLE) 11 February 2013 – Opinion on a draft order relating to supplementary pension scheme of social security for non-permanent staff of the Central Government and public entities 45

  46. The replies of the Council to the consultations of the IPSAS Board (1/4) • June 2009 - Exposure Draft “ED 36 – Agriculture” • June 2009 - Exposure Draft “ED 41 – Entity combinations from exchange transactions” • June 2009 – Exposure Drafts “ED 37, 38, 39 – Financial Instruments: Presentation, Recognition and Measurement, Disclosures” • July 2009 – Exposure Draft “ED 40 – Intangible Assets” • October 2009 – Exposure Draft “ED 42 – Improvements to IPSASs” • June 2010 – Consultation Paper “Reporting on the Long-Term Sustainability of Public Finances” • June 2010 – Exposure Draft “ED 43 – Service concessions arrangements: Grantor” • June 2010 – Exposure Draft “ED 44 – Improvements to IPSASs”.

  47. The replies of the Council to the consultations of the IPSAS Board (2/4) June 2011: General comments concerning consultations relatives to the Conceptual Framework for Public Sector Entities. June 2011: Exposure Draft, phase 1 “Conceptual Framework”. June 2011: Consultation Paper, phase 2 “Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Measurements of Assets and Liabilities in Financial Statements”. June 2011: Consultation Paper, phase 3 “Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Elements and Recognition in Financial Statements”. July 2011: Exposure Draft “ED 45 - Improvements to IPSASs 2011”. August 2011: Exposure Draft “Key Characteristics of the Public Sector with Potential Implications for Financial Reporting”. 47

  48. The replies of the Council to the consultations of the IPSAS Board (3/4) February 2012: Exposure-Draft "ED 46 - Reporting on the long-term sustainability of a public sector entity's finances". May 2012: "Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Presentation in General Purpose Financial Reports". May 2012: " Reporting Service Performance Information" July 2012: Exposure-Draft "ED 47 - Financial Statement Discussion and Analysis". October 2012: "Public Sector Combinations“ October 2012: IPSAS Board's work plan for 2013 and 2014. 48

  49. The replies of the Council to the consultations of the IPSAS Board (4/4) April 2013 - Consultation Paper “IPSASs and Government Finance Statistics Reporting Guidelines” April 2013 - Conceptual Framework Exposure Draft 2 - Elements and Recognition in Financial Statements April 2013 - Conceptual Framework Exposure Draft 3 - Measurement of Assets and Liabilities in Financial Statements July 2013 – Conceptual Framework Exposure Draft 4 - Presentation in General Purpose Financial Reports 49

  50. The replies of the Council to the other international consultations May 2012: Eurostat consultation on IPSAS Standards July 2012 : "Public consultation on the governance (with special focus on organisational aspects, funding, composition and the roles) of the Monitoring Group, the PIOB, the standard setting boards and Compliance Advisory Panel operating under the auspices of IFAC". March 2013 – IVSC - Exposure Draft on Valuations of specialised public service assets September 2013 – IFAC - Public consultation “Good governance in the Public Sector” 50

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