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This article discusses the benefits of implementing International Public Sector Accounting Standards (IPSASs) in order to improve financial management, reporting quality, transparency, and credibility of public sector financial statements. It explores the advantages of accrual accounting and the potential for enhanced audits and quality control. The article also addresses the debate between IPSASs and European Public Sector Accounting Standards (EPSAS) adoption and highlights the necessary steps and conditions for successful implementation.
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THE INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS: A STEP TOWARDS IMPROVING PUBLIC FINANCE MANAGEMENT TRANSPARENCY AND ACCOUNTABILITY BOYKO KOSTOV, ICPAB President
IFAC/IPSAS/ICPAB The Institute of Certified Public Accountants in Bulgaria is a full member of the International Federation of Accountants /IFAC/, which develops the International Public Sector Accounting Standards /IPSASs/. With regards to this and as a part of its individual membership compliance action plan the ICPAB seeks to promote and explain the benefits of implementing a clear framework for preparing and presenting public sector financial statements.
IPSAS’s Aims Currently the IPSASs are the only internationally recognized set of public sector accounting standards. They are developed on the basis of the International Financial Reporting Standards /IFRS/, which are generally applied in the real economy. The IPSAS aims are: • to improve financial management; • to improve the quality of financial reporting; • to increase the transparency and to achieve a higher credibility of financial reports;
ICPAB’s perspective Full implementation of the accruals principle in the public sector. The advantages: • Overall accounting framework will be implemented with clear rules on public sector financial statements preparation; • The application of this framework allows the disclosure of the required information about contracts in progress and the respective potential obligations assumed by budget-financed enterprises that would have an effect in subsequent reporting periods;
ICPAB’s perspective • This would enhance to a considerable degree the quality of audits of budget-financed entity’s financial statements since every audit provides an opinion on compliance /true and fair presentation/ with a defined accounting framework for financial statements preparation and presentation; • This would result in material enhancement of quality control. Application of the accruals principle is the global approach to modernize public finance management. By applying this principle, both a higher credibility of financial statements and an opportunity to present required information in a timely manner are being achieved. As a final effect, an enhanced comparability of financial statements over different reporting periods would also be achieved.
IPSAS or EPSAS? The basic issue IPSAS or European Public Sector Accounting Standards /EPSAS/? The IPSAS or EPSAS adoption issue cannot be resolved by a single act. What we need is not only a strong political will, but very serious and effective preliminary preparations and subsequent work to implement such a difficult reform in public finances.
Steps and conditions Steps: National Audit Office, ICPAB and UNWE – organized discussions on IPSAS adoption. Conditions: • Strong political will; • Taking into consideration the opinion and the position of all interested parties through a public consultation process; • Elaborating a road map for the step-by-step IPSAS implementation; • Organizing training courses for all the public sector servants; • Ensuring a relevant IT support for the whole implementation process.
