Public Sector Accounting and Reporting Reform

1. Public Sector Accounting and Reporting Reform Ukraine, Kiev Minsk, Belarus 2016

2. Legislative Framework for the Reform Initially: Strategy to Upgrade Public Sector Accounting System for 2007-2015 (Resolution of the Cabinet of Ministers #34 dated January 16, 2007) PFM Modernization Strategy (instruction of the Cabinet of Ministers #888-p dated October 17, 2007) Since August 2013 – a component of the PFM reform (instruction of the Cabinet of Ministers #774-p dated August 01, 2013 «PFM Development Strategy») At present– Strategy for Governance Reform in Ukraine for 2016 - 2020 (instruction of the Cabinet of Ministers #474-p dated June 24, 2016) calls for a revision of the PFM Development Strategy

3. Goal: improve public sector accounting system compliant with the International Standards (IPSAS) Objectives: design and introduce national standards of public sector accounting and reporting compliant with IPSAS develop a Unified Chart of Accounts for public sector accounting harmonized with the budget classification improve techniques to develop and consolidate statements using state-of-the-art IT systems

4. Legislative Framework The Budget Code and Law on Accounting and Financial Statements have been amended The MoF developed and approved by its orders: 19 NPSASthat reflect the requirements of IPSAS PFA Chart of Accounts, guidelines on using the Chart of Accounts, standard correspondence templates

5. Accounting Reporting 101Presentation of Financial Statements 102 Consolidated Financial Statements 103 Segment Reporting 105 Financial Reporting in Hyperinflationary Economies 121Property, Plant and Equipment 122 Intangible Assets 123 Inventories 124 Revenues 125 Changing in Accounting Estimates and Errors 126 Leases 127 Impairment of Assets 128 Liabilities 129 Investment Property 130 The Effect of Changes in FX rates 131 Construction Contracts 132 Employee Benefits 133 Financial Investments 134 Financial Instruments 135 Expenditures National Standards (NPSAS) * White color denotes NS introduced since January 1, 2015

6. The reform is implemented in stages 1) since January 1, 2015, nine NPSAS have been introduced 2) МoF plans to introduce 10 NPSAS and Chart of Accounts from January 1, 2017 – for budget fund administrators and state special purpose funds from 2018 – for the Treasure of Ukraine The Treasury together with MoF have developed an action plan for 2017 – 2018 to introduce the PSA Chart of Account and NPSAS regarding financial statements production and budget execution.

7. NPSAS Introduction Challenges Мethodological Lack of: approved regulation regarding budget classification (economic and incomes classification) approved procedures for NPSAS-compliant financial statements rules to consolidate financial statements data Тechnology public sector entities lack relevant software Institutional staff training

8. Key challenges misalignment between the current budget classification andGFS requirements defining rules to consolidate some data contained in budget holders’ financial statements defining of reporting segments by public sector entities (country cases) migration of state special purpose funds to NPSAS and Chart of Accounts procedure to reflect differences in foreign exchange rates According to NPSAS: revenues +; expenses + Is it necessary to adjust budget appropriations approved by Law on State Budget for the amount of foreign exchange rate differences?

9. Thank you!