Enhancing transparency of government financial statements

The International Public Sector Accounting Standards Board of the International Federation of Accountants is working to ensure that governments are accountable for their performance against their budgets. For this reason, it has issued an exposure draft dealing with the reporting of budget and actual financial information in general-purpose financial statements. ED 27, “Presentation of budget information in financial statements,” applies to entities that are required to make publicly available the approved budgets for which they are held accountable. It proposes the disclosure of the original and final approved budgets and actual financial information on a comparable basis to the budget.

“Since budget authorizations to spend given by the Parliament are so important in the public sector, most governments prepare and make publicly available their financial budgets,” says IPSASB Chair Philippe Adhémar. “Reporting against those budgets will enhance the transparency of general-purpose financial statements and is an important element in the discharge of accountability of these entities.”

IPSASB has also issued ED 28, “Disclosure of financial information about the general government sector.” ED 28 has been issued as part of the IPSASB’s program to support convergence of IPSASs and statistical bases of financial reporting, where such convergence is appropriate.

“Statistical reporting bases and IPSASs have many similarities in their treatment of particular transactions and events, but there are also differences. This can be confusing to users, particularly in jurisdictions in which governments issue financial reports prepared in accordance with both statistical reporting bases and accounting reporting bases,” says Philippe Adhémar. “This exposure draft proposes disclosure about the general government sector in general purpose financial statements and mechanisms to better explain those differences.”

The ED does not require disclosure of such information, but prescribes reporting requirements that must be adopted by governments which elect to make such disclosures.

Comments on both ED 27 and ED 28 are requested by February 10, 2006. The EDs may be viewed by going to www.ifac.org/EDs. Comments may be submitted by email to publicsectorpubs@ifac.org.