International Public Sector Accounting Standards (IPSAS) are the public sector equivalent of International Financial Reporting Standards (IFRS). IFRS have been credited with providing a more transparent and accurate financial overview of listed companies around the world, using accruals accounting as opposed to cash accounting. The move towards using IPSAS in the public sector has the potential to radically change the practice of accounting and financial reporting in the sector, just as IFRS have accomplished with listed companies.
The adoption of IPSAS is gaining momentum across the world. In 2015, the European Union announced the establishment and adoption of European Public Sector Accounting Standards (EPSAS) based on IPSAS with adoption dates to be determined by the respective countries. Further afield, Australia and New Zealand have already converted from IFRS to IPSAS type standards for the public sector. In Africa, South-East Asia and South America, statements of support for IPSAS have also encouraged a trend of adoption across developing countries.
The need for greater transparency and accountability in government financial reporting was heightened by the global financial crisis, which reduced the resources that governments had available. In some instances, information contained in cash based financial statements had been insufficient for countries to predict and prevent sovereign liquidity crises. To attract foreign direct investment, countries have initiated financial management reform programmes, including the adoption of accrual accounting as part of broader reform programmes.
These factors have encouraged countries across the world to make statements concerning the adoption of standards established on either cash basis IPSAS or accrual basis IPSAS, with various deadlines. Countries have used differing approaches in their adoption of IPSAS and are in different stages of adoption, with some having just started, while others have completed the process. The level of success has varied and is typically measured by the outcomes of the external audit process.
This report examines progress across a sample of developing countries where much of the recent IPSAS commentary has been focused. The list is not intended to be exhaustive, rather it aims to give select insights into the current status quo of IPSAS adoption across a range of developing countries, identifying commonalities and emerging issues. Specifically the study considers the adoption of IPSAS focusing on:
- Date of announcement and date of adoption
- Overview of progress to date
- Success factors
- Challenges experienced
The study is based on desktop reviews of existing public information, including: annual reports of ministries of finance or supreme audit institutions; public expenditure framework assessment reports; IFAC, World Bank and IMF reports; and presentations at public sector conferences. We also reviewed published academic research papers studying the effects of implementing IPSAS.
Senior public sector leaders were consulted to validate the findings, analyse the reasons for IPSAS adoption and the benefits and costs involved, as well as the challenges and their solutions. We thank all those who participated in the study.