Selecting International Standards for Accrual-Based Accounting in the Public Sector: IPSAS or IFRS?

By Aggestam-Pontoppidan, Caroline | The Journal of Government Financial Management, Fall 2011 | Go to article overview

Selecting International Standards for Accrual-Based Accounting in the Public Sector: IPSAS or IFRS?


Aggestam-Pontoppidan, Caroline, The Journal of Government Financial Management


For a number of years, academics, regulators and practitioners active within the sphere of public sector accounting have debated the benefits and disadvantages of adopting accrual accounting within the public sector. Nevertheless, there is a clear push toward furthering the conversion to accrual accounting among governments and public sector entities.

This movement is strongly pursued by the international standards-setter, the International Public Sector Accounting Standards Board (IPSASB)1, issuer of International Public Sector Accounting Standards (IPSAS).2 The International Federation of Accountants (IFAC) issued a series of recommendations3 for consideration by the G20 countries at their meeting in June 2010. IFAC specifically points out that:

"...many governments adhere to the cash basis of accounting, IFAC and the [IPSASB] encourage the adoption of accrual-based accounting as it reinforces the principles of transparency and accountability. Under the accrual basis of accounting, transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid). Therefore, transactions and events are recognized and reported in the financial statements of the periods to which they relate."4

In addition, the Organisation for Economic Co-operation and Development (OECD) has stated that accrual accounting is critical to enable accounting and reporting on the allocation and use of total economic resources at the disposal of managers. Recently, Ian Ball of the IFAC strongly re-emphasized the message of the incoming chairman of the International Accounting Standards Board (IASB), Hans Hoogervorst5 that "without transparency, there can be no enduring stability" at a 2011 international conference on "Trust and Accountability in Public Financial Management."6 Ball added to Hoogervorst's statement: "I believe that without transparency, neither can there be trust or accountability. And as a basis for what follows, I should be clear that a crucial element of transparency in the public sector is accrual accounting."7

At the same time, though, academics are debating whether the accounting needs of the public sector are well served by accrual accounting practices. Although the debate continues, the trend in practice seems clear-the number of public entities and governments that have or are in the process of adopting accrual accounting is continuously increasing. Today approximately one-third of OECD countries have adopted full accrual accounting. This has been done either for the entire government accounts or at the ministry level.8

Public sector entities that seek to apply a set of internationally recognized accounting standards in their move toward accrual accounting most often turn to IPSAS issued by the IPSASB, an independent board of IFAC." A few countries have recently chosen International Financial Reporting Standards (IFRS). Australia, for example, became one of the first countries to adopt IFRS within local governments for the 2005-2006 financial year. Another example is the United Kingdom, where the accounts of central government departments and entities in the wider public sector are to be produced using IFRS as of March 2010. This article provides an overarching introduction to the definition of a government business enterprise (GBE), as provided in IPSAS, as a determinant for applying IPSAS or IFRS for a public sector entity. It also briefly discusses some key arguments for the application of IFRS versus IPSAS by public entities moving toward accrual accounting.

GBE or Not?

Following the I PSAS, if a public sector entity meets all the criteria for being a GBE it is excluded from the scope of I PSAS and mandated toapply private sector international standards IFRS.10 A GBE is an entity that has all of the follow ing characteristics:

a. it is an entity w ith the power to contract in its own name;

b. it has been assigned the financial and operational authority to carry on a business;

c. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Selecting International Standards for Accrual-Based Accounting in the Public Sector: IPSAS or IFRS?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.