Accounting Developments of Spanish Local Governments: An International Comparison

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ABSTRACT. This paper analyzes the developments of Spanish local government accounting. To evaluate the Spanish developments in the presentation of annual accounts, we have taken as a benchmark the IPSAS (International Public Sector Accounting Standards) of the International Federation of Accountants (IFAC) and the accounting information disclosed by other countries at local level. This comparison allows us to identify strong and weak points and the degree of implementation of generally accepted accounting principles (GAAP) in Spanish local governments. In this article we also study the different ways of managing public services in Spanish and European local governments and the accounting procedures employed for consolidating the accounts of local governments. The results show a higher degree of coincidence between the services provided by larger European Union (EU) local governments and the need to consolidate their financial report.


In the last fifteen years, the developed countries have encouraged reforms in their governmental accounting systems, in order to improve the disclosure of information for both external and internal purposes. Although, traditionally, the users of public sector accounting have been managers and control bodies, nowadays, the generally accepted objectives of governmental accounting are, together with accountability, to provide useful information to guide the decision-making process of other potential users: legislative body members, audit offices, public service users, financial entities, investors, rating agencies, employees, tax payers, media, civil associations...

These reforms are produced within a framework in which governments are making important efforts to improve the efficiency of the public sector by means of the reduction of its size and the implementation of private sector management techniques. According to Guthrie (1999), public sector reforms have encouraged the promotion of performance measurement, auditing and business accounting systems for a wide range of public sector organizations. Furthermore, the implementation of Generally Accepted Accounting Principles (GAAP) attempts to give answers to information requirements originated by the decentralization of local government services: "the quid pro quo for increased autonomy and discretion on the part of managers or subordinate levels of government is more extensive accounting practices" (Pallot, 2000, p. 4).

At international level the International Federation of Accountants (IFAC) has submitted twenty International Public Sector Accounting Standards (IPSAS).1 The aim of this initiative is to assist governments at all levels in the preparation of their financial reports on the accrual basis. These IPSAS are based primarily on International Accounting Standards (IAS), submitted by the International Accounting Standard Committee (IASC) for business companies.

The IFAC and IASC have been working together since 1982. Since the constitution of the Public Sector Committee (PSC) in 1984, the IFAC has been working on the adaptation of the IAS to the public sector, first in state-owned enterprises and now in governmental entities. The impressive presence of IAS in the private sector accounting systems of almost all countries.2 and the above mentioned governmental reforms provide credentials for making the IPSAS of the IFAC a point of reference for the implementation of GAAP in governmental accounting.

The aim of this paper is to analyze the features and developments of Spanish local government accounting with respect to the framework and objectives of the reform, technical issues related to the budgetary accounting-financial accounting links, presentation of financial statements, problems of implementation, consolidation of annual accounts and auditing. In order to evaluate the Spanish local government accounting developments in the presentation of annual accounts, we have taken as a point of reference the IPSAS No. …