Within the next five years 65% of governments globally will report on accrual basis, according to the International Federation of Accountants (IFAC) and the Chartered institute of Public Finance and Accountancy (CIPFA).
IFAC’s 2018 Index Status Report had indicated that 25% of governments currently report on accrual basis, whilst 65% will do so by the end of 2023. Asia, Africa, Latin America and the Caribbean are said to lead the increase.
Accrual reporting means recording the economic substance of transaction when they are occurring as opposed to when a cash settlement occurs, this is a significant difference which impacts transparency and accountability.
CIPFA’s chief executive Rob Whiteman said: “Accruals-based accounting and auditable financial statements are essential if governments are to promote trust and transparency, identify and fight corruption, and above all deliver the outcomes their citizens expect and deserve.”
IFAC’s incoming CEO Kevin Dancey commented: “The rapid acceleration of accrual reporting in the public sector, and IPSAS in particular, is a promising sign for citizens across the globe. Professional accountants play a critical role in unlocking the full benefits of accrual accounting and in improving decision making, transparency and accountability throughout the economy.”
Furthermore, 51% of the governments that report on accrual basis also use International Public Sector Accounting Standards (IPAS) directly, indirectly or as a reference point. IPSAS provides financial reporting guidance to public bodies, as a bid to improve consistency and transparency.
Planning for the accrual reforms is significant and also require sustained support. According to the report additional requirement include, frequent and clear communication, a change management programme, coordinated training, and capacity building.