Ian Ball: “If Germany used IPSAS, it would need to report a loss associated with its holdings of Greek Government debt”

Ian Ball, chairman of the Chartered Institute of Public Finance and Accounting (CIPFA) and financial transparency champion, answers the questions of The Accountant on Greece’s misleading debt measurement and why Germany turns its back on IPSAS

On former Greek Deputy Finance Minister June announcement that Greece would be implementing IPSAS and the capacity to do so:

"Like any government moving to adopt IPSAS or accrual accounting, the capacity has to be built or hired. Governments currently using cash accounting will never have the capacity to operate a full accrual based system – it would be wasteful for them to do so. So, if they wish to move to accrual accounting, they will need to develop the capacity."

On Germany, one of Greece’s toughest creditors, who doesn’t use IPSAS:

"Germany’s reluctance to adopt IPSAS pre-dates the Greek crisis, but signals an unwillingness to produce financial information that is fully transparent and internationally comparable. If Germany used IPSAS, it would need to report a loss associated with its holdings of Greek Government debt. Under a cash basis of accounting, this is not the case."

On the difference between Greece’s debt measured under IPSAS (68% of GDP) and the conventional figures (180% of GDP):

"The difference between the IPSAS based number and the "conventional figures" is that the latter is the face value of the debt, whereas IPSAS takes account of the length of the maturity of the debt and concessional interest rates.

"Economists also agree, and it is increasingly being recognised by informed commentators, that debt with long maturities and concessional interest rates should not be measured at its face value."

Read the full Q&A with Ian Ball here