The European Commission (EC) has warned there will be an issue with implementing International Public Sector Accounting Standards (IPSAS) across EU member states in their current form.
In a report, Towards implementing harmonised public sector accounting standards in the Member States, the EC said while IPSAS are not suitable for direct adoption they can be used to build a framework for the future development of European Public Sector Accounting Standards (EPSAS).
The EC said key IPSAS principles could be used as the initial basis for any EPSAS but any harmonized standards should be based on a "strong EU governance system".
However, it also noted the final decision as to whether to move to an EU-wide system accruals-based accounting standards would fall outside of the scope of this report.
In the EC’s opinion, there would, however, be "distinct benefits" for public sector management and governance in adopting a single set of accruals-based accounting standards, potentially leading to an improvement of "transparency, accountability, and the comparability of financial reporting in the public sector".
The Chartered Institute of Public Finance and Accountancy (CIPFA) welcomed the report’s support for the adoption of accrual reporting.
"The consistent adoption of accrual reporting in central, state and local governments across Europe as recommended by Eurostat would be a major step towards strengthening PFM in the region, as well as providing an important lead for other parts of the world," CIPFA policy and technical director Ian Carruthers commented.
"We welcome Eurostat’s recognition that IPSAS represent an ‘indisputable’ reference point for the development of harmonised accounting standards in Europe. However, the extent to which future public finance information is comparable globally will depend on how closely Eurostat follows IPSASs in its implementation requirements," he added.
The EC report is a result of a consultation with Commission services, international organisations, member states’ experts and other interested parties.