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First of all, it is to be stressed that FEE has always supported accruals-based accounting in the public sector and fully supports its implementation at all levels of government. The majority of EU Member States has already implemented accruals accounting or are at least in the process of doing so.
A single set of high quality principle-based standards could greatly contribute to stability and sustainability of public finance – accruals-based accounting standards would ensure completeness and reliability of information; harmonised public sector accounting standards would enhance comparability.
IPSAS already exist. They are the only recognised set of international standards. They are based on IFRS, which are endorsed in the EU and they have been developed through a thorough due process including public consultation with the opportunity for everybody (also in Europe) to contribute.
As any set of standards, IPSAS may have pros and cons for certain stakeholders, or some shortcomings. Critical voices point out that they are not complete in terms of coverage (e.g. social benefits), they need to be updated in line with IFRS developments, they provide options between alternative accounting treatments and the current governance process lacks public oversight. Never the less, most of these issues could be solved.
As a result of the consultation on the suitability of IPSAS, the European Commission now suggests developing European standards (EPSAS).
After due consideration and debate with the profession across Europe, FEE has identified some concerns related to the development and implementation of EPSAS:
a. Duplicating the organisation and the effort of creating public sector standards for the EU when global standards are already available does not seem to be entirely logical and cost efficient. In this respect, there might be other, more time- and cost-efficient solutions to make accruals accounting mandatory in the EU and ensure that Member States use the same model, for example an EU endorsement of IPSAS. Taking into account that IFRS are used in some countries for public sector accounting, it might also be worth leveraging their experience.
b. Developing EPSAS for the EU within the European Unions’ legislative process has limited chances to produce a timely and harmonised solution, as 28 Member States would need to agree. This problem occurs in any area of EU legislation; a recent example is the EU Accounting Directive, which has casted light on the difficulties in brokering a consensual, European common approach. The number of Member State options left in this directive can only prove the challenges incumbent to harmonising financial information at a European level. The problem is even more likely to occur when EU legislation has an impact on Member States’ financial statements and the related transparency.
c. Developing EPSAS for the EU within the European Unions’ legislative process also makes the standard setting process vulnerable to political tinkering. When developing the standards as implementing acts, decisions in the EPSAS Committee would be made by representatives from Member States, who may want to push forward their domestic agenda regarding public sector accounting. The standards produced in such process and the financial statements produced on the basis of such standards might trigger less investor confidence than those produced on the basis of independent international standard setting.