The Right Approach: International Public Sector Accounting Standards (IPSAS)
Public finances have been affected greatly by the influence of Covid-19. Although governments have taken action throughout the pandemic to help individuals and businesses, its effects will have an extended impact on the global market.
International organizations have provided support in form of financial aid to underdeveloped and developing economies. Moreover, progressive economies have worked on introducing economic support in different areas, averaging at six percent of their Gross Domestic Product (GDP).
In the meantime, the IMF, International Monetary Fund has recently projected 2020 worldwide growth at -4.4 percent, which sustained a higher impact from Covid-19 than expected in the 1st half of the year. They further predicted that the recovery would be slower than forecasted before.
A More In-depth Understanding
During this complex time, financial information has been prepared according to the high standards of financial reporting. This includes the International Public Sector Accounting Standards (IPSAS), which allows the stakeholders to have a better perception of the activities and financial position of the governments.
Confidence and trust are built through transparency and accountability which are promoted through IPSAS based statements. They increase the ability of decision making and assist in making policies. Moreover, they let taxpayers assess the financial reports with assurance and help them in getting a better perception of the usage of resources, future, and current obligations, and the government’s skill to achieve them.
In current times, the reviewing of existing reporting policies might not be the top priority. Though, it remains significant for government bodies to understand the current condition of the financial statements in their jurisdiction and to identify the variations required in order for collection of high-quality information in the future.
A More Comprehensive Picture
The chair of (IPSASB) International Public Sector Accounting Standards Board has emphasized that the impact of Covid-19 will have an extensive effect on public investments. In order to go through the recovery process, government bodies need to wrap their heads around the information that accounting principles provide today.
Ever since IPSAS was first introduced by the International Federation of Accountants (IFAC), many public sectors and government individuals around the globe have stopped using the traditional accounting methods and use IPSAS policies instead.
The IFAC’s International Standards: 2019 Global Status Report states that 11% of the associate jurisdictions have adopted IPSAS fully and 52% have partially implemented some standards.
In the economic year 2014, the United Nations displayed firsthand how to adopt and produce its 1st set of financial statements of IPSAS, and the EU, European Union announced its adoption of the European Public Sector Accounting Standards based on IPSAS.
In the Middle East, many countries have started moving towards the framework of accrual accounting. The UAE has been making efforts to improve its statements as well. IPSAS is being implemented in both government and public entities.
It is more important to adapt to the IPSAS process as soon as possible. However, since this process can be considered overwhelming, it is important to take on its policies carefully in order to avoid errors.