ESA and IPSAS: harmonization of government financial reporting

The European statistical guidelines for governments - prescribing how to determine government deficit and debt under Economic and Monetary Union (EMU) guidelines - and international government accounting standards have many similarities: they are both accrual accounting systems and they report on the same transactions and events. Yet their objectives differ and certain transactions and events are thus recognized differently. This paper analyzes the similarities and differences between the statistical principles of the European System of National and Regional Accounts (ESA) and the accounting standards of the International Public Sector Accounting Standards (IPSAS). With this analysis we aim to enhance the understanding of the financial information published by governments, which we consider highly relevant in this era of debt crises. Our conclusion is that the financial statements of governments prepared under generally accepted accounting standards and provided with an independent auditor’s opinion issued by a supreme audit institution or an audit firm may contribute significantly to the quality of statistics on government finances, and to the monitoring of the financial position of EU member states by the European Commission.

This comparison between ESA and IPSAS is a topical issue, since the European Commission (2013) issued a report recommending the adoption of IPSAS similar standards for the financial statements of the government of the member states, as input to the national accounts in accordance with ESA. Furthermore, the IPSAS Board (2012) issued a consultation paper ‘IPSASs and Government Finance Statistics Reporting Guidelines’.