By Nick Mann | 12 June 2012

The Group of Twenty should back moves towards greater transparency and accountability in public finances as part of a global effort to create economic sustainability and growth, the International Federation of Accountants said on Friday.

In a letter to G20 leaders as they prepare to meet in Mexico next week, IFAC called for ‘global solutions to global issues’. In particular, it said immediate action was needed to address the unsustainability of government financial positions and processes in many countries.

‘The threats to long-term sustainability and standards of living brought about by an ageing population and by politicians taking a short–term focus on decision-making, require immediate action,’ it said.

G20 leaders should support the development of international governance principles for public sector organisations. Work by CIPFA and IFAC could provide an understanding of what good governance in the public sector involves and create a ‘powerful stimulus for positive action’, it said.

Governments should also do as much as possible to eliminate corruption by adopting standards aimed at combating money laundering and terrorist financing, as well as ensuring tax obligations are properly assessed and collected according to the law. This could involve a ‘more simplistic’ tax regime, the letter said.

IFAC reiterated its support for the adoption of accrual-based accounting by governments and public sector bodies and said this should be mirrored in the private sector by the adoption and implementation of International Financial Reporting Standards and International Standards on Auditing.

‘IFAC believes it is imperative that the G20 support the adoption of globally accepted, high-quality international standards and requirements across all key aspects of the financial sector, in a manner appropriate for each regulated profession or industry,’ it said.

It added: ‘Consistent financial information around the world assists in facilitating cross‐border activity and promoting economic and financial stability. Global adoption and implementation of high-quality standards promotes the G20’s goal of strengthening transparency and accountability in the context of financial and capital markets and creating a level playing field in the interpretation and exchange of financial information.’

To support this goal, the G20 should support moves to increase the resources of international regulatory organisations and encourage national regulatory bodies to work together.

IFAC chief executive Ian Ball said the G20 was ‘uniquely positioned’ to provide the global solutions needed to support sustainability and growth.

‘The current problems being confronted by the global community require enhanced management of public resources, improved non-financial reporting and more sustainable organisations. The accountancy profession is well-placed to assist in finding and implementing these solutions,’ he added.