By Judith Ugwumadu | 15 August 2014

The G20 must make enhanced public sector financial management a key priority this year and in the future, the International Federation of Accountants said as it urged the group to adopt International Public Sector Accounting Standards.

Pointing to Argentina, a G20 member, which recently defaulted on its external debts, the global accountancy body, said the South American country was the latest in a long list of government defaults, bailouts and restructurings over the years. The case of Argentina also showed that the sovereign debt problems seen during the recent global financial crisis had not gone away, IFAC said.

IFAC chief executive Fayezul Choudhury said it was critical for G20 nations to focus on initiatives to improve governments’ financial management and reporting practices.

He recommended the adoption of accrual-based financial reporting, which needed to be ‘in accordance with high-quality, globally accepted standards’, like IPSAS. However, like many countries, Argentina does not prepare accrual-based financial statements, ‘which are essential for effective management’, IFAC said.

Accrual-based financial statements show a government’s total assets, liabilities, and cash flows and provide other important disclosures about future commitments and contingencies.

IFAC maintains that collection and recording of all this information is ‘essential for making proper decisions and ensuring that there is sound financial management for today, tomorrow, and for a long-term sustainable future’.

Choudhury continued: ‘IFAC urges the G20 to promote greater adoption of IPSASs, by adding these standards to the Financial Stability Board’s list of standards that are designated as deserving of priority implementation.’

He said countries continued to default on their debt, but were not pushed to significantly improve public sector financial reporting.

‘These same countries require private sector companies in their jurisdictions to publish audited, accrual-based, financial statements when raising funds in capital markets.

‘What justifies the double standard whereby a government compels private companies to be transparent and accountable, when it avoids using accrual accounting itself—despite having bonds traded on the capital markets?’