Clearer and better-informed balance sheets ‘a no-brainer’

12 Mar 19

Countries must start using the information presented in accrual financial reports to make better policy decisions, a seminar in Washington has heard.

Producing balance sheets and publishing comprehensive reports of what governments own and owe – their assets and liabilities – will also improve transparency and accountability, experts from the World Bank, IMF and the International Public Sector Accounting Standards Board agreed at the event.

Ed Olowo-Okere, World Bank director of governance global practice, said: “Accrual accounting can provide information for better management of government resources, with the potential to transform public sector financial management practices.

Jason Harris, deputy division chief of public financial management at the IMF, said: “It is key that policymakers use this information [for policymaking].”

A balance sheet should include clear liabilities – what a government owes and their commitments, such as pensions – and assets. These will present a more comprehensive picture of public finances.

Using this information to make fiscal policies can help governments strengthen their public finances, the seminar heard.

For example, the IMF highlighted that by better managing public assets, governments could add an extra 3% of GDP in revenue to its coffers.

Using the information and disclosing a clear picture of the state of the finances is “conceptually a no-brainer”, said James Brumby, World Bank director of governance.

Ian Carruthers, chair of the IPSASB, said accrual accounting and implementing the international public sector standards can help provide the information needed to produce clearer balance sheets.

According to a CIPFA and International Federation of Accountants index, 65% of governments will shift to accrual-based accounting within the next five years.

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