Over two days in the beginning of March 2019, over a hundred delegates from all over the world convened in Paris for OECD’s 19th annual symposium on public sector financial management of reporting.
There were a total of 21 presentations covering a wide range of topics. It felt that the overall theme of the discussions have moved on from the ‘benefit of accruals accounting’ of the recent past. The symposium advanced the discussion on wider public sector financial management, in particular the presentations on balance sheet management and use of big data stood out.
However, one delegate questioned whether accruals accounting (as well as whole of government reporting) was really necessary (or beneficial). This question could easily have been dismissed but it warranted a proper response given the number of countries that have not, nor plan to, adopted accruals accounting. The chair of the symposium, Mr. Michel Prada, President of the Public Sector Accounting Standards Council of France, responded to this question by saying that the discussions over the last seven years have demonstrated the benefits of accruals accounting over and above cash accounting. He made quite a passionate appeal on behalf of accruals accounting and was supported by Ian Carruthers, Chair of the International Public Sector Accounting Standards Board (IPSASB), who provided some concrete examples of the benefits of accruals data. A good double act.
The IMF presented a study it carried out on the balance sheets of 36 different countries. One of its conclusions was that countries with higher net worth (assets less liabilities) enjoyed lower interest costs on their borrowing than countries with lower net worth. Some delegates questioned the link between government’s net financial assets and interest costs. The UK’s net worth has deteriorated since the financial crisis in 2008 without experiencing increases in borrowing costs. Some delegates thought that the type of assets and liabilities on the balance sheet would play a role, such as liquidity of the assets. The IMF agreed to look into its assumptions.
One surprise was that ICAEW’s report Reporting Business Risk: Meeting Expectations was highlighted by D Scott Showalter, chairman of the US Federal Accounting Standards Advisory Board (FASB), as being excellent further reading on the subject of risk. As part of his presentation (on risk reporting), he brought up a screenshot of our report and said that it provided valuable practical insights on the topic. In case of interest, the report can be found here.
I will write a follow up blog going into more of the technical detail. . . Italy, for example, has come up with a novel way of using ‘value in use’ to measure heritage assets. Watch this space.