ACCRUALS IN

OECD MEMBER COUNTRIES

Jón R. Blöndal

Directorate for Public Governance

Santiago de Chile

29January 2003

AGENDA

• Why Accruals?• Application of Accruals

– Overview of Member Countries’ Practices

• Key Issues– Recognition Issues– Valuation Issues – Accounting Standards– Implementing Accruals

• Conclusion: Importance of Cash

WHY ACCRUALS ?

• Major Trend in OECD Member countries• Making the True Cost of Government Services Transparent• Linkages with Wider Public Sector Reforms

SPECTRUM OF ACCRUALS (1)

• Cash Basis, But Supplementary Information Presented on Accrual Basis

• Cash Basis, Except Certain Transactions on Accrual Basis

• Accrual Basis, Except No Capitalisation or Depreciation of Assets

• Full Accrual Basis

SPECTRUM OF ACCRUALS (2)

• Departmental/Agency Financial Statements

• Consolidated, Whole of Government Financial Statements

• Budget

Recognition Issues

• Heritage Assets ?• Military Systems ?• Infrastructure Assets ?• Natural Resource Assets ?• Social Insurance Programs ?

Valuation Issues

• Historical Cost• Current Market Value

Accounting Standards

Three Basic Models for Deciding Them

• Traditional: Finance Ministry Decision, with or without Consultative Group • Australia/New Zealand: Single Standard Setter for Private and Public Sectors• International Public Sector Accounting Standards

Implementation Issues

• Too Slow vs. Too Fast• Education and Training Issues

– Including Members of Parliament, the Media and the Public

• Computer Systems• Assets Registers• Determining Accounting Standards

Conclusion:Cash Still Very Important

• Role of Cash-Flow Statement• Focus on Economic Impact

– Cash Injection/Withdrawal

• Fiscal Policy Setting• In-Year Control

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