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Accounting Standards for Governments

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Presentation given by Ian Ball, IFAC chief executive officer, at the Financial Focus Breakfast in Brussels, January 2012.

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Accounting Standards for Governments

  1. 1. Accounting Standards forGovernmentsIan BallCEO International Federation of AccountantsFinance Focus Breakfast26 January 2012Bruegel, Rue de la Charité 33, 1210 Brussels
  2. 2. Accounting Standards for Governments
  3. 3. Accounting Standards for Governments
  4. 4. Accounting Standards for Governments “IFAC is concerned that the standards and regulations governing sovereign issuers are not of sufficient quality to protect investors and ensure the stability of capital markets…” “…looking at potential measures that could improve the quality and reliability of information disclosed by sovereign issuers and therefore increase the protection of investors and improve the stability of capital markets.”
  5. 5. Accounting Standards for GovernmentsLatin American sovereign debtNumber of years in default, 1824-2004 Latest period of default 0 20 40 60 80 100 120 Ecuador 116.0 1992-90 Mexico 85.0 1984-97 Peru 75.0 1995-97 Venezuela 65.0 2001-04 Argentina 50.0 1983-90 Chile 45.0 1983-94 Brazil 45.0 1986-97 Bolivia 40.0 2003 Uruguay 25.0
  6. 6. Accounting Standards for GovernmentsCountries with Sovereign Restructuring between 1990-2005(Agreement Date)1 Algeria (07/1996) Pakistan (12/1999) Argentina (04/1993, 04/2005) Panama (05/1996) Brazil (04/1994) Peru (03/1997) Bulgaria (06/1994) Philippines (12/1992) Chile (12/1990) Poland (10/1994) Cote dIvoire (03/1998) Russia (08/2000) Croatia (07/1996) South Africa (09/1993) Dominican Rep.(08/1994, 05/2005) Ukraine (04/2000) Ecuador (02/1995, 08/2000) Uruguay (05/2003) Mexico (05/1990) Venezuela (12/1990) Morocco (09/1990) Vietnam (12/1997) Nigeria (12/1991) Serbia & Montenegro (07/2004) Source: Cruces J and Trebesch C, Sovereign Defaults: The Price of Haircuts (Preliminary Paper) December 2010
  7. 7. Accounting Standards for GovernmentsGovernment-issued financial instruments represented3/4 of NYSE trading volume NYSE 2010 Trading Volume = $1425 trillion 16% Equities 7% Mortgage backed 0% securities 77% Mutual funds US Government securities
  8. 8. Accounting Standards for Governments
  9. 9. Accounting Standards for Governments
  10. 10. Accounting Standards for Governments
  11. 11. Accounting Standards for Governments New Zealand Government net worth 70.0 120,000 105,514 60.0 96,827 99,515 94,988 100,000 52.0 57.8 83,971 56.4 53.9 50.0 50.2 80,000 40.0 35.2 54,240 60,000 30.0 27.3 20.9 39,595 18.0 40,000 20.0 28,012 12.9 22,825 15,450 20,000 10.0 0.0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Net Worth ($ millions) Net Worth (as % of GDP)
  12. 12. Accounting Standards for Governments
  13. 13. Accounting Standards for GovernmentsMembers of the IPSASB are nominated by IFAC member bodies and, for publicmembers, through nominations from member bodies, other organizations, and thegeneral public.David Bean, Deputy Chair United States Ron Salole CanadaThomas Müller-Marqués Berger Germany Adriana Tiron-Tudor RomaniaIan Carruthers United Kingdom Isaac Umansky UruguayMarie-Pierre Cordier France Ken Warren New ZealandRachid El Bejjet Morocco Tim Youngberry AustraliaKenji Izawa JapanHong Lou China Public MembersMasud Muzaffar Pakistan Andreas Bergmann, Chair SwitzerlandAnne Owuor Kenya Mariano DAmore ItalyJeanine Poggiolini South Africa Sheila Fraser Canada
  14. 14. Accounting Standards for Governments “1.1 In relation to the need for high-quality and timely accrual-based financial reporting, IFAC recommends that the G-20 actively encourages and facilitates the adoption of accrual-based accounting by governments and public sector institutions.”
  15. 15. Accounting Standards for Governments “1b. Member States shall move to adopt International Public Sector Accounting Standards within three years of this Directive coming into force.…”
  16. 16. Accounting Standards for GovernmentsTo quote the American colonial revolutionaryPatrick Henry: “The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them.
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