Belén Hernández, Public Accounting Directorate Spain - IFAC Sovereign Debt Seminar

1. THE SOVEREIGN DEBT CRISIS,
A MATTER OF URGENCY-FROM
LESSONS TO REFORM
VIENNA, 19th-MARCH-2012
FROM CASH TO ACCRUAL ACCOUNTING AND
BUDGETING IN GOVERNMENT.
WHY, WHEN AND HOW?
Belén Hernández
1
BHernandez@igae.minhap.es

2. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: WHEN?
BEFORE 1981
PUBLIC ACCOUNTING = BUDGETARY ACCOUNTING
ALMOST CASH BASED SYSTEM
1981-1986
NEW PUBLIC ACCOUNTING
REGULATION +
NEW IT SYSTEM: SIC
PUBLIC ACCOUNTING:
 BUDGETARY ACCOUNTING: ALMOST CASH BASED SYSTEM
 FINANCIAL ACCOUNTING: ACCRUAL BASED SYSTEM
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3. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: WHEN?
FROM 2011
NEW PUBLIC ACCOUNTING
REGULATION ADAPTED TO IPSAS
+
NEW IT SYSTEM: SIC’3
PUBLIC ACCOUNTING :
 BUDGETARY ACCOUNTING: ALMOST CASH BASED SYSTEM
 FINANCIAL ACCOUNTING: ACCRUAL BASED SYSTEM
ADAPTED TO IPSAS
 COST ACCOUNTING
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4. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: WHY?
1981
WHY?
TO HARMONIZE TO SHOW THE
WITH THE NEW FAITHFUL
SPANISH IMAGE OF
BUSINESS FINANCIAL
ACCOUNTING STATEMENTS
REGULATION
(1973)
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5. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: WHY?
FROM 2011
WHY?
TO HARMONIZE WITH TO SHOW THE
THE SPANISH FAITHFUL IMAGE
BUSINESS OF FINANCIAL
ACCOUNTING STATEMENTS
REGULATION (2007)
ADAPTED TO IAS-IFRS
TO ADAPT
TO PROVIDE INFORMATION ACCOUNTING
ABOUT NEW REGULATION
TRANSACTIONS WHICH TO IPSAS
WEREN´T ANALYZED IN THE
PREVIOUS REGULATION
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6. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: HOW?
1981 2006 2011
WINNING INTEREST AND SUPPORT FROM
POLITICAL LEVEL
MINISTRY OF FINANCE AS REFORM DRIVER
AND STANDARD SETTER FINANCIAL
REFORM DESIGN AND IMPLEMENTATION STATE
THROUGH OWN STAFF
MENTS
STUDY OF SPANISH BUSINESS ACCOUNTING ADAPTED
REGULATION
TO IPSAS
INTENSIVE STUDY
OF IPSAS, IAS-IFRS
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7. FROM CASH TO ACCRUAL ACCOUNTING
IN GOVERNMENT: HOW?
1981 - 1986 2006 - 2011
HOW?
NEW PERSONAL
REGULATION TRAINING
NEW IT
SYSTEM
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8. GOVERNMENT BUDGET
BUDGETARY EXERCISE:
1ST JANUARY-31ST DECEMBER
BUDGET STRUCTURE:
 EXPENDITURE BUDGET: LIMITATIVE
 REVENUE BUDGET: ESTIMATIVE
BUDGETARY ACCOUNTANCY:
RIGHTS AND OBLIGATIONS RECOGNITION
(ALMOST CASH BASED SYSTEM)
FINANCIAL STATEMENTS:
INFORMATION ABOUT BUDGET EXECUTION
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9. GOVERNMENT ACCOUNTING
PUBLIC ACCOUNTING REGULATION PROVIDES TWO
RECORDING SYSTEMS COMPLETELY INTEGRATED:
 FINANCIAL ACCOUNTANCY
 BUDGETARY ACCOUNTANCY
FINANCIAL ACCOUNTANCY (double-entry book-keeping)
applies a FULL ACCRUAL BASED SYSTEM.
BUDGETARY ACCOUNTANCY (single-entry book-keeping)
almost applies a CASH BASED SYSTEM.
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10. FINANCIAL ACCOUNTANCY
(DOUBLE-ENTRY BOOK-KEEPING)
ACCRUAL BASED SYSTEM (I)
ACCRUAL STANDARD:
“Transactions and other events should be
recognised when they occur (and not as cash or its
equivalent is received or paid) and they are recorded
in the accounting records and reported in the
Financial Statements of the periods to which they
relate.”
Financial statements prepared on the accrual
basis inform users not only of past transactions
involving the payment and receipt of cash but
also of obligations to pay cash in the future and
of resources that represent cash to be received in
the future.
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11. FINANCIAL ACCOUNTANCY
(DOUBLE-ENTRY BOOK-KEEPING)
ACCRUAL BASED SYSTEM (II)
Economic revenues and expenses deriving from
budget execution can be recorded at the same time as
the correlative budgetary rights and obligations.
TWO KIND OF ADJUSTMENTS should be made at the
end of the year:
 All revenues and expenses already recorded and
assigned to budget but not totally accrued must be
corrected through accrual adjustments.
 All revenues and expenses accrued in the financial
sphere but not assigned to budget yet must be
recorded.
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12. FINANCIAL ACCOUNTANCY
CHART OF ACOUNTS
GROUP 1
BASIC FINANCING
GROUP 2 NON CURRENT ASSETS
STATEMENT OF
GROUP 3
INVENTORY AND OTHER CURRENT ASSETS
FINANCIAL
POSITION
GROUP 4
CREDITORS AND DEBTORS
CASH FLOW
GROUP 5 STATEMENT
FINANCIAL ACCOUNTS
GROUP 6
BUYS & EXPENDITURES STATEMENT OF
FINANCIAL
GROUP 7
SALES & INCOMES PERFORMANCE
GROUP 8: EXPENDITURES RECOGNIZED
DIRECTLY IN EQUITY STATEMENT OF
CHANGES IN
GROUP 9: INCOMES RECOGNIZED
DIRECTLY IN EQUITY
EQUITY
GROUP 0
BUDGETARY CONTROL ACCOUNTS
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13. BUDGETARY ACCOUNTANCY
(SINGLE-ENTRY BOOK-KEEPING)
EXPENDITURE BUDGET
BUDGET BUDGET UNPAID
BUDGET EXECUTION= PAYMENTS RECOGNIZED UNEXECUTED
ITEM ORIGINAL CHANGES FINAL RECOGNISED (5) OBLIGATIONS BUDGET
(1) (2) (3=1+2) OBLIGATIONS (7=4-5) (8=3-5)
(4)
TOTAL
COMPARISON OF BUDGET AND ACTUAL
AMOUNTS
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14. BUDGETARY ACCOUNTANCY
(SINGLE-ENTRY BOOK-KEEPING)
INCOME BUDGET
BUDGET
BUDGET
EXECUTION= CASH IN UNPAID UNEXECUTED
BUDGET RECOGNIZED FLOW RECOGNIZED BUDGET
ITEM ORIGINAL CHANGES FINAL RIGHTS RIGHTS
(5) (6=4-5) (7=3-4)
(1) (2) (3=1+2) (4)
TOTAL
COMPARISON OF BUDGET AND ACTUAL
AMOUNTS
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15. FINANCIAL STATEMENTS
STATEMENT OF
FINANCIAL POSITION
STATEMENT OF
FINANCIAL
NOTES PERFORMANCE
FINANCIAL
STATEMENTS STATEMENT
OF
CHANGES
IN EQUITY
COMPARISON
OF BUDGET CASH FLOW
AND ACTUAL STATEMENT
AMOUNTS

16. I. STATEMENT OF FINANCIAL POSITION (I)
ASSETS
A) NON-CURRENT ASSETS NOTES N N-1
I. Intangible assets
II. Property, plant, and equipment
III. Investment property
IV. Financial assets in controlled entities, joint
ventures and associated.
V. Financial assets (in the rest of entities)
B) CURRENT ASSETS
I. Available-for-sale-non-financial assets
II. Inventories
III. Recoverables
IV. Financial assets in controlled entities, joint
ventures and associated
V. Financial assets (in the rest of entities)
VI. Accrual adjustements
VII. Cash and cash equivalents
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17. I. STATEMENT OF FINANCIAL POSITION (II)
EQUITY AND LIABIILITIES
A) EQUITY NOTES N N-1
I. Contributed capital
II. Accumulated surpluses or deficits and
reserves
III. Changes in fair value recognized in equity
IV. Another equity increases
B) NON CURRENT LIABILITIES
I. Provisions
II. Financial liabilities (in the rest of entities)
III. Financial liabilities in controlled entities, joint
ventures and associated
C) CURRENT LIABILITIES
I. Provisions
II. Financial liabilities
III. Financial liabilities in controlled entities, joint
ventures and associated
IV. Payables
V. Accrual adjustements
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18. II. STATEMENT OF FINANCIAL
PERFORMANCE (I)
NOTES N N-1
1. Taxes contributions to National insurance
2. Transfers
3. Sales and rendering of services
4. Inventory turnover &disposals
5. Other revenues from ordinary activities
6. Increase in provisions
A) TOTAL REVENUE FROM OPERATING ACTIVITIES (1+2+3+4+5+6)
7. Wages, salaries, and employee benefits
8. Grants and other transfer payments
9. Acquisitions
10. Other expenses from ordinary activities
11. Depreciation and amortization expense
B) TOTAL EXPENSE FROM OPERATING ACTIVITIES (8+9+10+11)
I. SURPLUS/DEFICIT FROM OPERATING ACTIVITIES (A-B)
12. Impairment and disposals of items of property, plant, and equipment
13. Non ordinary items
II. NON FINANCIAL SURPLUS/DEFICIT (I+12+13)
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19. II. STATEMENT OF FINANCIAL
PERFORMANCE (II)
NOTES N N-1
14. Finance revenues
15. Finance expenses
16. Changes in fair value recognized in surplus or deficit
17. Changes in foreign exchange rates
18. Impairment and disposals of financial assets and liabilities
III. FINANCIAL SURPLUS/DEFICIT RESULT (14+15+16+17+18)
IV. SURPLUS OR DEFICIT FOR THE PERIOD (II + III)
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20. III. STATEMENT OF CHANGES IN EQUITY:
STRUCTURE
TOTAL STATEMENT OF CHANGES IN EQUITY
STATEMENT OF REVENUES AND EXPENSES
STATEMENT OF TRANSACTIONS WITH OWNERS
ACTING IN THEIR CAPACITY AS OWNERS
EQUITY TRANSACTIONS WITH OWNERS ACTING IN
THEIR CAPACITY AS OWNERS
ANOTHER TRANSACTIONS WITH OWNERS ACTING IN
THEIR CAPACITY AS OWNERS

21. III.TOTAL STATEMENT OF CHANGES IN
EQUITY (I)
II. III.
I. IV.
Accumulated Changes in
Contri Another
NOTES surpluses or fair value TOTAL
buted equity
deficits and recognized
capital increases
reserves in equity
A. EQUITY AT THE END OF
THE PERIOD N-1
B. CHANGES IN
ACCOUNTING POLICIES
AND CORRECTIONS OF
ERRORS
C. EQUITY AT THE
BEGINNING OF THE
PERIOD N (A+B)
D. CHANGES IN EQUITY FOR
THE PERIOD
1. Total revenue and expense
for the period
2. Transactions with owners
acting in their capacity as
owners
3. Another equity increases
E. EQUITY AT THE
END OF THE PERIOD N (C+D) 21

22. III. STATEMENT OF REVENUES AND
EXPENSES (II)
NOTES N N-1
I. SURPLUS OR DEFICIT FOR THE PERIOD
II. REVENUE AND EXPENSE FOR THE PERIOD THAT IS
RECOGNIZED DIRECTLY IN EQUITY
1. Property, plant, and equipment & Investment property
2. Financial assets and liabilities
3. Hedge accounting
4. Another equity increases
III. TRANSFERS TO THE STATEMENT OF FINANCIAL
PERFORMANCE
1. Property, plant, and equipment & Investment property
2. Financial assets and liabilities
3. Hedge accounting
4. Another equity increases
IV. TOTAL REVENUE AND EXPENSE FOR THE PERIOD (I+II+III)
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23. III. STATEMENT OF TRANSACTIONS WITH OWNERS
ACTING IN THEIR CAPACITY AS OWNERS (III)
EQUITY TRANSACTIONS WITH OWNERS
ACTING IN THEIR CAPACITY AS NOTES N N-1
OWNERS
1. CASH-CONTRIBUTED-CAPITAL
2. IN-KIND-CONTRIBUTED-CAPITAL
3. DEBT RELIEF OR ASSUMPTION OF
FINANCIAL LIABILITIES
4. ANOTHER CONTRIBUTED CAPITAL
5. (-) IN-KIND-DEVOLUTIONS TO OWNERS
6. (-) ANOTHER DEVOLUTIONS TO OWNERS
TOTAL
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24. III. STATEMENT OF TRANSACTIONS WITH OWNERS
ACTING IN THEIR CAPACITY AS OWNERS (IV)
ANOTHER TRANSACTIONS WITH
OWNERS ACTING IN THEIR NOTES N N-1
CAPACITY AS OWNERS
REVENUES AND EXPENSES
RECOGNISED IN THE ECONOMIC AND
ASSET RESULT STATEMENT
REVENUES AND EXPENSES
RECOGNISED IN THE STATEMENT OF
CHANGES IN EQUITY
TOTAL
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25. IV. CASH FLOW STATEMENT
NOTES N N-1
I. CASH FLOWS FROM OPERATING ACTIVITIES
II. CASH FLOWS FROM INVESTING ACTIVITIES
III. CASH FLOWS FROM FINANCING ACTIVITIES
IV. OTHER CASH FLOWS
V. EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES
VI. NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS (I+II+III+IV+V)
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
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26. V. COMPARISON OF EXPENDITURE
BUDGET AND ACTUAL AMOUNTS (I)
BUDGET BUDGET UNPAID
BUDGET EXECUTION= PAYMENTS RECOGNIZED UNEXECUTED
ITEM ORIGINAL CHANGES FINAL RECOGNISED (5) OBLIGATIONS BUDGET
(1) (2) (3=1+2) OBLIGATIONS (7=4-5) (8=3-5)
(4)
TOTAL
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27. V. COMPARISON OF INCOME BUDGET AND
ACTUAL AMOUNTS (II)
BUDGET BUDGET
EXECUTION= CASH IN UNPAID UNEXECUTED
BUDGET RECOGNIZED FLOW RECOGNIZED BUDGET
ITEM ORIGINAL CHANGES FINAL RIGHTS RIGHTS
(5) (6=4-5) (7=3-4)
(1) (2) (3=1+2) (4)
TOTAL
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28. V. COMPARISON OF BUDGET AND ACTUAL
AMOUNTS: BUDGETARY RESULT (III)
BUDGET BUDGET
EXECUTION= EXECUTION= BUDGETARY
RECOGNIZED RECOGNISED RESULT
RIGHTS OBLIGATIONS
a. Current operations
b. Non current operations
c. Comercial operations
1. Non financial operations (a+b+c)
d. Financial assets
e. Financial liabilities
2. Financial operations (d+e)
I. BUDGETARY RESULT FROM THE PERIOD (1+2)
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29. MORE INFORMATION ABOUT
SPANISH ACCOUNTING REGULATION
www.igae.pap.minhap.gob.es
Normativa e informes
(Legislation and reports)
Contabilidad Pública
(Public accounting)
bhernandez@igae.minhap.es
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