This document discusses moving governments from cash to accrual accounting and budgeting. It notes that while accrual accounting is widely accepted, with about 50 countries using it, accrual budgeting has seen less adoption. Only 4 countries fully use accrual budgeting, though some others use a mixed approach. The document argues for an integrated accrual accounting and budgeting system to improve transparency and accountability in government financial reporting. It stresses that reforms are needed now to address issues like Greece manipulating deficit and debt data and inaccurate pension liability reporting.

1. From cash to accrual accounting
and budgeting in government -
why when and how?
Prof. Dr. Andreas Bergmann
Chair IPSAS Board
The Sovereign Debt Crisis, a Matter
of Urgency – from Lessons to
Reform
Vienna Austria
19 March 2012
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2. Transparency and Accountability
Government accounting and budgeting is relevant
• Just a few headlines
– Greece: “Strong evidence for manipulation of the deficit
and debt data presented”
– Germany: “55 billion accounting mistake reduces debt
levels”
– UK: “Banks not consolidated due to temporary control”
– Almost everywhere: “Pension Liabilities not included …”
• Who’s next to follow?
• But it is clear: Uncertainty damages the economic
development
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3. Transparency and Accountability
Accrual accounting is generally accepted
• After 20+ years of reform
– About 50 countries are on accrual accounting, thereof about
40 on IPSAS basis
– In some additional countries sub-national levels are on
accrual accounting even if national level is still on cash
– None of the reforms have been reverted
– Accrual accounting provides cash information (in the cash
flow statement)
– Broad consensus: Accrual accounting enhances
transparency and improves decision making – especially in
respect of investments (e.g. infrastructure) and liabilities
(e.g. the non-government-bond types)
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4. Transparency and Accountability
Accrual budgeting has gained little ground
• After 20+ years of reform
– Only 4 countries are on full accrual budgeting (AUS, NZ, UK,
CH), a few more one a mixed form (namely Scandinavia,
North America)
– Consensus amongst the users: An integrated system has
advantages, but cash appropriations are a generally
accepted feature – also in many accrual budgeting system
– But a majority goes with cash budgeting, even when using
accrual accounting (“French model”)
• IPSAS: Reconciliation required – either at budget stage or at
reporting stage
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5. Transparency and Accountability
Need for an integrated system
Governmental
Budgeting Accounting Audit Financial
Statistics
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6. Transparency and Accountability
Why, when and how
• Why? Improve accountability and decision making
• When? Now – why wait …
• How? As part of an integrated reform – see Spain and
Austria!
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