Accounting and Reporting Systems in the Public Administrations in Europe vis-a-vis the IPSAS’ Conceptual Framework Issue: Traditional Systems

Abstract

Important reforms in accounting and reporting systems of Public Administrations have occurred on the international scenario in the last twenty years, coupled with a tension towards international harmonization and the application of international accounting standards specifically for the Public sector. Many studies and research efforts have been dedicated to this strand (Brusca and Condor, 2002; Bossert, 2005; Anessi-Pessina and Steccolini, 2007, Benito et al. 2007; Christiaens and Reyniers 2010; Groot and Budding, 2008) because the application of the same principles for preparing report could increased the comparability and could increase the possibility of a real consolidation as well as the accountability towards different stakeholders. In the last years a strong political and cultural orientation toward the harmonization of financial reporting within all kinds of public administration across different countries or institutional levels, according to the business model, has arisen. Accounting standards issued by IPSASB are the result of this tendency. Despite this main trend of converging accounting systems toward financial reporting inspired by the accrual model, timing and mode that each country is following differ significantly, leading to diverging practices. Moreover, full accrual accounting reforms – faraway from cash-basis accounting – has provoked different and sometimes opposite reactions among scholars (Anessi Pessina, 2005; Zambon, 2006). The current research belongs to the vein of comparative international studies (Jones, 2007) and aims, in an international accounting approach (Choi-Muller, 1992; Vigano, 1990), to analyse changes in the international scenario, in order to examine the concrete consequences of an important IPSAS’ Conceptual Framework issue, i.e. imbedded traditional systems in European countries and the ability to increase the level of accountability. As matter of fact, in a first stage the IPSAS has been characterized by a tendency to converge with IAS/IFRS standards, to the point of referring to the IASB’s Conceptual Framework. However, because of the different nature and objective of the reporting prepared by a public administration, the board has opted for the preparation of a specific framework: a long-term project had been launched in order to develop a conceptual framework for the preparation and the presentation of a general purpose financial report for entities belonging to the public sector (IPSASB 2006, p. 3). An important issue that underlies this framework is the occurrence of traditional probably different contexts of countries / jurisdictions, whereby these differences indicate implementation difficulties. According with the main objective, the research is developed in the endeavor to reach three targets: 1. To analyse the state of the art and the presence of a common path in the evolution of international accounting standards in some European countries; 2. To investigate the level of accounting harmonization within the countries observed and the adoption of IPSASs already occurred; 3. To analyse which determinants, in each country, have an impact on the current configuration of the accounting system and the reporting model and, consequently, to investigate the compatibility with the IPSAS’ Conceptual Framework. Methodologically, the analysis and comparison of accounting standards in the same number of countries belonging to Nordic and Anglo-Saxon tradition (UK, Germany, Sweden) and Continental tradition (France, Italy and Spain) has been carried out and accounting laws and national standard have been examined (Pina et. al, 2009). Moving from the idea that historical, cultural and social context can influence stakeholders’ information needs (Luder, 2002; Benito et. Al, 2007; Brusca & Condor, 2002; Pina et al., 2009) single countries have been analysed and compared looking at their traditional existing systems, which could influence the adoption of the IPSAS’ Framework. In a second step, the accounting system of each country has been analysed, considering different institutional levels (State, Regions, Local Governments), in order to investigate the level of internal harmonization and to understand the key-factors that have contributed to the state of the art, according with Luder’s model (Luder and Jones, 2003). Results show an higher heterogeneity in national accounting systems and standards within the European countries analysed. The situation requires the adoption of international standards in European countries in order to facilitate comparability; on the other hand, it highlights how difficult it is to apply the IPSAS’ Framework in the European context, especially in those countries in which there is a lack of internal harmonization. In this prospective, the paper aims to underline the key-factors that can facilitated the process.