New guidance is now available to governments worldwide operating under the cash basis of accounting. The International Federation of Accountants (IFAC's) Public Sector Accounting Committee has released a new International Public Sector Accounting Standard (IPSAS) entitled “Financial Reporting under the Cash Basis of Accounting.” An exposure draft on the topic had been issued in 2000 and was revised to address issues raised by respondents.
The IPSAS includes requirements for a government and government entity to report all cash receipts, payments and balances that it controls and to disclose information about amounts settled on its behalf by third parties. It allows more flexibility in reporting format than was proposed in the exposure draft, and encourages note disclosure of additional information about, for example, assets, liabilities, transactions administered on behalf of others and whether budgeted amounts have been exceeded.
“Compliance with this standard will enhance the transparency and comprehensiveness of financial reporting under the cash basis,” states Ian Mackintosh, Public Sector Committee Chair. “The cash basis of accounting is adopted by many jurisdictions around the world. Prior to the issuance of this IPSAS, there was not an international standard on financial reporting under the cash basis and the quality of financial reporting was at best variable and often poor.”
The release of this standard is part of a broader IFAC program to develop accounting standards that enhance accountability and transparency in financial reporting by public sector entities adopting the cash and accrual basis of accounting. In addition to this comprehensive standard on the cash basis of accounting, IFAC's Public Sector Committee has issued approximately twenty standards for application when the accrual basis of accounting is adopted. These are all accessible through the IFAC web site (www.ifac.org/PublicSector/)
