Public Sector Accrual Accounting in Latvia

Transcription

1 Public Sector Accrual Accounting in Latvia Diana Krisjane Accounting Reforms in the Public Sector Brussels, 13 May 2016

2 Agenda Introduction Current status of public sector accounting and future prospects Implementing principles of accrual accounting in Latvia Projects, timeline, scope, key challenges and solutions Main conclusions and lessons learned so far

3 Current status of public accrual accounting in Latvia Key points In substance all areas on accrual basis already for many years, except: Tax accounting - on cash basis Financial instruments simplified approach Consolidation - controlled GBE s (Government Business Entities) excluded Need for full accrual basis: In 2015 projects were started for development of IPSAS based national standards (guidelines) and implementation of accrualbased principle in state revenue accounting

4 Future prospects for public sector accounting - significant milestones Full accrual principle in public sector 2019 IPSAS implementation finished Tax accounting IT system adoption 2015 Start of IPSAS implementation including implementation of accrual principle in tax acounting

5 Implementing principles of accrual accounting in public sector IPSAS implementation State Treasury Implementation of accrual-based principle in state revenue accounting State Revenue <text> Service Comparison of IPSAS to current Latvian public sector accounting legislation Development of guidelines for Latvian public sector accounting standards based on IPSAS Development of detailed accounting manuals Performing training for public sector accountants Providing consultations and support Improvement of state revenue administration processes Development and implementation of information system for accrual-based tax accounting

6 IPSAS implementation project Project Timeline and Scope Phase 1 End of Project Comparison of current legislation with IPSAS and other countries Identifying suggestions for Standards Development of standard for non-exchange revenues Phase 3 Trainings for public sector accountants Consultation and support period of 6 months Development of guidelines for national public sector accounting Standards Development of manual for nonexchange transactions Phase 2 Development of detailed manuals for public sector accountants Phase 4

7 Key challenges and solutions Text Text Finding applicable national Text approach Text Text Text Consolidation Text Text Consolidation First time adoption IPSAS implementation experience from other countries Some IPSAS not fully applicable to Latvian public sector Selecting one method if multiple options in IPSAS provided Full consolidation of controlled public sector entities Controlled GBEs (Government Business Enterprises) accounted for using equity method Transition period planned No final decision made and still open for discussions Consolidation Tax accounting Building understanding and awareness of accrual principles for non-exchange transactions (taxes) Revenue recognition from income taxes Levies

8 Challenges in tax accounting Taxes Maximum compliance with accrual principle of IPSAS Revenue from taxes recognized when taxable event has occurred e.g. VAT monthly declarations Main challenge corporate income tax (statistical model approach) Recognizing impairment losses on taxes according to IPSAS 29 Financial Instruments: Measurement and Recognition Fines and penalties recognized only when revenue is highly probable Text Text Text Levies Text Levies are administered by multiple entities Final decisions still to be made on implementing full accrual principle on all levies

9 Main conclusions and lessons learned so far Gradual approach to IPSAS implementing Following best practices in other countries State Treasury as solid and knowledgeable policy setter Right solution appropriate and unified Awareness of administrative burden IT system updates Thorough analysis for transition (First time application) Educated staff - trainings Gradually approaching EPSAS

10 Questions?

11 Diana Krisjane ACCA CIA Latvian Certfied Auditor Partner Assurance SIA Ernst & Young Baltic Muitas iela 1A, Rīga, LV-1010, Latvia Office: Fax: Direct: Mobile: Place image here with reference to guidelines Agnese Strautmane Manager Assurance SIA Ernst & Young Baltic Muitas iela 1A, Rīga, LV-1010, Latvia Office: Fax: Direct: Mobile: