EUROPEAN COMMISSION EUROSTAT. Directorate C: National Accounts, Prices and Key Indicators Task Force EPSAS. EPSAS Cell on First Time Implementation

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1 EUROPEAN COMMISSION EUROSTAT Directorate C: National Accounts, Prices and Key Indicators Task Force EPSAS EPSAS FTIcell 15/08 EPSAS Cell on First Time Implementation Second meeting, Paris, 24 July 2015 Note of the meeting Eurostat and the participants thanked CNOCP for kindly hosting the meeting. Main points of the first meeting of the Cell Cell participants had no comments on the draft text, which would be finalised shortly after the meeting. Discussion points/ conclusions Balance sheet comparison on the basis of the template provided by CIPFA, data had been provided for the UK (whole of government accounts) and Austria and France on the structure of the BS (central government). The analysis showed broad comparability, but it was nevertheless stressed that, at the local level, infrastructure may make up 90-95% of assets for some entities. It was noted that the table showed the latest data available for the UK, 2013 data from the annual report for Austria and 2006 (so from the year of the OBS, but not from the OBS) data for France. For France the current/non-current split was estimated for the purposes of filling the template. Difficult to measure on the basis of the notes provided by CIPFA, participants identified: land and buildings including heritage assets, military equipment (measurement and potential presentation sensitivities), investments (just use the equity method?), receivables (business taxes and income tax declarations), provisions and pension liabilities. Criteria for the exclusion of assets and liabilities from the first transitional OBS - FEE provided before the meeting a first list of seven such possible criteria, with examples for each: 1. Political sensitivity (in the sense that it should not anticipate the future EPSAS standards); 2. Complexity; 3. Practicality; 4. Maturity/time pattern; 5. One-off effects/items in transit; 6. Materiality; 7. Existence uncertainty. The participants agreed that the criteria, which should be regarded as internal to the cell s work, would very much help the cell to apply consistent bases for conclusions when formulating the guidance. In the discussion it was suggested to reformulate the titles of 1 and 2, combine 4 and 5, and consider whether 7 could be a sub-case of 3. In addition some of the wording could be further specified (e.g. pensions, financial instruments). It would also likely be necessary in the future discussions to weight criteria against each other.

2 For the examples noted in the explanation of each criteria, which in large part overlapped with the difficult to measure items identified earlier by CIPFA, cell participants had a first exchange of whether these were issues which might or not be omitted from the first transitional OBS, needed to be treated in the transition period following that, or were for inclusion in the first EPSAS OBS. A key question was should the EPSAS OBS guidance aim at the improvement of key systems or processes, even if they would not be so critical for the first transitional OBS. It was stressed that a genuine EPSAS OBS would require comprehensive accounts, not just data on the main assets and liabilities. Participants considered that the guidance would be most useful if it helped those transitioning to accruals/epsas to put in place, early enough, those systems and processes that would be needed - especially those accruals systems and processes that took the most time and efforts to prepare. The first accruals OBS discussion on specific group types of assets and liabilities: Social benefits: on the basis that: a) is a material and complex issue for most MS, and b) though there is literature in ESA, there is no current general accounting literature; Certainly this item has materiality, but in this case, is materiality more important than sensitivity? Disclosure could be required in the notes to the first EPSAS OBS with the objective to improve fiscal transparency and public management. A final decision on recognition in EPSAS OBS would be reached upon further development of EPSASs. But MS would need to start working on this subject early in advance. Heritage assets: on the basis that a) is a material and complex issue for some MS, and b) there are currently differing views as to the definition of heritage assets as well as to their measurement; Comprehensive stocktaking could be required, without requiring comprehensive recognition (ie, extensive use of disclosures). Set a minimum requirement for the OBS but MS need to be aware of the stages of the process and that EPSAS may require it. In AT the approach is to treat heritage assets like any other building. In FR the heritage assets are all listed but recorded at a symbolic value. Heritage assets may be seen as a) obligations to maintain; and/or b) sources of income. And can the asset be sold or not? Intangible assets: may exist a recommendation to recognise acquired intangible assets as long as they might still be significant at the time of the EPSAS OBS; and, a relief for the recognition of internally generated assets. Financial instruments: need to distinguish between assets and liabilities. And propose to leave aside complex transactions for the first EPSAS OBS, such as derivatives and more complex instruments where you need to have valuation models in place. Accounting receivables and payables (both short and medium-long term) should be included. Military equipment: there is a constraint that if recognition and measurement are required, guidance on spare parts will also be needed. Propose recognition in the OBS but create comparability only for the EPSAS OBS. 2

3 OBS headings and presentation The cell has two possible models on the table. The template circulated by CIPFA, and one developed by Eurostat from the presentation in IPSAS 1 and taking into account the further specifications that could be found within certain other IPSAS standards. For presentational purposes, it was agreed that the simpler CIPFA template would be preferred. The Eurostat template could be considered to be more about coverage. Measurement hierarchy Not further discussed at this meeting. Would be taken up in the next meeting, after integrating with the item specific guidance in the draft paper from Austria Implementation Guideline OBS. Draft template for the Cell report Eurostat proposed an outline for the interim report that should be provided to the EPSAS Working Group at its meeting in September. It aimed to present some of the substance on the Cell s work, even if at this stage it would not be possible to provide detail on the future guidance. Eurostat would circulate a draft of the interim report by 24 August at the latest for the comments of cell participants. Action Points Eurostat to finalise the note of the main points of the first meeting of the Cell. FEE would review the wording of some of the criteria and Eurostat would then take the criteria developed by FEE and aim to integrate that with the CIFPA template. Austria would take the measurement hierarchy for assets discussed in the first meeting of the cell and integrate that into its draft paper Implementation Guideline OBS. Austria would thereby make their guidance more general for the purpose of the guideline document. France would review the Eurostat template with respect to minimum coverage and reflect on the issue of materiality. All participants were invited to comment on the disaggregation of the table (the blue parts in Eurostat's table). France would look up at its OBS guidance on military assets, heritage assets and other issues to see if it seems helpful for the cells work. Eurostat to draft the cell s input for the EPSAS WG meeting in September, for the comments and inputs of cell participants, by 24 August. Next steps September 2015 presentation of the outline of the Guidance Note on FTI for OBS for discussion at the EPSAS meeting in Malta. If possible an informal meeting of cell participants would be held in the margins of the Working Group meeting. Mid-2016 Full draft Guidance Note on FTI for Opening Balance Sheets. 3

4 Participants List - EPSAS Cell FTI, Paris, 24 July 2015 Austria: France: Portugal: UK: FEE: Eurostat: Sandra Kaiser (Ministry of Finance) Bernhard Schatz (Ministry of Finance) Fabienne Colignon (Ministry of Finance) Luís Moreira (Ministry of Finance) Ian Carruthers (CIPFA) Thomas Müller-Marqués Berger Alexandre Makaronidis Keith Hayes Anabela Rodrigues 4

5 Participants List - EPSAS Cell FTI, 12 June 2015 Austria: France: Portugal: UK: FEE: Eurostat: Sandra KAISER (Ministry of Finance) Monika GEPPL (Ministry of Finance) Fabienne Colignon (Ministry of Finance) Luís Moreira (Ministry of Finance) Ian Carruthers (CIPFA) Thomas Müller-Marqués Berger Alexandre Makaronidis Keith Hayes Norbert Gaspar Istvan Varjas Anabela Rodrigues Carmela Zammit 5