Task Force on Harmonisation of Public Sector Accounting

1
Task Force on Harmonisation of Public Sector
Accounting

• Progress Report
• OECD Working Party on National Accounts (Paris,
  12 October 2005)

2
TFHPSA raison dêtre, objectives

• October 2003 creation in Paris (several
  international organisations OECD, IMF, Eurostat,
  ECB, IPSASBoard ex-IFACPublic sector committe)
• Harmonisation and convergence between
• - Accounting standards (IAS and IPSAS)
• and statistical manuals (SNA and GFS) WG1
• - Statistical frameworks and guidelines, in the
  context of SNA review for 2008 (SNA and GFS, ESA
  manual on deficit and debt -EMGDD) WG2
• Output a chapter on General Government and
  public sector accounts in the SNA

3
TFHPSA brief history

• February 2004 1st meeting, in Paris (28
  participants)
• - Working group 1 Matrix of comparison of
  standards (IPSAS, GFS, ESA, EMGDD)
• - Working group 2 5 priority issues and 5
  working teams
• . Tax revenue and tax credits
• . Public/private/government sector delineation
• . Transactions with public corporations
• . Privatisation, restructuring agencies, SPVs
• . Contingent assets / government guarantees

4
TFHPSA brief history

• 22-24 September 2004 2nd meeting, in Washington
  DC (40 participants)
• 2-4 March 2005 3rd meeting, in Paris
• - enlargement of the TFHPSA basis more
  countries and international organisations (WB,
  UNSD)
• - modifying the time frame for discussions due
  to
• . some issues may require conceptual changes
• . consider other inputs other bodies and
  recent set-up of the Eurostat task force (for ESA
  review)
• 18-22 July 2005 AEG in Bangkok discusses the
  substance of 3 issues

5
TFHPSA to-day

• 3-6 Oct. 2005 4th meeting in Washington
• - Main last issues (to be submitted to AEG)
• 1. Privatisations, restructuring agencies, SPEs,
  reorganisation of debt,
• 2. Earnings from equity, capital injections
• - First draft of the Chapter on the government
  and the public sector (J.Pitzer)
• 30 January 3 February 2006 final AEG in
  Frankfurt

6
Public accounting standards WG1

• The PSC, a body of IFAC, has produced 20 IPSAS
  (standard setting activity) now the IPSAS Board
• Main focus of IPSAS on the consolidated public
  sector, based on the notion of control
• Working group 1 has released the matrix of
  comparison of standards (accounting and
  statistics)
• Convergence IPSASB now recommends disclosure of
  statistics on the General Government (including
  sub-sectors), and takes on board the distinction
  between transactions and other flows

7
WG2 Tax revenue and tax credits

• Definition of tax revenue minor changes to the
  core definition.
• Implementation of accruals more guidance on the
  time of recording and amounts to be recorded
• Tax credits nothing at present in the SNA.
• Need to borrow guidance from OECD, GFS, on the
  difficult case of payable tax credits. Task Force
  recommendation for a  split  recording actual
  payments recorded as expenditure, except in the
  case of certain social benefits (income
  substitutes) paid through the tax system (to be
  fully expensed)

8
The AEG on tax issues

• Tax definition and accrual recording
• - Broad agreement on the principles (time of
  recordingaccruals, amounts of tax revenue not
  including uncollectible taxes)
• - No precise recommendations in the SNA, no
  changes
• Tax credits the AEG majority expressed
  disagreement with the TF recommendation to
   split , and recommended to gross up the tax
  revenue for all payable tax credits

9
Government / public / private sector

• A decision tree (to classify units in the public
  sector) is proposed
• Notion of control for the public sector  the
  ability to determine the general corporate policy
  of an entity . Eight indicators of control are
  defined.
• Cases of NPIs to be classified in GG five
  indicators of control are defined
• Economically significant prices
  (market/non-market distinction) reference is
  made to the relationship between the value of
  output and production costs, but no numerical
  prescription (50). Indicators proposed.

10
The AEG on delineation issues

• Broad agreement on the principles (decision tree,
  control, ESP)
• Some reluctance on too prescriptive criteria or
  indicators
• The paper needs some redrafting, for
  clarification
• Members of the AEG were asked to provide written
  proposals. None has been provided yet (new
  deadline30 November)

11
Government guarantees

• Changes in the international context IPSAS19,
  and increasing consensus that most of guarantees
  produce economic and financial effects, and
  should be recorded as transactions
• Three types of guarantees
• 1. Standardised guarantees (export insurance
  type), to be recorded like insurance technical
  reserves
• 2. Tradable or offsettable guarantees, to be
  recorded as financial derivatives
• 3. One-off guarantees (to public corporations),
  to be recorded in supplementary accounts

12
The AEG on the guarantee issue

• Large agreement with the proposals
• Requirement for limited improvements, clarifying
  the recording when guarantee is granted and when
  it is activated
• New draft of the paper expected rapidly

13
Transactions between government and public
corporations

• In order to solve the problems due to lack of
  guidance on the recording of these transactions
  (capital injections and superdividends for
  instance), two approaches were proposed and
  opposed
• 1. For an improved / amended SNA, to take on
  board some recommendations from the EMGDD and
  GFSM2001 (no fundamental change to the present
  conceptual framework, only more precise
  definitions)
• 2. To apply the treatment recommended for
  foreign direct investment using reinvested
  earnings (D.43) to accrue the profit or loss of
  the public corporation in the GG account.

14
Transactions between government and public
corporations

• The opinion of the task force members was shared
  between the two main options no overwhelming
  majority in favour of one approach
• It appeared during the discussion that some
  uncertainties were affecting the D.43 recording
  (only 100 owned corporations?, scope of
  financial transactions) situation not mature
• Orientation of TFHPSA preference for the
  improved / amended SNA approach the paper
  presented to the task force developing the D.43
  proposal will be put on the  Research agenda 

15
Privatisation, restructuring agencies and SPVs

• Non-controversial issue of privatisation and
  nationalisation for clarification of SNA only
• More complicated cases and issues securitisation
  and SPEs, restructuring agencies (defeasance
  etc.), Public Private Partnerships
• Case of SPEs, often created for the purpose of
  securitisation of assets
• - mostly financial institutions, classified in
  sub-sector S.123 (if institutional units)
• - but may be ancillary units, or consolidated
  with the government

16
TFHPSA the next steps

• January-February 2006 AEG (Frankfurt) a few
  issues will be submitted for approval, related to
  privatisation and restructuring agencies, SPEs,
  debt reorganisation, and the recording of
  transactions between government and public
  coprporations
• March 2006 last TFHPSA meeting, in Paris
• To be discussed the new draft chapter in SNA
  for the Government and public sector