Task Force on Task Force on Harmonisation of Public Harmonisation of Public

Sector AccountingSector Accounting

Progress Report Progress Report

OECD Working Party on National OECD Working Party on National Accounts (Paris, 13 October Accounts (Paris, 13 October

2004)2004)

TFHPSA: raison d’être, objectivesTFHPSA: raison d’être, objectives

October 2003: October 2003: creation in Pariscreation in Paris (several (several international organisations: OECD, IMF, international organisations: OECD, IMF, Eurostat, ECB, IFAC–Public sector committe) Eurostat, ECB, IFAC–Public sector committe)

Harmonisation and convergenceHarmonisation and convergence between: between:- Accounting standards (IAS and IPSAS)- Accounting standards (IAS and IPSAS)and statistical manuals (SNA and GFS): WG1and statistical manuals (SNA and GFS): WG1- Statistical frameworks and guidelines, in the - Statistical frameworks and guidelines, in the context of SNA review for 2008 (SNA and GFS, context of SNA review for 2008 (SNA and GFS, ESA manual on deficit and debt -EMGDD): WG2ESA manual on deficit and debt -EMGDD): WG2Towards a chapter on GG accounts in the SNATowards a chapter on GG accounts in the SNA

TFHPSA: the startTFHPSA: the start February 2004: 1st meeting, in Paris (28 participants)February 2004: 1st meeting, in Paris (28 participants)

- - Working group 1Working group 1: Matrix of comparison of standards : Matrix of comparison of standards (IPSAS, GFS, ESA, EMGDD)(IPSAS, GFS, ESA, EMGDD)

- - Working group 2Working group 2: 5 priority issues and 5 working : 5 priority issues and 5 working teams:teams:

. Tax revenue and tax credits . Tax revenue and tax credits

. Public/private/government sector delineation . Public/private/government sector delineation

. Transactions with public corporations . Transactions with public corporations

. Privatisation, restructuring agencies, SPVs. Privatisation, restructuring agencies, SPVs

. Contingent assets / government guarantees. Contingent assets / government guarantees

The TFHPSA todayThe TFHPSA today

22-24 September 2004: 22-24 September 2004: 2nd meeting, in 2nd meeting, in WashingtonWashington DC (40 participants) DC (40 participants)- enlargement of the TFHPSA basis: more - enlargement of the TFHPSA basis: more countries and international organisationscountries and international organisations- deeper into the issues and narrowing the focus- deeper into the issues and narrowing the focus- modifying the time frame for discussions due - modifying the time frame for discussions due to:to:. some issues may require conceptual changes . some issues may require conceptual changes . consider other inputs: other bodies and recent . consider other inputs: other bodies and recent set-up of the Eurostat task force (for ESA review) set-up of the Eurostat task force (for ESA review)

Public accounting standards: Public accounting standards: WG1WG1

The PSC, a body of IFAC, has produced 20 The PSC, a body of IFAC, has produced 20 IPSAS (standard setting activity)IPSAS (standard setting activity)

Main focus of IPSAS on the consolidated public Main focus of IPSAS on the consolidated public sector (not GG), based on the notion of control sector (not GG), based on the notion of control

Working group 1 has agreed on a matrix of Working group 1 has agreed on a matrix of comparison of standards (accounting and comparison of standards (accounting and statistics)statistics)

Some convergence: PSC agrees to recommend Some convergence: PSC agrees to recommend disclosure of GG statistics, takes on board the disclosure of GG statistics, takes on board the distinction between transactions and other distinction between transactions and other flows…flows…

WG2: Tax revenue and tax WG2: Tax revenue and tax creditscredits

Definition of tax revenueDefinition of tax revenue: only a minor : only a minor change to the core definition. More change to the core definition. More developments to distinguish with purchase developments to distinguish with purchase of services, fees, leases etc.of services, fees, leases etc.

Implementation of accrualsImplementation of accruals: time of : time of recording and amounts to be recorded recording and amounts to be recorded need more guidanceneed more guidance

Tax creditsTax credits: nothing at present in the SNA.: nothing at present in the SNA.Need to borrow guidance from OECD, GFSNeed to borrow guidance from OECD, GFS

Government / public / private Government / public / private sectorsector

Notion of Notion of controlcontrol: « the capacity to : « the capacity to govern the policy objectives of a unit »govern the policy objectives of a unit »

Economically significant pricesEconomically significant prices (market/non-market distinction): can the (market/non-market distinction): can the ESA threshold (50% test) be taken over ESA threshold (50% test) be taken over in the SNA? Reluctance outside Europe…in the SNA? Reluctance outside Europe…

Cases of NPIs to be classified in GGCases of NPIs to be classified in GGThe notion of « ancillary units »The notion of « ancillary units »

Transactions between Transactions between government and public government and public

corporationscorporationsThe lack of guidance in the SNA (for capital injections, The lack of guidance in the SNA (for capital injections, super-dividends, debt assumptions etc.) means super-dividends, debt assumptions etc.) means inconsistency and possible irrelevant balancing itemsinconsistency and possible irrelevant balancing items

3 recommendations3 recommendations::- R0: to bring only minor changes to the letter of the SNA R0: to bring only minor changes to the letter of the SNA

(dropping reference to « transfers » etc.)(dropping reference to « transfers » etc.)- R1: to take on board the EMGDD provisions on these R1: to take on board the EMGDD provisions on these

issuesissues- R2: to apply the treatment recommended for foreign R2: to apply the treatment recommended for foreign

direct investment and reinvested earnings (D43): to direct investment and reinvested earnings (D43): to accrue the profit or loss of the public corporation in the accrue the profit or loss of the public corporation in the government accountgovernment account

Restructuring agencies and SPVsRestructuring agencies and SPVs

General issue of privatisation General issue of privatisation Complicated cases and issues: Complicated cases and issues:

securitisation, restructuring agencies, securitisation, restructuring agencies, SPVsSPVs

Case of SPVs: Case of SPVs:

- mostly financial institutions, classified - mostly financial institutions, classified in sub-sector S.123 or S.122in sub-sector S.123 or S.122

- but may be ancillary units- but may be ancillary units

Government guaranteesGovernment guarantees

Changes in the international context: Changes in the international context: IPSAS19, public accounts in some IPSAS19, public accounts in some countries (Sweden, UK, USA)countries (Sweden, UK, USA)

Growing consensus: most of guarantees Growing consensus: most of guarantees produce economic and financial effects, produce economic and financial effects, and should be recorded as transactions, and should be recorded as transactions, and in the balance sheet of GGand in the balance sheet of GG

Related issue: the recording of Related issue: the recording of provisionsprovisions

The case of export credit insurance The case of export credit insurance

TFHPSA: the next stepsTFHPSA: the next steps

No proposal for decision at this stageNo proposal for decision at this stage December 2004: Progress report to the Advisory December 2004: Progress report to the Advisory

Expert Group (AEG for SNA review)Expert Group (AEG for SNA review) February-March 2005: TFHPSA meeting in Paris February-March 2005: TFHPSA meeting in Paris October 2005: TFHPSA meeting in WashingtonOctober 2005: TFHPSA meeting in Washington November 2005: AEG meeting (decision on November 2005: AEG meeting (decision on

TFHPSA papers and proposals)TFHPSA papers and proposals) February 2006: final TFHPSA meetingFebruary 2006: final TFHPSA meeting

Output: new chapter in SNA for Government Output: new chapter in SNA for Government sectorsector