Comparability in IPSASs: lessons to be learned for the European Standards

In 2013 the European Commission started addressing issues concerning public sector accounting harmonization across EU Member States, embarking on a project to develop European Public Sector Accounting Standards (EPSASs). Although acknowledging the indisputable reference of the existing International Public Sector Accounting Standards (IPSASs), it highlighted that IPSASs, as they were, could not be suitably applied in the EU context (European Commission, 2013a). IPSASs were considered as not covering specific important matters of public sector accounting, not showing enough stability due to the need of constant convergence with IFRSs, and offering several options that compromised comparability. Comparability of public sector accounts across Member States is one of the main objectives of EPSASs (EUROSTAT, 2016, 2019), clearly established as a qualitative characteristic in the draft EPSAS Conceptual Framework (EUROSTAT, 2018). It is critical for EU economic and fiscal convergence that countries’ accounts allow for substantial comparison and standardized transition to the National Accounts (Jorge et al., 2014). The IPSAS Conceptual Framework (IPSASB, 2014), meanwhile issued, sustains that adopting these standards would improve comparability of General Purpose Financial Reporting (GPFR), in this way strengthening transparency and accountability of public sector finance. Given that, despite the above concerns, EPSASs are to be developed on the basis of IPSASs (European Commission, 2019), the purpose of this paper is to show that IPSASs are not an adequate reference for EPSASs in terms of allowing the desired comparability of countries’ accounts in the EU. It relies on evidence gathered from IPSAS-based financial reports prepared by some Agencies of the United Nations System and from audit reports of the UN Board of Auditors. The research illustrates that IPSASs only allow for de jure comparability of financial reports at a very broad level. Their implementation and interpretation in practice (due to the options permitted and the judgement required) does not allow for de facto comparable GPFR. European standard-setters need to be aware that the comparability EPSASs need to address across EU Member States’ accounts must go beyond the one that is permitted by IPSASs – EPSASs need to stretch IPSASs harmonization to a higher level of standardization.