eurostat

EPSAS Cell on principles related

to EPSAS standards:

Interim Report

3rd meeting of the Working Group EPSAS

22/23 November 2016 – Rome

Directorate C: National Accounts, Prices and Key Indicators

Task Force EPSAS – European Public Sector Accounting Standards

eurostat

EPSAS Cell on Accounting Principles – state of play

Volunteers from BE, FI, FR, IT, DE (federal level and Hessian Court

of Auditors), IPSASB and the FEE participate in this Cell.

• 1st meeting: 18th March 2016 in Luxembourg;

• Conference call: 13th June 2016;

• 2nd meeting: 30th September 2016 in Luxembourg;

• Outcome of the Cell are following reports:

Progress report – WG in Paris Jul 2016

Interim report – WG in Rome Nov 2016

2

eurostat

Work of the Cell

Background of the Cell's work

Feedback and comments from the WG and last

meeting of the Cell

The comparison table of principles

The EPSAS outline

3

eurostat

Background of the Cell's work

It is necessary to distinguish between:

The objectives of EPSAS and the objectives of General

Purpose Financial Reporting (GPFR).

High level objectives/ principles, on the one hand, and

conceptual (qualitative) characteristics/ accounting

principles and their constraints on the other (as for

instance in the IPSASB or the French conceptual

frameworks).

4

eurostat

Background of the Cell's work

At the first Cell meeting it was agreed to compile an overview

table comparing the approaches and definitions of principles/

qualitative characteristics in:

use in the countries of the cell participants,

IPSAS, and

the Commission's own accounting rules.

5

eurostat

Feedback and comments

Comments from the WG in Paris (written comments

received from BE and CY)

• regarding the conceptual framework,

• stay as close as possible to IPSAS; and

• true and fair view;

Comments at and following last Cell meeting

• qualitative characteristics and hierarchy,

• different views on prudence and reliability,

• standard setters and standard preparers,

• accounting principles

6

eurostat

The comparison table

The comparison table summarizes principles from the

individual contributions of Cell participants to allow a better

comparison of different groupings and levels of principles:

1st block: high-level objectives and high level general

principles;

2nd block: the qualitative characteristics and

constraints ;

3rd block: lower-level principles or practical

considerations.

7

eurostat

8

Comparison table of principles ANNEX 2

IPSAS / IPSAS1 European Commission Belgium France Finland German Federal MoF 3rd Senate of the Hessian Court of Auditors

Objectives of standard setter Objectives of standard setter Objectives of the standard setter Objectives of the standard setter Objectives of the standard setter Objectives of standard setter Objectives of standard setter

Objectives of financial reporting/GPFRs Objectives of financial reporting/GPFRs Objectives of financial reporting/GPFRs Objectives of financial reporting/GPFRs Objectives for EPSAS CF Objectives of financial reporting/GPFRs Objectives of financial reporting/GPFRs

Users of financial reports Users of financial reports Users of financial reports/GPFRs Users of financial reports/GPFRs Objectives of financial reporting/GPFRs Users of financial reports Users of financial reports

Reporting entity Going concern Users of financial reports/GPFRsFUNDAMENTAL PURPOSES (Basic

objectives)Objectives of financial reporting

GENERAL PRINCIPLE Transparency and information Intergenerational fairness

Faithful representation Stability and intergenerational fairness Financial stability and sustainability

Compliance Comparability Accountability

True and fair view Comparability

QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS QUALITATIVE CHARACTERISTICS

Relevance Relevance Relevance Neutrality Relevance Relevance Reliability

Faithful Representation -materiality Reliability Relevance Reliability Faithful representation -verifiability

-reliability Reliability -faithful representation Reliability Prudence Understandability -substance over form

-substance over form -faithful representation -substance over form Completeness Faithful representation Timeliness -prudence (conservatism)

-neutrality -substance over form -neutrality Understandability Understandability Comparability -faithful representation

-prudence -neutrality -prudence Prudence Timeliness Verifiability Objectivity

-completeness -prudence -completeness (Timeliness)* Comparability Constrains Relevance

Understandability -completeness Understandability Comparability Verifiability -materiality Understandability

Timeliness Understandability Timeliness Substance over form -(cost-benefit)* Timeliness

Comparability Comparability Comparability Offsetting -(balance between the QCs)* Comparability

Verifiability Verifiability = Justification Verifiability Verifiability (subprinciple of reliability)

Constraints Constraints Constraints Constraints Constraints PRIMARY PRINCIPLES MATERIAL ACCOUNTING PRINCIPLES

-materiality -timeliness -materiality -materiality -materiality Prudence (Conservative Accounting) Prudence

-cost-benefit -cost-benefit -cost-benefit -cost-benefit -cost-benefit Reliability -realisation principle

-balance between the qualitative

characteristics

-balance between the qualitative

characteristics

-(balance between the qualitative

characteristics)*

-(balance between the qualitative

characteristics)*

-balance between the qualitative

characteristicsObjectivity -imparity principle

-confidentiality -confidentiality -valuation at cost principle

PRINCIPLES OVERAL CONSIDERATIONS ACCOUNTING PRINCIPLES OTHER PRINCIPLES Single asset / liability reporting

Fair presentation Fair presentation True and fair view Accrual concept CONSTRAINTS

Compliance Compliance (required by Fin.Reg.) Entity concept Individual valuation Accruals concept

Going concern Accrual basis Going concernCorrespondence of opening and closing

balance sheetGoing concern

Consistency Going concern Money measurement principle Consistency Correspondence

Aggregation ConsistencyIndividual recognition and

measurementNeutrality Consistency

Offsetting Aggregation Off-setting Completeness Cost-Benefit

Reporting period Offsetting Periodicity Freedom from material errorBalance between the Qualitative

Characteristics

Reporting period (required by Fin.Reg.) Matching principle Clarity

* items not covered

eurostat

EPSAS outline

• Based on the comparison and taking into account

comments from the working group a approach for EPSAS

was outlined;

• The structure seemed complete, despite terminology used

not being consistent the meanings seem similar in practice.

9

eurostat

High-level objectives of EPSAS

• these High-level objectives and

users are in line with the scope

of the work of Cell on

Governance principles

10

EPSAS Outline

EUROPEAN PUBLIC GOOD

OBJECTIVES OF EPSAS

Constraints - Subsidiarity,

Proportionality

OBJECTIVES AND USERS

OF GPFRs UNDER EPSAS

True and fair view

Accrual concept

eurostat

Qualitative Characteristics & Constraints – I.

• no hierarchy among QCs – all self-

standing and mutually limiting /

balancing one another;

• principles under faithful

representation (Reliability,

Substance over form, Neutrality,

Prudence, Completeness);

• reliability and prudence discussed

in more detail

11

QUALITATIVE CHARACTERISTICS

Relevance

Faithful representation

Reliability *

Substance over form *

Neutrality *

Prudence *

Completeness *

Understandability

Timeliness

Comparability

Verifiability

eurostat

Qualitative Characteristics & Constraints – II.

• there are areas, where there may

be some sensitivity when it

comes to providing detailed

information, therefore:

presentational sensitivity was

added to the constraints;

12

CONSTRAINTS

• Materiality

• Cost-benefit

• Balance between

the QCs

• Presentational

sensitivity

eurostat

Application principles

• the concept of Going Concern

was discussed as it plays a

particularly important role in the

French public accounting

framework

13

APPLICATION PRINCIPLES

Compliance

Consistency

Aggregation

Offsetting

Going concern

Reporting period

eurostat

Qualitative Characteristics vs

Application principles

Qualitative Characteristics are addressing mainly the

Standards-setters while the Application principles are

addressing mainly the preparers.

14

eurostat

Next steps

Common meeting of the two Cells (Cell on

governance principles and Cell on principles relating

to EPSAS standards) to safeguard consistency

between their work;

The EPSAS Outline should be discussed, further

developed, and finalised including definitions;

Prepare the draft final report of the Cell

15

eurostat

European Commission (Eurostat) Task Force EPSAS:

http://ec.europa.eu/eurostat/web/government-finance-

statistics/government-accounting

16