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Governments and Accrual reporting

Governments and Accrual reporting

Accrual reporting refers to the recording of the economic substance of transactions when they occur, rather than when cash settlement occurs. Many governments have already adopted accrual reporting and many more are on the road of the implementation.


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Taking into account the data collected for 150 governments, we list below the analysis of their reporting status:

  • 37 governments (25%) reported on accrual in their last set of published financial statements
  • 68 governments (45%) are transitioning to accrual or already have some element of accrual in their financial statements
  • 45 governments (30%) still report on a cash basis.

Accrual reporting frameworks are developed in various ways, many making use of international standards. Of the 37 governments that currently report on accrual, 19 (51%) are using International Public Sector Accounting Standards (IPSAS), in one of these three ways:

  • 5 governments have adopted IPSAS directly; implementing without altering any of their requirements
  • 5 governments apply IPSAS indirectly; implementing through a national endorsement process, adjusting for any specific jurisdictional features
  • 9 governments use IPSAS to develop their own national standards; they use IPSAS as a guidance source.

What is IPSAS?

The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board, develops IPSAS, a suite of cash and accrual-based standards used by governments and other public sector entities around the world to prepare general purpose financial statements.

Financial and sovereign debt crises have brought to light, as never before, the need for better financial reporting by governments worldwide and the need for improvements in the management of public sector resources. The IPSASB has established IPSAS to improve the quality, consistency and transparency of public sector financial reporting globally.

Benefits of IPSAS

Improved accountability and decision-making

Adopting accrual-based IPSAS:

  • improves the quality of general purpose reporting by public sector entities
  • can lead to better informed assessments of governments' resource allocation decisions
  • helps increase transparency and accountability.

Improved management of assets and liabilities

Governments reporting on a cash basis do not account for significant liabilities, such as pensions, and property or plant and equipment, such as infrastructure development. Adopting accrual-based accounting will improve financial management and give a more complete, accurate view of assets and liabilities.

Improved accuracy in reflecting revenues and expenses

Accrual-based standards provide a complete, reliable picture of a government's financial and economic position and performance.

Regional status

The regions expected to see the greatest increases in accrual adoption by 2023 include:

  • Latin American and the Caribbean: 21 countries (5 currently)
  • Africa: 19 countries (2 currently)
  • Asia: 21 countries (6 currently)
  • Europe: accrual adoption predictions are made more complicated by uncertainties surrounding the development of European Public Sector Accounting Standards (EPSAS). It is expected that the number of governments on accrual will double to 24 total over the next five years.

Of the 98 governments projected to be reporting on accrual by 2023, 72 (73%) will be making use of IPSAS:

  • 31 governments will adopt IPSAS directly
  • 14 indirectly
  • 27 will use IPSAS in developing their national standards.  

Government of the Republic of Cyprus

The Government of the Republic of Cyprus (Government) has been maintaining accounts and preparing financial statements using the cash basis of accounting, with certain modifications to financial liabilities in the form of bonds and guarantees. The Treasury of the Republic of Cyprus (Treasury) is responsible for the execution of all accounting activities of the central Government, including the preparation of its annual financial statements.

Ιn 2016, the Treasury prepared and adopted an action plan and roadmap to transition from modified cash to accrual basis accounting. Based on the initial plans, if necessary measures are taken, it is expected that the Government will prepare its first Opening Balance Sheet on 1 January 2020 and its first set of consolidated financial statements that will be in compliance with IPSAS for the year ending 31 December 2021.

The Treasury contracted KPMG Limited in Cyprus, on the 16th of November 2017, to assist with the provision of training services to the Government in the understanding of IPSAS and the framework for public sector accounting. The IPSAS training sessions started in March 2018 and completed in April 2019.

In Cyprus, the Government is at the first stages of its effort to convert from cash accounting to the accrual basis of accounting for the preparation of its financial statements. This conversion will most probably take place in line with the relevant IPSAS provisions, as the process within the European Union for the issuance of the EPSAS is expected to take time. The aim is to complete the conversion at the central Government’s level within the next two years, while the wider Government and other public sector entities are expected to follow.

Beyond the above mentioned benefits, the future implementation of IPSAS from both the central and wider Government and hence the uniform accounting policies, will allow the preparation of consolidated financial statements, something that could also be useful in future capital raising in the public sector.


Michalis Lardis, Senior Manager, KPMG Limited,

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