Will the adoption of IPSAS help Greece?
Thursday 20 August 2015
Following an announcement by the government of Greece that it would be adopting International Public Sector Accounting Standards (IPSAS), an intriguing article by publicfinanceinternational.org examines whether the adoption could change the world's view of Greek debt.
As things currently stand, an agreement has been reached between Greece and its creditors, although further negotiations on several matters, such as debt relief, are still required. The agreement is founded on the idea that Greece has an unsustainable burden of debt - and the debate has focused on what kind of changes are required in order to make the debt sustainable. The International Monetary Fund (IMF) has expressed the view that, for Greece's debt to be sustainable, debt relief is required.
But how could the adoption and use of IPSAS-based accounting help a country? Put simply, good accounting is a vital element of good governance. High-quality public financial management enables tighter fiscal control and the transparency associated with IPSAS-based financial statements leads to a better informed electorate and a more accountable government.
Government accounting is an essential element of a well-functioning management system - it enables decision-makers to measure and monitor performance, creating incentives for them not to make decisions that are likely to have a negative impact on either efficiency or intergenerational equity.
In the case of Greece, adoption of IPSAS may well generate these benefits, over time. However, the current context is one generally characterised by a widespread and pervasive misunderstanding of Greece's actual fiscal position. This misunderstanding has led to a scenario whereby the solution reached between Greece and its creditors does not entirely address the root of the problem (and may even serve to exacerbate it). To this end, IPSAS can assist in an immediate and significant way, by helping Greece to reveal its current position, and take adequate measures to prevent it from getting any worse.
Read the full article:
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