What IPSAS means for local authorities
Annual accounts under IPSAS are structured like the accounts of a private sector company. Besides the balance sheet, profit and loss account and the cash flow account they also contain proof of the changes in capital resources as well as clearly structured and informative notes. This means that the accounts are also easier for the not so practised balance sheet reader to interpret. They enable anyone familiar with the basic principles of double-entry bookkeeping to gain a quick insight into the financial situation of the public institution. This is particularly important for the members of militia authorities.
Today a local authority submits its accounts in accordance with the Harmonised Accounting Model, HRM. IPSAS are interesting primarily with regard to the rating of public bodies. Because IPSAS makes the financial situation clearer and offers the possibility of more effective financial management, financiers obtain a more reliable assessment of the public bodies.
How great the expenditure on switching over to IPSAS effectively is depends on the complexity of the public body switching over. On the size of the consolidation circle in particular.
In the Harmonised Accounting Model, HRM, public companies and special associations are often consolidated because of the population groups. Frequently these so-called distribution keys do not equate to the actual financial share of the local authority in the corresponding body.