Nearly three-quarters of OECD countries have adopted accrual accounting for their year-end financial reports and more than a quarter now prepare their annual budgets on an accrual basis, according to the landmark study Accrual Practices and Reform Experiences in OECD Countries by the International Federation of Accountants (IFAC) and the Organisation for Economic Co-operation and Development (OECD).
The study, which examined accounting and budgeting practices at the national government level in OECD countries, discusses the challenges and benefits of accruals reforms and considers what steps countries are taking to make better use of accrual information in the future.
“High-quality financial reporting is essential to ensure that governments make fiscal decisions based on up-to-date information and an accurate understanding of their financial position,” said Fayez Choudhury, IFAC CEO. “They provide a mechanism through which legislatures, auditors, and the public at large can hold governments accountable for their financial performance.”
The study showed that most OECD countries have reformed and modernized their financial reporting practices over the last few decades:
- approximately three-quarters of OECD countries have adopted accrual accounting for their year-end financial reports as a key priority;
- more than a quarter of OECD countries prepare their annual budgets on an accrual basis; and
- audit techniques and accounting standard-setting mechanisms have also evolved significantly in the wake of accounting reforms.
The study also points out that while the direct adoption of international accounting standards, such as International Public Sector Accounting Standards (IPSAS) or International Financial Reporting Standards (IFRS), by national governments remains very low, many standard setters use IPSAS or IFRS as primary or explicit references for developing their national standards.
“While governments still seek to improve the usefulness and comprehensibility of their financial reports, a majority of OECD countries expressed satisfaction that accounting reforms have already resulted in greater transparency and accountability of their financial operations,” said Jón R. Blöndal, Head of the OECD Budgeting and Public Expenditures Division.
A digital version of the report can be found at on the IFAC and OECD websites.
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.
About OECD
Working with over 100 countries, the OECD is a global policy forum that promotes policies to improve the economic and social well-being of people around the world.