The development of the European public sector accounting standards : an analysis

Abstract

Purpose: The main aim of this study was to ascertain the reason behind the need for EPSAS for use by EU Member States. Furthermore, the study assessed how EPSAS have been managed to date (December 2022) in terms of the technical developments and institutions involved. Finally, an analysis of the perceptions of Maltese Government officials with regards to the development and application of EPSAS was carried out. Design: The study adopted a qualitative approach based on documentary research and semi-structured interviews conducted with both Maltese and foreign research participants. Four interviews were carried out with officials from the Ministry for Finance, NAO and NSO. Two interviews were conducted with EPSAS Team members from Eurostat and a former IPSASB member. Findings: The findings indicate that the sovereign debt crisis and lack of comparability in public sector financial reports of Member States were the main reasons which prompted the EU to take on the EPSAS project. Eurostat commenced the EPSAS development process after IPSAS were not deemed suitable for use within Member States. Nonetheless, the former shall be based on the latter. A two-phase approach has been adopted with the aim to increase transparency, promote accrual accounting and address comparability across all levels of government. Public sector reforms in Member States are also being assisted by financial and technical support provided by the EU Commission and Eurostat. Despite the growing trend in favour of accrual accounting, it is still not clear whether EPSAS will be accrual-based. Nevertheless, accrual accounting is the main priority of the Maltese public service as it commenced the process to adopt IPSAS. However, there is still a lack of training and accountants to handle this transition. The Government and its employees’ mindset has to shift from cash-based to one which is accrual-based. Due to other pressing issues of international importance, the development of EPSAS has slowed down and not much progress is expected in the next couple of years. Conclusion: This study concludes that the development and eventual adoption of EPSAS among Member States is key to bring about the desired improvement in public sector financial reporting in the EU. Despite the slow progress, Eurostat’s effort to achieve fiscal transparency and comparability should not cease. In successfully implementing its government accounting reform, the Maltese Government should continue supporting its employees and change in mindset required. Value: This study hopes to raise more awareness on the harmonised set of public sector accounting standards (EPSAS) being developed. It also points out how the Maltese public sector may be better equipped to deal with such change.