Question

The convergence between IFRS and IPSAS is one of the main topics in the debate about the IPSAS. Discuss whether the implementation of a global accounting system is possible, highlighting the benefits and limitations associated with the adoption of IPSAS.

Answer 1

In the current scenario implementation of global accounting system is essential. However this requires a lot more reserach and co-ordination among nations to decide on the accounting system which will be accepted globally. IPSAS is one of such standards which can be accepted globally and will help in harmonization of the accounting.

Following are the benefits associated with the IPSAS:

1. Increased transperancy in financial statements will help to reduce fraud and also increase the accountability.

2. Credibility of financial information will increase because all the countries will be using same methods of accounting

3. It will also help in long term decision making by helping government in calculting future deficits in advance.

4. Providing various information like cash flow, fiscal, financial which will help in better decision making.

5. It will improve the disclosure requirements of the public entities which is critical for investors, government ( Since they collect tax) etc.

Limitation with adoption with IPSAS :

1. The main disadvantage is the circumstances prevailing in the member state. Scope of better accounting wilth IPSAS will depend on the state of the member country.

2. If a country is following cash system of accounting than it will be more difficult for them to switch to Accural accounting as the whole concept of accounting will change for them.

3. The cost and resources are another limitation in implementation of IPSAS. Its diificult to find such accountants in the beginning stage who have full fledge knowledge of IPSAS.

4. Government support is highly required as it is not only a change in the finance function but a change in structure.