Public Sector Accounting and the Sustainability of Public Finance Among Accounting Bases, Harmonization, and Flexibility Concerns

Abstract

Since the introduction of the European Semester, the endorsement of the “Six Pack” and the Directive 85/2011 (European Council Secretariat, Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States), harmonization and mutual influences among Government Accounting (GA), Government Finance Statistics (GFS), and IPSAS have been addressed continuously at the European level. The main issue seems to be “if and how” the IPSAS may integrate the GFS’ various purposes, within the entire financial reporting process. After focusing on the role played by accrual accounting in the public sector and the financial accountability needs in the European context, this chapter presents an argument centered on a systematic relationship among different accounting systems, in the light of the current European legislation. It highlights, from a qualitative standpoint, the impact of that relationship on users and their information needs. A breakdown into the revenue recognition practice, as an explanatory approach on the subject, is provided. The results raised the cue to bring out an unavoidable and structural trade-off, recognizable between the harmonization among different accounting systems and the flexibility within each of them. As such, this is discussed as a purposeful starting point, useful to figure out future improvements of the public sector accounting rules across Europe. At the end, progresses by this side could help European Union countries in effectively contributing to the achievement of some sub-targets and indicators included in the Sustainable Development Goal (SDG) 17—Partnership for the Goals—promoted by the United Nations (UN) in 2015.