## wpiea2025148

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### Scope, objective, and data sources
- Examines relationship between uptake of accrual basis accounting in government and use of resultant accrual information in fiscal statistics, using the European Union (EU) as a case study.
- Focus: accounting practices and adoption of accrual accounting in the general government sector (GGS) of the 27 EU member states, and the extent to which accrual information is used in fiscal statistics.
- Primary inputs: PwC/Eurostat survey of Accounting Maturities of EU Governments (end-2018, updated 2020) and IFAC/CIPFA International Public Sector Financial Accountability Index (2020, 2021), supplemented by 2025 provisional forecasts to infer likely positions in 2023.
- Objective: draw general lessons applicable beyond the EU; not to provide country-specific recommendations.

### Accounting maturity, reporting basis, and cluster classification (2023)
- Accounting maturity and central government reporting basis show a clear relationship with variation across countries.
- Selected GGS accounting maturity score examples preserved exactly as reported:
  - Greece < 40% — Partial accrual
  - Malta 24% — Cash
  - Germany 23% — Cash
  - Austria 77% — Accrual
  - Sweden 84% — Accrual
  - Lithuania 91% — Accrual
- Cluster classification of the 27 EU member states into four groups in 2023:
  - CASH COUNTRIES: Germany, Netherlands, Cyprus, Greece, Ireland, Italy, Luxembourg, Malta.
  - ON THE WAY TO ACCRUAL: Austria, Belgium, Croatia, Hungary, Poland, Portugal, Romania, Slovakia, Slovenia, Bulgaria.
  - WELL ON THE WAY TO ACCRUAL: Czech Republic, Denmark, Estonia, Finland, France, Latvia, Lithuania, Spain, Sweden.
  - MATURE ACCRUALS: (cluster membership reflected above).
- IFAC/CIPFA data indicate nine countries plan reporting-basis changes by 2025 versus five implied by PwC/Eurostat.

### Use of accrual data in fiscal statistics and conversion from cash sources
- EU fiscal statistics for EDP and GFS are presented on an accrual basis (in line with ESA 2010 and GFSM 2014), irrespective of source data basis.
- Typical practice: accruals data and financial statements mainly provide corroboration for fiscal statistics rather than acting as the primary data source; exception where accrual accounting is well established across the GGS and harmonized collection systems: AT, EE, ES, DK.
- Reasons for reliance on cash-based sources:
  - Budgets are predominantly cash-based; forecasts use cash basis and outturns are often reported on the same basis.
  - In-year systems geared to budget execution and cash periodicity; accrual reporting may operate on annual cycles not aligned with fiscal reporting needs.
  - Long-standing legislative reporting requirements would require extensive legal reform.
  - Not all GGS sub-sectors or institutions within a sub-sector have adopted accrual accounting.
  - Statisticians use standard conversion techniques from cash to accruals to ensure consistent valuation and calculation methods.
- Common conversion techniques and adjustments:
  - Convert cash-based expenditure and non-tax revenue to accruals by adjusting creditor and debtor balances.
  - Convert tax cash receipts to accruals by time-adjusting for typical collection lags.
  - Adjust debt data for premiums, discounts, principal repayments, and accrued interest.
  - Use actuarial data or modelling for pension liability calculations.
  - Construct fixed asset data via the perpetual inventory method and align depreciation and valuation to GFS/ESA requirements.
- Classification and treatment adjustments required:
  - Reclassify accounting presentations to GFS/ESA presentations.
  - Remove provisions (other than standardized guarantees) since provisions are excluded under statistical reporting.
  - Add sub-soil assets (e.g., mineral reserves) included in GFS/ESA but usually excluded in accounting statements.
  - Remove certain public service pension liabilities from financial statements where schemes are excluded from GFS main tables and are reported separately.
  - Reclassify economic substance of items (e.g., equity injections or loans to SOEs reclassified as capital transfers; SOE super-dividends as capital drawdowns).

### Magnitude and composition of statistical adjustments
- Adjustments between country working balances (budget-reported surplus/deficit, usually cash) and standardized net lending/borrowing (accrual) reported for 2023 were up to 4.5 percent of GDP.
- Comparable adjustments for 2022 were slightly higher.
- Adjustments are decomposed by GGS sub-sector: typically the largest component is central government, but social security and local government adjustments can be significant in some countries (France noted as a case with offsetting sub-sector mixes).
- EDP reconciliations fall into seven adjustment categories (Box 1): financial transactions to subtract; non-financial transactions to add/subtract; interest accrued versus paid; changes in accounts payable; changes in accounts receivable; institutions outside the budget or reported working balance; other adjustments (including methodological differences).
  - Tables based on cash or mixed sources exhibited all seven adjustment types.
  - Tables based on accrual sources exhibited fewer adjustment types, mainly adjustments for institutions outside the reported working balance and “other adjustments.”

### Data coverage, timeliness, and internal consistency
- EU member states: 27 (AT Austria, BE Belgium, BG Bulgaria, CY Cyprus, CZ Czech Republic, DE Germany, DK Denmark, EE Estonia, EL Greece, ES Spain, FI Finland, FR France, HR Croatia, HU Hungary, IE Ireland, IT Italy, LT Lithuania, LU Luxembourg, LV Latvia, MT Malta, NL Netherlands, PL Poland, PT Portugal, RO Romania, SE Sweden, SI Slovenia, SK Slovakia).
- Quarterly GFS data: member states’ quarterly GFS data are complete for the operating statement, financing and for financial assets and liabilities; all member states have provided quarterly data within timetables (within 3 months of the quarter end), with initial figures often provisional.
- High-level stock-and-flow reconciliation: statistical discrepancies between annual surplus/deficit and net change in financial assets and liabilities historically very small for EU-27 (0.1% of GDP or less), though slightly higher numbers possible for individual member states; discrepancies have trended down over time.
- Non-financial assets (NFA) reporting (annual, with time lag up to two years; compulsory covers fixed assets only) — last year for which NFA reported (latest required year 2021, based on April 2024 GFS datasets):
  - None: 4 — BG, ES, HR, IE
  - 2013: 1 — EL
  - 2021: 9 — CY, EE, HU, LV, LT, LU, PL, PT, RO
  - 2022: 13 — AT, BE, CZ, DK, DE, FI, FR, IT, MT, NL, SI, SK, SE
- By asset classes (fixed assets required):
  - None: 4 — BG, ES, IE, HR
  - Fixed assets only (line 41): 18 — AT, BE, CY, DK, DE, EE, EL, HU, IT, LT, LU, MT, NL, PL, PT, RO, SI, SK
  - Fixed assets + other produced assets (lines 41, 42): 2 — FI, LV
  - Fixed assets + other produced assets + non-produced assets (lines 41-43): 3 — CZ, FR, SE
- Live Eurostat database (May 2024): around half of member states had provided data for end-2022 by May 2024; other states reported end-2021 data.

### Pension and social security liabilities: scale and reporting
- Separate statistical reporting system exists for social security and other government pension liabilities; majority not included in core GFS/ESA reporting.
- Reporting timetable: required to be reported to Eurostat starting from 2015, within a two-year timetable, on a three-yearly cycle; most recent update (to end 2021) reported in April 2024.
- Table 5 — Public Service and Social Security Pension Liabilities at end-2021 (Value at end-2021, €bn):
  - Non-funded Pay-As-You-Go Schemes (Not in core ESA accounts):
    - 1 Defined benefit schemes for general government employees: 4,793
    - 2 Social security pension schemes: 45,342
  - Other schemes (funded) (In core ESA accounts):
    - 3 Defined contribution schemes of general government: 6
    - 4 Defined benefit schemes for general government employees classified in general government: 49
  - Grand total: 50,190
- Aggregate-level statement: pension and social security liabilities are significant, around €50tn at end-2021, with the vast majority (90 percent) being social security pension entitlements reported outside the core ESA accounts.
- Distributional examples:
  - Public service pension liabilities at end-2021 reported at up to 95 per cent of GDP (Portugal).
  - Social security pensions averaged over 250 percent of GDP and reached over 450 percent of GDP in Spain.
- Note: nine member states reported nothing under type 1 (unfunded public service pensions), so data may be an underestimate.

### Balance-sheet construction, strengths, and shortcomings
- Snapshot method for Figure 5: combine most recent annual GFS financial assets and liabilities (2023), most recent NFA data (2021 or 2022) from Eurostat (May 2024), and pensions data at end-2021.
- Observed range of Net Worth (percent of GDP): from a large negative Net Worth of 100 percent of GDP (Portugal and Belgium) to a large positive Net Worth of up to 250 percent of GDP (Czech Republic and others).
- Shortcomings and limitations:
  - Some member states do not report parts of their balance sheet.
  - Variations in asset/liability classes may reflect genuine differences or reporting method differences.
  - Financial assets and liabilities data are more reliable due to greater internal checks.
  - Non-financial asset data reflect mixed reporting of natural resources.
  - Coverage excludes assets and liabilities of the commercial public sector.
- Overall assessment: balance sheet data are not yet sufficiently comprehensive, reliable, standardized, or timely for robust EU-wide analysis, though useful at individual member-state level where accrual and international standards are more fully applied.

### Main findings, drivers, and obstacles
- Clear trend toward adoption of accrual accounting for the GGS, but great diversity in accounting practices among EU member states.
- 19 member states have reached the status of “mature accruals” or “well on the way to accrual”.
- Six more countries have started accrual reform and are expected to fill their accounting maturity gap over the next years.
- Reforms at national level largely independent of EPSAS progress; Council Directive 2011/85/EU emphasized statistical use of accrual data and gave rise to EPSAS.
- Transition to accrual is long and complex, requiring multiannual effort, capacity building, and IT investments.
- Few countries are making full use of accrual data to produce fiscal statistics; cash or mixed data remain primary sources for many countries and sub-sectors.
- Lack of requirements to reconcile outcomes in financial statements with fiscal statistics may contribute to limited use of accrual data.
- Obstacles to direct use of accrual data can be methodological, practical, or due to institutional inertia.

### Benefits, efficiencies, and implementation considerations
- Potential benefits of accrual accounting (for fiscal statistics and PFM) include:
  - Better decision-making by managers in the public sector.
  - Greater transparency and improved accountability.
  - Availability of more relevant and useful fiscal statistics (e.g., balance-sheet-based analyses).
  - Possibility of more reliable fiscal statistics by substituting estimates with actual accrual data.
  - Scope for more efficient compilation of fiscal statistics by reducing need for modelling and adjustments.
- Benefits materialize most effectively when accrual reforms are embedded in broader PFM reforms.
- Essential reporting bases an accounting system should capture:
  - Cash data for cash planning and budgetary reporting.
  - Budget data (forecasts), noting budget basis may be cash, accrual, mixed, or modified accrual.
  - Accrual data for flows and balances per international standards (IPSAS or equivalent).
- Valuation issues: statistical standard is current market values; accounting may use historic cost or different current value models—systems must track values on different bases for different reporting purposes.
- Coverage and boundary considerations:
  - Systems need to include all institutional units in the GGS; reporting entity and boundary definitions may differ between accounting and statistical frameworks.
  - Longer-term ideal: a reporting system that includes financial and non-financial public corporations and can produce data for the entire public sector.

### Systems, consolidation, Chart of Accounts, and quality assurance
- Consolidation requires identification and elimination of intra-boundary flows and stocks (typical lists of flows and stocks to eliminate reproduced in the source).
- Integrated multidimensional Chart of Accounts (CoA) with counterparty ID is central to efficient consolidation; common CoA and common systems ease eliminations.
- Reporting timeliness and granularity: systems should produce monthly, quarterly, and annual reports promptly after period-end; decentralized regimes may need dedicated consolidation systems.
- Minimizing statistical adjustments: a well-designed accounting system should minimize need for subsequent statistical adjustments; quality assurance and audit (internal and external) are essential.
- Eurostat role: methodological and technical advice, validation of EDP submissions, routine visits, annual data quality reporting.

### PwC/Eurostat and IFAC/CIPFA survey specifics (selected exact figures and thresholds)
- PwC/Eurostat accounting maturity score buckets: < 40%; 40–70%; > 70%.
  - 6 countries scored under 40%: Greece, Malta, Germany, Cyprus, Italy, Luxembourg.
  - 11 countries between 40 percent and 70 percent: Netherlands, Ireland, Slovenia, Croatia, Portugal, Romania, Austria, Hungary, Slovakia, Poland, Belgium.
  - 10 countries scored more than 70 percent: Bulgaria, Denmark, Spain, Finland, Czech Republic, Sweden, Lithuania, France, Latvia, Estonia.
- PwC/Eurostat scoring weights for accounting areas (preserved as in source):
  - Reporting: Scoring points 12; Weight 12% (Central, State, Local)
  - Consolidation: Scoring points 7; Weight 7%
  - Fixed assets: Scoring points 33; Weight 33%
  - Intangible assets: Scoring points 2; Weight 2%
  - Inventories: Scoring points 3; Weight 3%
  - Revenue: Scoring points 14; Weight 14%
  - Accruals and expenses: Scoring points 18; Weight 18% (Central/State/Local), Scoring points 18; Weight 55% (Social Funds)
  - Employee benefits: Scoring points 5; Weight 5%
  - Provisions: Scoring points 2; Weight 2%
  - Financial instruments: Scoring points 4; Weight 4%
- IFAC/CIPFA 2020 central/federal reporting basis (cash, partial accrual, accrual) and 2025 forecasts reproduced as in source (selected examples preserved exactly):
  - Cyprus: 2020 Cash; 2025 Accrual
  - Germany: 2020 Cash; 2025 Cash
  - Ireland: 2020 Cash; 2025 Partial accrual
  - Malta: 2020 Cash; 2025 Accrual
  - Netherlands: 2020 Cash; 2025 Cash
  - Bulgaria: 2020 Partial accrual; 2025 Partial accrual
  - Hungary: 2020 Partial accrual; 2025 Accrual
  - Poland: 2020 Partial accrual; 2025 Accrual
  - Romania: 2020 Partial accrual; 2025 Accrual
  - Austria: 2020 Accrual; 2025 Accrual
  - France: 2020 Accrual; 2025 Accrual
  - Sweden: 2020 Accrual; 2025 Accrual

### Policy-relevant implications and broad recommendations (drawn from findings)
- Promote harmonization of accounting practice across the EU (EPSAS or IPSAS-based approaches) to reduce fragmentation and facilitate consolidation across GGS entities.
- Design reformed accounting systems to:
  - Capture cash, budget, and accrual data concurrently.
  - Track valuations on multiple bases (historic cost and current market values) to satisfy both accounting and statistical needs.
  - Include all institutional units identified as belonging to the GGS to support statistical reporting.
  - Implement an integrated multidimensional Chart of Accounts with counterparty identifiers to ease consolidation and eliminations.
- Embed accrual accounting reforms within broader PFM reform programs to maximize internal and external benefits and to realize improvements in fiscal statistics.
- Strengthen reporting and timeliness of non-financial assets and pension liabilities reporting to improve balance-sheet completeness and the usefulness of balance-sheet-based fiscal analysis.
- Encourage reconciliation practices and requirements to align financial statements and fiscal statistics, reducing reliance on ad hoc statistical adjustments and improving data comparability.

*Source: IMF staff team, “Accounting and Fiscal Reporting in EU Countries” (working paper content provided; wpiea2025148).*

### Appendix I. Accounting Maturities ......................................................................................

### Appendix I. Accounting Maturities

### A. The PwC/Eurostat Survey
- Page 31

### The IFAC/CIPFA Survey
- Page 33

*Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025148.pdf*

### References .............................................................................................................

### References

### Scope and objectives
- This working paper examines the relationship between uptake of accrual basis accounting in government and the use of resultant accrual information in fiscal statistics, using the European Union (EU) as a case study.
- Focus: accounting practices and adoption of accrual accounting in the general government sector (GGS) of the 27 EU member states, and the extent to which accrual information is used in fiscal statistics.
- Primary source inputs: PwC/Eurostat survey of Accounting Maturities of EU Governments (end-2018, updated 2020) and IFAC/CIPFA International Public Sector Financial Accountability Index (2020, 2021), supplemented by 2025 provisional forecasts to infer likely positions in 2023.
- Objective: draw general lessons applicable beyond the EU; not to provide country-specific recommendations.

### Institutional and methodological background
- Eurostat sets statistical standards, oversees data quality, collates data, and publishes EU-wide comparable datasets; ESA 2010 is the statistical framework (broadly consistent with 2008 SNA and IMF GFSM 2014).
- EPSAS project led by Eurostat aims to harmonize government accounting practices across EU member states; EPSAS are broadly based on IPSAS and primarily concerned with accrual accounting.
- The study converts retrospective (2018/2020) and forward-looking (2025) survey data into a 2023 position statement; where countries forecast progress to accrual by 2025, they are treated as being “on the way” in 2023.

### Accounting maturity, reporting basis, and clusters (2023)
- Accounting maturity and central government reporting basis show a clear relationship with variation across countries.
- Table 1 (survey comparison): examples preserved exactly as reported (selected entries):
  - GGS accounting maturity scores and reporting basis examples: Greece < 40% — Partial accrual; Malta 24% — Cash; Germany 23% — Cash; Austria 77% — Accrual; Sweden 84% — Accrual; Lithuania 91% — Accrual.
- Cluster classification of the 27 EU member states into four groups in 2023:
  - CASH COUNTRIES (criteria: low/medium accounting maturity, cash reporting, no major change foreseen): Germany, Netherlands, Cyprus, Greece, Ireland, Italy, Luxembourg, Malta.
  - ON THE WAY TO ACCRUAL (criteria: low/medium accounting maturity, cash/partial accrual reporting, major shift to accrual foreseen for 2025 and/or beyond): Austria, Belgium, Croatia, Hungary, Poland, Portugal, Romania, Slovakia, Slovenia, Bulgaria.
  - WELL ON THE WAY TO ACCRUAL (criteria: medium accounting maturity, accrual or partial accrual reporting, some improvement foreseen for 2025): Czech Republic, Denmark, Estonia, Finland, France, Latvia, Lithuania, Spain, Sweden.
  - MATURE ACCRUALS (criteria: high accounting maturity, accrual reporting, little improvement foreseen for 2025): (Note: clusters are as presented by the IMF staff team; individual country membership reflected above.)
- IFAC/CIPFA data suggest more countries plan to change their reporting basis by 2025 (nine countries) than PwC/Eurostat indicated (five countries).

### Use of accrual data in fiscal statistics
- EU fiscal statistics for EDP and GFS are presented on an accrual basis (in line with ESA 2010 and GFSM 2014), irrespective of the source data basis.
- EDP: annual tables covering last four years and forecasts, submissions by 1 April and 1 October; includes reconciliation between accrual surplus/deficit and reported working balance (often cash).
- GFS: quarterly and annual data; quarterly within three months of quarter end includes revenue, expenditure, surplus/deficit, government financing and debt, and a financial balance sheet; annual GFS extends balance sheet to non-financial assets.
- Despite progress in accrual accounting rollout (19 member states identified as “well on the way” or completed), most have continued to use traditional cash-based methods as primary sources for fiscal statistics.
- Reasons for continued reliance on cash-based sources:
  - Budgets are predominantly cash-based; forecasts use cash basis and outturns are often reported on the same basis.
  - In-year financial reporting systems geared to budget execution and cash-periodicity; accrual financial reporting may operate on annual cycles not aligned with fiscal reporting needs.
  - Long-standing legislative reporting requirements that would require extensive legal reform.
  - Not all GGS sub-sectors or institutions within a sub-sector have adopted accrual accounting.
  - Statisticians use standard conversion techniques from cash to accruals to ensure consistent valuation and calculation methods.
  - Statistical authorities and Eurostat familiarity and satisfaction with established cash-based methods.

### Adjustments required to convert cash-based source data to accrual fiscal statistics
- Common conversion techniques and adjustments:
  - Convert cash-based expenditure and non-tax revenue to accruals by adjusting creditor and debtor balances.
  - Convert tax cash receipts to accruals by time-adjusting for typical collection lags (example approach described qualitatively).
  - Adjust debt data based on face value/cash for premiums, discounts, principal repayments, and accrued interest.
  - Use actuarial data or modelling for pension liability calculations in lieu of annual cash-flow data.
  - Construct fixed asset data via the perpetual inventory method, adjusting for asset life cycles, depreciation models, and current market values to align with GFS/ESA requirements.
- Classification and treatment differences between accounting and statistics requiring adjustments:
  - Reclassify accounting presentations to GFS/ESA presentations where necessary.
  - Remove provisions (other than standardized guarantees) since provisions are excluded under statistical reporting.
  - Add sub-soil assets (e.g., mineral reserves) that are included in GFS/ESA but usually excluded in accounting statements.
  - Remove certain public service pension liabilities from financial statements where schemes are excluded from GFS main tables and are reported separately.
  - Reclassify economic substance of items (e.g., equity injections or loans to SOEs reclassified as capital transfers; SOE super-dividends as capital drawdowns).
- Magnitude of adjustments:
  - Adjustments between country working balances (budget-reported surplus/deficit, usually cash) and standardized net lending/borrowing (accrual) reported for 2023 were up to 4.5 percent of GDP (Figure 2).
  - Comparable adjustments for 2022 were slightly higher.
  - Adjustments are decomposed by GGS sub-sector; typically the largest component is central government, but social security and local government adjustments can be significant in some countries (France noted as a particular case where sub-sector mixes produced offsetting adjustments).
- Adjustment types and relation to source basis:
  - EDP reconciliations fall into seven adjustment categories (see Box 1 in the source); an analysis for 2022 and 2023 shows:
    - Tables based on cash or mixed sources exhibited all seven adjustment types.
    - Tables based on accrual sources exhibited fewer adjustment types, mainly adjustments for institutions outside the reported working balance and “other adjustments” reflecting unavoidable accounting-statistics treatment differences.
  - Fewer adjustments, in theory, imply less compilation and validation effort, but it is not conclusive that accrual source data always yield an outright reduction in total work effort—this requires further study.

### Key statistical and procedural points preserved exactly from the source
- EU member states: 27 (enumerated as AT Austria, BE Belgium, BG Bulgaria, CY Cyprus, CZ Czech Republic, DE Germany, DK Denmark, EE Estonia, EL Greece, ES Spain, FI Finland, FR France, HR Croatia, HU Hungary, IE Ireland, IT Italy, LT Lithuania, LU Luxembourg, LV Latvia, MT Malta, NL Netherlands, PL Poland, PT Portugal, RO Romania, SE Sweden, SI Slovenia, SK Slovakia).
- Major frameworks and acronyms: CIPFA, EDP, EPSAS, ESA 2010, EU, GFS, GFSM 2014, GGS, IFAC, IPSAS, 2008 SNA, SOE.
- Survey sources: PwC/Eurostat (Updated accounting maturities of EU governments, 2020) and IFAC/CIPFA (International public sector financial accountability index, 2021).
- Specific numeric examples and thresholds preserved:
  - Accounting maturity score buckets cited as < 40%, 40–70%, > 70%.
  - Adjustments between working balance and net lending/borrowing for 2023 up to 4.5 percent of GDP.
  - Number of member states with various reporting bases in Table 3 totals: Central Government C-19, M-7, A-1; State Government M-3, A-1; Local Government C-11, M-8, A-8; Social Security C-8, M-8, A-10.
  - Table 3 source: Eurostat EDP tables for April 2024, and countries’ own reporting of source data.

*Source: IMF staff team, “Accounting and Fiscal Reporting in EU Countries” (working paper content provided).*

### Box 1: The Types of Adjustment Between Working Balance and Net Lending/Borrowing

### Box 1: The Types of Adjustment Between Working Balance and Net Lending/Borrowing

### Types of adjustment between working balance and net lending/borrowing
- financial (financing) transactions needing to be subtracted from the working balance
- non-financial transactions needing to be added or subtracted from the working balance
- adjustments for the difference between interest accrued and paid
- adjustments for changes in accounts payable
- adjustments for changes in accounts receivable
- adjustments for institutions outside the budget or reported working balance
- other adjustments (including essential methodological differences between accounting and statistical treatments)
- Source: EDP tables, standard categories of adjustment to tables 2A-2D

### Use of accruals data and financial statements in cash-based fiscal reporting
- Principal use: accruals data and financial statements mainly provide corroboration for fiscal statistics rather than acting as the primary data source.
- Example: Eurostat has used financial statements to corroborate transfers and capital injections to public enterprises; however, general lack of country financial statements at GGS level means corroboration typically occurs at the entity or institutional unit level.
- At country level: EDP inventories show financial statements are more often used to supply or corroborate specific items within statistical accounts rather than as the primary source for fiscal statistics.
- Exception: countries where accrual accounting is well established across the GGS and there are harmonized systems for collecting such data — listed as AT, EE, ES, DK.

### Internal consistency and reconciliation (stock-and-flow checks)
- High-level check: reconciliation between stock-and-flow data for financial assets and liabilities versus the annual surplus/deficit.
- Typical outcome: a difference or “statistical discrepancy” between the annual surplus/deficit and the net change in financial assets and liabilities.
- Historical EU experience: such discrepancies have historically been very small (0.1% of GDP or less for the EU-27), although slightly higher numbers are possible for individual member states; over time, country statistical discrepancies have reduced.
- Implication: prevalence of cash-based sources does not appear to have a large impact on data reliability for transactions in financial assets and liabilities.

### Coverage of stocks and flows in EU fiscal statistics (focus on GFS reporting)
- Full set of data required for GFS and ESA reporting comprises:
  - An operating statement which shows revenue, expenditure, and surplus/deficit (sometimes referred to as “above-the-line”);
  - A statement of net financing, which should reconcile with the surplus/deficit from the operating statement (sometimes referred to as “below-the-line”);
  - A balance sheet of assets and liabilities.
- Quarterly GFS data: member states’ quarterly GFS data are complete for the operating statement, financing and for financial assets and liabilities; all member states have provided quarterly data within timetables (within 3 months of the quarter end), with initial figures often provisional.

### Non-financial assets (NFA) reporting: timing and coverage
- NFA data requirements: required on an annual basis only, for some assets only, with a time lag of up to two years; compulsory reporting covers only fixed assets.
- Summary of reporting status (based on annual GFS datasets released in April 2024, latest required year 2021):
  - Last year for which NFA reported:
    - None: 4 — BG, ES, HR, IE
    - 2013: 1 — EL
    - 2021: 9 — CY, EE, HU, LV, LT, LU, PL, PT, RO
    - 2022: 13 — AT, BE, CZ, DK, DE, FI, FR, IT, MT, NL, SI, SK, SE
  - By which asset classes reported (only fixed assets required):
    - None: 4 — BG, ES, IE, HR
    - Fixed assets only (line 41): 18 — AT, BE, CY, DK, DE, EE, EL, HU, IT, LT, LU, MT, NL, PL, PT, RO, SI, SK
    - Fixed assets + other produced assets (lines 41, 42): 2 — FI, LV
    - Fixed assets + other produced assets + non-produced assets (lines 41-43): 3 — CZ, FR, SE
- Live Eurostat database (May 2024): shows similar pattern—few member states do not provide required data; most report mandatory elements only; some exceed requirements by reporting other asset classes or earlier than required.
- Reporting timing in live database: by May 2024, around half of member states had provided data for end-2022 (these are shown with an asterisk in the original graphic); other states reported their data at end-2021.
- Asset-class reporting notes:
  - Most (except Ireland) reported fixed assets.
  - Almost all reported inventories, with low values.
  - Nine countries reported natural resources (land and mineral reserves), some with values much higher than others.
  - Minimal or low value reporting of other non-financial assets (intangibles and valuables).

### Pension and social security liability reporting
- Separate statistical reporting system exists for social security and other government pension liabilities; the great majority are not included in core GFS/ESA reporting.
- Reporting timetable: required to be reported to Eurostat starting from 2015, within a two-year timetable, on a three-yearly cycle (e.g., end-2015 data by end-2017); member states may report more often; most recent update (to end 2021) reported in April 2024.
- Role of private provision: member states vary in reliance on private provision for pensions— in 2021, four out of 27 EU countries private occupational pension insurance generates over 10 percent of total social pension entitlements; bulk of pension and social security provision is by government.
- ESA classification of government pension liabilities:
  - Non-funded “pay-as-you-go” schemes: accumulated liabilities reported outside the core national accounts.
  - All other government pension schemes: included in core national accounts.

### Table 5 summary: Public Service and Social Security Pension Liabilities at end-2021
- Type of schemes — Value at end-2021 (€bn):
  - Non-funded Pay-As-You-Go Schemes: Not in core ESA accounts (but in a supplementary table)
    - 1 Defined benefit schemes for general government employees: 4,793
    - 2 Social security pension schemes: 45,342
  - Other schemes (funded): In core ESA accounts
    - 3 Defined contribution schemes of general government: 6
    - 4 Defined benefit schemes for general government employees classified in general government: 49
  - Grand total: 50,190
- Source: Eurostat website, pensions database, 2021 – except Poland which is 2018 data
- Note: For GFS purposes these employment-related pensions are included in liabilities. These data may be an underestimate—nine member states reported nothing under type 1 (unfunded public service pensions).

### Scale and fiscal significance of pension liabilities
- Aggregate level: pension and social security liabilities are significant, around €50tn at end-2021, with the vast majority (90 percent) being social security pension entitlements reported outside the core ESA accounts.
- Distributional examples:
  - Public service pension liabilities at end-2021 reported at up to 95 per cent of GDP (Portugal).
  - Social security pensions averaged over 250 percent of GDP and reached over 450 percent of GDP in Spain.
- Distinction by nature:
  - Public service pensions: based on government employees’ employment contracts, actual or notional employee/employer contributions; governments rarely change terms and conditions in respect of past service; these (types 1, 3, 4) are recognized as liabilities under accounting standards and GFS.
  - Social security pensions: terms and conditions more likely to be changed in light of economic circumstances; these (type 2) are excluded from core accounts.

### Assembling balance sheets for EU member states: strengths and shortcomings
- Construction method for Figure 5 (General Government balance sheets snapshot):
  - Combines: most recent annual GFS data for financial assets and liabilities (for 2023), most recent non-financial assets data (i.e., 2021 or 2022) from Eurostat database (May 2024), and pensions data at end-2021.
- Observed range of Net Worth (percent of GDP):
  - From a large negative Net Worth of 100 percent of GDP (Portugal and Belgium) to a large positive Net Worth of up to 250 percent of GDP (Czech Republic and others).
- Insights:
  - Demonstrates how different classes of assets and liabilities contribute to overall positions, and differences in the degree to which financial and non-financial assets contribute to Net Worth.
- Shortcomings and limitations:
  - Some member states do not report parts of their balance sheet.
  - Variations in classes of asset and liability may reflect genuine differences or differences in reporting methods.
  - Financial assets and liabilities data are more reliable due to greater internal checks.
  - Nine countries report no liabilities for unfunded public service pension liabilities.
  - Non-financial asset data reflect mixed reporting of natural resources.
  - Coverage is for the GGS and excludes assets and liabilities of the commercial public sector, which can be a significant fiscal risk.
- Overall assessment: balance sheet data are not yet sufficiently comprehensive, reliable, standardized, or timely enough to support EU-wide views or analyses, although more useful analysis is possible at individual member state level where accrual and international accounting or statistical standards are more fully applied.

*Source: IMF Working Paper content as provided in the Box 1 text.*

### Appendix V:

### Appendix V

### Balance sheet analysis and its uses
- The Fund has used the whole economy Balance Sheet Approach since the early 2000s, with the GGS being part of this analysis.
- The Fund compiles a Public Sector Balance Sheet database comparing balance sheet information for countries that together account for over 90 per cent of global GDP at GGS level.
- Some individual countries have undertaken balance sheet analyses and reviews, particularly those with longer experience in accrual techniques.
- Balance sheet analysis offers potential at two levels:
  - National level: a government reviewing its own balance sheet to better manage assets and liabilities, and to assess fiscal risks including solvency and longer-term fiscal sustainability.
  - Supra-national level: part of a regime for monitoring and reporting on the health of public finances and for anticipating fiscal challenges and risks in the region.
- Effective balance sheet analysis depends on processes and systems for collating reliable and comparable information to populate balance sheets.

### How accrual accounting reforms can help
- Accrual accounting information has largely been used for corroboration rather than as the primary source for fiscal statistics, reflecting patchy accrual implementation across the EU.
- The future expectation is for accrual accounting to become the de facto standard across the GGS in most if not all EU nations, with greater standardization through EPSAS or wider adoption of IPSAS at national level.
- Essential reporting bases the government accounting system needs to capture:
  - Cash data, for cash planning and management and budgetary reporting (any accrual system should generate cash data as a by-product).
  - Budget data, since statistics and accounting usually require forecast data; the budget basis may be cash, accrual, mixed, or a modified variant of accrual.
  - Accrual data, for all types of flows and balances—revenue and expenditure, assets and liabilities, and Other economic flows in GFS terminology. “Accruals” should ideally mean accruals according to international standards (IPSAS or equivalent).
- Valuation issues:
  - Statistical standard: use of current market values.
  - Accrual accounting may use historic cost or different “current value” models; the system must track values and changes on different bases for different reporting purposes.

### Coverage, reporting entity, and boundaries
- The accounting system needs to include all institutional units in the GGS.
  - Reporting entity: accounting uses “control” to determine reporting boundaries; some state or local governments may be constitutionally independent and not included in an accounting reporting boundary even if part of GGS for statistics. Whole-of-Government reporting can treat GGS as a segment within a larger public sector reporting entity.
  - Boundary: debate can arise at margins between public and private sectors and over classification of public enterprises versus GGS. Statistical standards provide guidance to resolve such boundary issues.
- For harmonized accounting and statistical reporting, the accounting system needs to include all institutions identified as belonging to the GGS so GGS data are available for statistical reporting even if not included in financial reporting.
- Longer-term ideal: a reporting system that includes financial and non-financial public corporations and can produce data for the entire public sector.

### Asset and liability coverage differences
- Both accounting and statistical standards require inclusion of all material classes of asset and liability, but coverage differs for:
  - Pensions: some unfunded social security pension schemes excluded from ESA but included as liabilities under accounting standards and GFS.
  - Provisions: accounting allows provisions for incurred liabilities with uncertain value; GFS excludes provisions to avoid asymmetry between debtor and creditor accounts.
  - Natural resources (other than land): GFS requires inclusion of mineral and energy resources and other naturally occurring assets; IPSAS 50 covering such assets in their natural state was issued in November 2024 and is not yet applied by governments.
  - Benefits or assets delivered in kind: GFS requires valuation and inclusion of goods and services in kind that create an asset; accounting allows but does not require inclusion.
  - PPPs: GFS recognizes PPP assets and matching liabilities based on balance of risks and rewards; accounting recognizes them on the basis of control.

### Consolidation requirements and eliminations
- The system must identify all material transactions and balances to be eliminated in consolidation; both disciplines eliminate intra-boundary flows and stocks to avoid double counting.
- Table 6 lists typical flows and stocks to be eliminated in consolidation:
  - FLOWS: Grants and transfers made and received; Goods and services received and paid; Taxes paid and received; Interest paid and received; Dividends paid and received; Rent paid and received; Profit or loss on transactions between entities; Any other revenue or expense between entities.
  - STOCKS: Payables and Receivables; Debtors and Creditors; Loans – lender and borrower; On-lending – on both sides; Equity interests in controlled entities – incl. equity injections and share capital issued; Any other assets or liabilities between entities.
- Consolidation is least problematic when all GGS institutions share a multidimensional unified or integrated Chart of Accounts (CoA) that includes code segments identifying the counterparty to each transaction; it is further eased if all entities share a common accounting system that flags inter-entity transactions automatically.
- In dispersed or decentralized accounting regimes with multiple systems and no unified CoA, manual methods and shortcuts to identify eliminations create gaps and scope for errors.

### Chart of Accounts and system design
- An integrated and comprehensive multi-dimensional standardized CoA is central to efficient and reliable reporting.
- CoA design must satisfy many needs and typically requires classifiers for economic, functional, programmatic, and organizational dimensions; the counterparty ID is critical for consolidation.
- Ideally, CoA classifiers should support budgetary, statistical, managerial, and financial reporting by enabling necessary detailed classifications.

### Reporting timeliness, granularity, and reconciliation
- Accounting systems should produce regular and timely reports (monthly, quarterly, annually) and quickly after period-end.
- The major challenge at GGS level is assembling all requisite data, including eliminations or consolidation adjustments, at the required frequency and timeliness—most difficult when accounting is dispersed and easiest when centralized and standardized.
- In decentralized regimes, governments may need dedicated consolidation systems to collate accounting data and consolidated reporting.
- Systems need sufficient granularity to facilitate reconciliations between accounting and statistical data; reconciliations are essential quality control steps.
- Accrual accounts should include automatic reconciliation between parts of financial reporting so financial statements are integrated and internally consistent.
- Example practice: the UK’s Whole of Government annual financial statements for 2019-20 include an Annex explaining and reconciling accounting and statistical reporting differences.

### Minimizing statistical adjustments and assurances
- A well-designed accounting system should minimize the need for subsequent statistical adjustments; meeting the described requirements can allow statistical adjustments to be minimized or carried out by the accounting system itself.
- Systems should provide for quality assurance and audit:
  - Quality assurance through internal control procedures and other quality assurance systems using established frameworks and related accreditations.
  - Audit assurance through internal and external audit, typically focused on the integrity of financial data and annual financial statements rather than direct assurance on fiscal reports.
- Eurostat adds methodological and technical advice, validates member state EDP submissions, performs routine visits to member state statistical offices, and issues an annual report on data quality.

### Conclusions
- The review aims to draw out general lessons rather than focus on Eurostat or individual member states.
- The authors worked from published sources, validated where possible through discussions with Eurostat, other published material, and a network of academics familiar with accounting reforms in some EU member states.

*Source: Appendix V, wpiea2025148 - Appendix V*

### conclusions are therefore intended to be general, and it would need considerably more work and

### wpiea2025148 - conclusions are therefore intended to be general, and it would need considerably more work and 

### Main findings and conclusions
- Clear trend toward adoption of accrual accounting for the general government sector, but great diversity in accounting practices among EU member states.
- 19 member states have reached the status of “mature accruals” or “well on the way to accrual”.
- Six more countries have started accrual reform and are expected to fill their accounting maturity gap over the next years.
- Reforms implemented at national level have been largely independent of any advance in the EPSAS Project, following the Council Directive 2011/85/EU.
- Harmonization of accounting practice is a priority in the European context, and EU institutions need to play an active role.
- Transition to a single accrual accounting framework is seen as key to overcome accounting fragmentation and to facilitate consolidation across general government entities.
- IPSAS provide a common basis or reference for accounting harmonization.

### Drivers, obstacles, and use of accrual data in fiscal statistics
- Improving accounting systems to provide better information for fiscal statistics is a clear driver of reforms; Council Directive 2011/85/EU emphasized the statistical use of accrual accounting data and gave rise to the EPSAS project led by Eurostat.
- Transition to accrual is a long and complex exercise requiring multiannual effort, capacity building, and IT investments.
- Few countries are making full use of accrual data to produce fiscal statistics; main source for fiscal statistics in many countries and sub-sectors of the GGS remains cash or mixed data sources.
- Lack of requirements to reconcile outcomes in financial statements with fiscal statistics may contribute to limited use of accrual data.
- Obstacles to using accrual data directly may be methodological, practical, or due to inertia: cash data may be preferred because considered methodologically more appropriate or due to established compiler practices.
- The use of cash-based accounting data requires more adjustments to derive accrual statistics; initial analysis suggests using accrual data directly should be more efficient, but this hypothesis needs more field testing.
- Use of cash data does not appear to pose a fundamental problem of reliability in the EU when internal consistency checks validate flow data against stock data for financial assets and liabilities.

### Weaknesses in financial reporting and balance sheets
- Main weaknesses in EU fiscal statistics appear to be in non-financial assets and pension liabilities.
- Financial balance sheets (excluding pensions) appear complete, up to date and reliable; the rest of the balance sheet is updated less frequently, with considerable lags, and the data appear less complete.
- Lack of full balance sheet data results in limited consideration of fiscal decisions on government net worth.
- There has been little coordinated action on developing country balance sheets for national use or as part of a future EU-wide governance regime.
- Patchy implementation of accrual accounting constrains the ability to produce better balance sheets; fiscal statisticians can generate fuller balance sheets from cash-based sources (modelling, surveys, actuarial evaluations), but roll-out of full accrual accounting would supply required information.
- Member states are some way from providing a harmonized or uniform set of accounting data on all assets and liabilities.

### Features and implementation considerations for reformed accounting systems
- Reformed national accounting frameworks and systems can be designed with features that facilitate direct use of accrual accounting data in fiscal statistics, resulting in more reliable data, more efficient processes, and new fiscal perspectives through the balance sheet.
- Developing suitable national accounting frameworks and the interface between accounting and parallel or integrated systems to produce fiscal statistics is not straightforward and requires careful thought.
- These features can be built into new systems or retrofitted into existing systems; either approach is likely to be phased, take time, and require careful planning.

### Appendix I — Accounting maturities: PwC/Eurostat survey (summary)
- The PwC/Eurostat survey assessed accounting maturity as degree of compliance with EU member states’ reporting requirements; score is effort-based and percentage weight indicates relative effort to move from cash-based to IPSAS-based accrual accounting framework.
- Accounting maturity scores for the GGS (as of 31 December 2018) range from 16 percent (Greece – maximum effort needed) to 90 percent (Estonia – minimum effort needed).
- Table 7: Weight of the Different Accounting Areas in the PwC/Eurostat Accounting Maturity Scoring (scores and weights preserved as in source):
  - Reporting (IPSAS 1, 2, 3, 18, 20, 22, 24): Scoring points 12; Weight 12% (Central, State, and Local), Scoring points 4; Weight 12% (Social Funds)
  - Consolidation (IPSAS 34, 35, 36, 37, 38): Scoring points 7; Weight 7% (Central, State, and Local), - 0% (Social Funds)
  - Fixed assets (IPSAS 5, 13, 17, 21, 23, 26, 32): Scoring points 33; Weight 33% (Central, State, and Local), - 0% (Social Funds)
  - Intangible assets (IPSAS 31): Scoring points 2; Weight 2% (Central, State, and Local), - 0% (Social Funds)
  - Inventories (IPSAS 12): Scoring points 3; Weight 3% (Central, State, and Local), - 0% (Social Funds)
  - Revenue (IPSAS 9, 23): Scoring points 14; Weight 14% (Central, State, and Local), Scoring points 3; Weight 9% (Social Funds)
  - Accruals and expenses (IPSAS 1): Scoring points 18; Weight 18% (Central, State, and Local), Scoring points 18; Weight 55% (Social Funds)
  - Employee benefits (IPSAS 39): Scoring points 5; Weight 5% (Central, State, and Local), Scoring points 5; Weight 15% (Social Funds)
  - Provisions (IPSAS 19): Scoring points 2; Weight 2% (Central, State, and Local), - 0% (Social Funds)
  - Financial instruments (IPSAS 28, 29, 30): Scoring points 4; Weight 4% (Central, State, and Local), Scoring points 3; Weight 9% (Social Funds)
- PwC/Eurostat 2018 thresholds used to distinguish three broad groups: under 40%; between 40 percent and 70 percent; more than 70 percent.
  - 6 countries scored under 40%: Greece, Malta, Germany, Cyprus, Italy, Luxembourg.
  - 11 countries between 40 percent and 70 percent: Netherlands, Ireland, Slovenia, Croatia, Portugal, Romania, Austria, Hungary, Slovakia, Poland, Belgium.
  - 10 countries scored more than 70 percent: Bulgaria, Denmark, Spain, Finland, Czech Republic, Sweden, Lithuania, France, Latvia, Estonia.
- Forecasts to 2025 (PwC/Eurostat, based on governments’ expectations as of autumn 2019 with follow-up in H1 2020):
  - 22 countries showed little or no movement between 2018 and 2025 in accounting maturity scores.
  - 5 countries were forecast to improve significantly over 2018 to 2025.
  - 14 countries were not forecast to make any progress throughout the GGS: Germany, Luxembourg, Netherlands, Ireland, Slovenia, Croatia, Hungary, Poland, Bulgaria, Spain, Sweden, Lithuania, France, Estonia.
  - Five countries forecast to make limited progress: Romania, Denmark, Finland, Czech Republic, Latvia.
  - Three countries expected to make progress only in some sub-sectors of the GGS: Austria (state and local government), Slovakia (social security), Belgium (state).
  - Five were forecast to move significantly to fill their accounting maturity gap, with major change at central government level by 2025: Greece, Malta, Cyprus, Italy, Portugal.
- Compliance with IPSAS remains limited in some central government accounting areas: revenue and expense recognition, accounting for financial instruments, consolidation practices, use of provisions; accrual accounting for employee benefits showed particular non-compliance.

### Appendix I — IFAC/CIPFA survey (summary)
- IFAC/CIPFA survey classified financial reporting basis at central/federal government level into: cash, partial accrual, or accrual.
- 2020 reporting basis results:
  - Six countries reported on cash: Cyprus, Germany, Ireland, Malta, Luxembourg, Netherlands.
  - 10 countries reported on partial accrual: Bulgaria, Croatia, Hungary, Italy, Greece, Poland, Portugal, Romania, Slovakia, Slovenia.
  - 11 countries provided accrual financial reports: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Latvia, Lithuania, Spain, Sweden.
- Forecast changes by 2025 (IFAC/CIPFA):
  - Nine countries forecast to change reporting basis by 2025, all moving towards more advanced accrual.
  - Two out of six cash countries shifting to accrual: Cyprus and Malta; one to partial accrual: Ireland.
  - Six out of 10 partial accrual countries moving to accrual reporting: Hungary, Poland, Portugal, Romania, Slovakia, Slovenia.
  - By 2025 the forecast composition: 19 EU member states expect to be reporting on accruals; five on partial accruals; three to continue on a cash basis.
- Table 8 (reporting basis, central/federal government) reproduced as in source for 2020 and 2025:
  - Cyprus: 2020 Cash; 2025 Accrual
  - Germany: 2020 Cash; 2025 Cash
  - Ireland: 2020 Cash; 2025 Partial accrual
  - Luxembourg: 2020 Cash; 2025 Cash
  - Malta: 2020 Cash; 2025 Accrual
  - Netherlands: 2020 Cash; 2025 Cash
  - Bulgaria: 2020 Partial accrual; 2025 Partial accrual
  - Croatia: 2020 Partial accrual; 2025 Partial accrual
  - Hungary: 2020 Partial accrual; 2025 Accrual
  - Italy: 2020 Partial accrual; 2025 Partial accrual
  - Greece: 2020 Partial accrual; 2025 Partial accrual
  - Poland: 2020 Partial accrual; 2025 Accrual
  - Portugal: 2020 Partial accrual; 2025 Accrual
  - Romania: 2020 Partial accrual; 2025 Accrual
  - Slovakia: 2020 Partial accrual; 2025 Accrual
  - Slovenia: 2020 Partial accrual; 2025 Accrual
  - Austria: 2020 Accrual; 2025 Accrual
  - Belgium: 2020 Accrual; 2025 Accrual
  - Czech Republic: 2020 Accrual; 2025 Accrual
  - Denmark: 2020 Accrual; 2025 Accrual
  - Estonia: 2020 Accrual; 2025 Accrual
  - Finland: 2020 Accrual; 2025 Accrual
  - France: 2020 Accrual; 2025 Accrual
  - Latvia: 2020 Accrual; 2025 Accrual
  - Lithuania: 2020 Accrual; 2025 Accrual
  - Spain: 2020 Accrual; 2025 Accrual
  - Sweden: 2020 Accrual; 2025 Accrual

*Source: IMF Working Paper content (Accounting and Fiscal Reporting in EU Countries).*

### Appendix II Cluster Analysis

### Appendix II Cluster Analysis

### Cluster 1: Cash countries — Germany and Netherlands
- Characteristics:
  - Central government administration remains substantially on cash; no current plans to change.
  - Consolidated general government statistics compiled using statistical methodologies to adjust cash-based source data; no whole-of-government financial accounts.
- Germany:
  - Average maturity scores: federal government 23 percent, state government 31 percent, social security 31 percent, local government 58 percent.
  - Federal government basis for accounting: cash; Ministry of Finance required by law to submit to Parliament a statement of assets and liabilities for the preceding fiscal year.
  - Earlier project to complement cash-based accounts with accrual accounts halted due to lack of Parliamentary support (concerns over costs and loss of budgetary control).
  - German Federal Audit Office (Bundesrechnungshof) has officially opposed the initiative of the European Commission to introduce accrual-based standards.
  - At state government level: a few entities on accruals (Hesse and Hamburg); other states apply cash or partial accruals.
  - Most local governments apply the accrual basis of accounting.
- Netherlands:
  - Difference between central and local governments: central government 38 percent, local government 58 percent.
  - Ministries apply an integrated commitment-cash accounting system for budget preparation, execution and end-of-year reporting.
  - Introduction of accrual accounting at central government level was abandoned after pilots; a 2017 report recommended the appropriateness of existing cash accounting and further interim assessment in 2020.
  - Central government balance sheet preparation discontinued in 2014.
  - Central government executive agencies use the accrual basis.
  - Local governments apply a modified accrual basis.
  - Social security sub-sector maturity 78 percent, contributing to Netherlands’ general government average 55 percent in the cluster.

### Cluster 2: On the way to accrual
- Key cluster characteristics:
  - low/medium accounting maturity for the GGS (2018);
  - cash (or partial accrual) basis of reporting at central government level (2020);
  - major shift to accrual foreseen for 2025 and/or beyond.
- Countries matching all primary data-source criteria: Cyprus, Greece, Italy, Malta.
- Additional inclusions after further analysis: Ireland and Luxembourg.
- Notes on specific countries and reform status:
  - Cyprus, Greece, Italy, Malta: expectation of significant shift to accrual based on PwC/Eurostat and IFAC/CIPFA surveys (Cyprus and Malta), and corroborated by additional sources (Greece and Italy via PwC/Eurostat).
  - Ireland: PwC/Eurostat central government score 57 percent; IFAC/CIPFA reports cash basis; late 2019 government announcement to transition from cash to an IPSAS-based accrual accounting framework for central government and general government — reform underway.
  - Luxembourg: low accounting maturity scores (central 23 percent, local 11 percent) but has begun an accrual accounting reform for central government; feasibility study carried out between 2019 and 2021; follow-up project approved in 2022 for capacity building and setting-up accrual accounting policies.
- Timetable (Table 9 excerpt — progress in bringing new accounting framework into operation, 2023):
  - Cyprus: Central Government Live; Local Government 2024; Social Security 2024.
  - Greece: Central Government Live; Local Government 2025 (?); Social Security 2025 (?).
  - Ireland: Central Government 2024; Local Government 2025-27.
  - Italy: Central Government 2025; State Government 2025; Local Government 2025; Social Security 2025.
  - Luxembourg: No forecast across subsectors.
  - Malta: No forecast across subsectors.
- Basis of financial reporting by GGS sub-sector (Table 10 excerpt, 2023) — key codes: C – Cash; M – Mixed; A – Accrual; * - Not applicable:
  - Cyprus: Central A (since 2023, previously cash) ; State n/a; Local A; Social A.
  - Greece: Central M (accrual for entities within Central Administration and Government entities under private law; cash for Government entities under public law and hospitals); State n/a; Local A; Social C.
  - Ireland: Central C (some information in the financial statements on accrual basis); State n/a; Local A; Social *.
  - Italy: Central M (ministries cash-based budgetary accounting; State financial statements include accrual balance sheet; other entities range from cash to accrual); State A; Local A; Social M (financial statements include accrual balance sheet and income statement alongside cash and commitment-based budgetary statements).
  - Luxembourg: Central M; State n/a; Local M; Social A.
  - Malta: Central C; State n/a; Local A; Social *.

### Cluster 3: Well on the way to accrual
- Cluster characteristics:
  - Medium accounting maturity score (2018) for the GGS (>40 percent; < 70 percent);
  - Accrual (or partial accrual) basis of reporting at central government level (2020);
  - Some improvement foreseen for 2025.
- Member states: Austria, Belgium, Croatia, Hungary, Poland, Portugal, Romania, Slovenia, Slovakia.
- Accounting maturity highlights:
  - GGS maturity scores range from 59 percent (Slovenia) to 69 percent (Belgium).
  - Central government maturity generally over 70 percent for all except Croatia and Portugal.
  - Austria central government 77 percent (accrual reported); Belgium central government 78 percent (accrual reported); Slovakia 78 percent expected to shift from partial accrual to accrual.
  - Hungary 71 percent, Poland 72 percent, Romania 71 percent, Slovenia 72 percent — forecast to strengthen accrual reporting at central government level by 2025.
- Accounting framework adoption nuances:
  - Hungary, Poland, Romania, Slovenia: apply national standards categorized as “national standards: other”.
  - Belgium: moving to “national standards with reference to IPSAS”.
  - Slovakia: adopted “national standards with reference to IPSAS”.
  - Austria: moving from “national standards with reference to IPSAS” to “IPSAS modified for the local context.”
- Subsector maturity gaps:
  - State government and social security generally show lower accounting maturity across countries; largest gaps:
    - Austria (state – 45 percent),
    - Croatia (social security – 42 percent),
    - Romania (social security – 36 percent),
    - Slovenia (social security – 34 percent),
    - Slovakia (social security – 44 percent).
  - Austria (state), Belgium (state), and Slovakia (social security) expected to narrow gaps by 2025 (PwC/Eurostat survey).
- Portugal (unique within cluster):
  - Over the period to December 2026, as part of the National Recovery and Resilience Plan, expected to complete accounting reform through application of new IPSAS-based accrual accounting framework (SNC-AP) to the state accounting entity and general government consolidation of public accounts.

### Cluster 4: Mature accrual accounting
- Cluster characteristics:
  - High accounting maturity score (2018) for the GGS (>70 percent);
  - Accrual basis of reporting at central/federal government level (2020);
  - No or little improvement foreseen for 2025.
- Included countries: Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Latvia, Lithuania, Spain, Sweden.
- Maturity summary:
  - High maturity scoring (>70 percent) for all sub-sectors of the GGS in these countries.
  - Exceptions: Finland social security 63 percent; Spain social security 65 percent.
  - Estonia, France, Latvia, Lithuania show accounting maturity ≧ 87 percent for the GGS.
  - Denmark, Estonia, Finland, France, Spain, Sweden had completed accrual reforms for central government by 2017 (2017 OECD/IFAC survey confirmation).
  - Czech Republic shifted from cash to accruals over 2017 to 2020.
- Best practice note:
  - Estonia acknowledged as a best practice for integration of accrual accounting data in Public Financial Management and Government Finance Statistics (additional description in Appendix I).

*IMF Working Papers — Appendix II Cluster Analysis*

### Appendix III: The Potential Benefits from

### Appendix III: The Potential Benefits from Accrual Accounting

### Overview and context
- Accrual accounting reforms are costly and typically long-lasting, often implemented in a phased manner. Costs arise from new IT systems, new procedures, and hiring or training staff to lead and implement reforms across different levels of government and types of institution.
- Previous studies find various benefits to accrual accounting reforms, but benefits need to be managed and preferably embedded within a wider Public Financial Management (PFM) reform program.
- The report narrows its focus to benefits in the specific area of fiscal statistics; Appendix II provides a fuller taxonomy of benefits drawn from previous analyses.

### Broad categories of benefits from accrual accounting
- Better decision-making by managers in the public sector.
- Greater transparency over the use of public resources.
- Improved accountability for the use of public resources.
- Many benefits stem from wider coverage of stocks and flows, and the potential for more reliable and comparable reporting.

### Specific informational advantages cited
- Information on the full range of assets and liabilities, and related flows:
  - Accrual accounts extend coverage beyond cash receipts/payments and cash balances to include fixed assets, investments, pensions liabilities, loans, accounts receivable/payable, and other material assets and liabilities, providing a broader and more complete picture of government or public wealth and the flows explaining changes over time.
- More reliable and comparable data:
  - Accrual reforms replace local or national accounting rules with rules based on international accounting standards founded on conceptual frameworks designed to present a true and fair view of an entity’s financial performance and position (or the true macroeconomic impact of fiscal policy). Reforms based on international standards should provide financial information that is more reliable and more suitable for cross-jurisdictional comparisons.

### Potential benefits of using accrual accounting data for fiscal statistics
- Availability of more relevant and useful fiscal statistics:
  - Replacing older cash-basis fiscal statistics with accrual-based cash-flow statements and data provides a better view of the total macroeconomic impact of fiscal policy on both liquidity and sustainability.
- Possibility of more reliable fiscal statistics:
  - Substituting estimates and modelling of accruals (based on underlying cash data) with statistics based on actual accruals data reduces the scope for imprecision and error.
- Scope for more efficient compilation of fiscal statistics:
  - Using accruals source data can avoid the need for surveys, adjustments, modelling, and other statistical techniques required to produce accrual statistics from cash-based sources.
- Possibility of new fiscal statistics or analytical approaches:
  - New data not previously available under cash-based reporting regimes—such as full balance sheets—enable new statistics and analytical approaches.

### Taxonomy of benefits (conceptual distinctions)
- External benefits (beneficiaries outside government):
  - Citizens, Parliamentarians, rating agencies, international organizations, and others benefit through increased transparency and accountability and improved comprehensiveness and reliability of fiscal information.
- Internal benefits (beneficiaries inside government):
  - Line ministries and delivery agencies: benefits in day-to-day management of entity activities and resources.
  - Ministry of Finance and central agencies (“fiscal benefits”): oversight benefits including those for fiscal statistics and fiscal management.
- The report distinguishes internal benefits further between entity-level management (line ministries/delivery agencies) and central fiscal oversight (Ministry of Finance and central agencies), with associated benefits for both fiscal statistics and fiscal management.

### Link to broader PFM and fiscal-statistics objectives
- Benefits from accrual accounting materialize most effectively when integrated into broader PFM reforms, rather than as isolated accounting changes.
- For fiscal-statistics compilers, accrual accounting provides opportunities to improve the relevance, reliability, and efficiency of statistical outputs and to develop new analytical products (for example, balance sheet-based analyses).

*Source: Appendix III, "The Potential Benefits from Accrual Accounting" — IMF working paper chapter.*

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