- Funding Programme
- Year
- 2022
Towards an accrual accounting system in Luxembourg based on international standards
The European Commission assisted the government of Luxembourg with the action plan defined under the ‘2019 SRSP (Structural Reform Support Programme) project’ for an ‘IPSAS light’ implementation covering several priority areas, including fixed assets, revenue, accruals and expenses, employee benefits, and financial instruments.
Context
In light of the development of harmonised public sector accounting standards (EPSAS) at the EU level, the government of Luxembourg requested technical support for an IPSAS light implementation in several priority areas. This initiative was preceded by a feasibility assessment of transitioning to an accrual-based accounting and financial reporting framework, based on the future EPSAS or a variation thereof (the ‘2019 SRSP project’).
As a result of the SRSP 2019 project, Luxembourg authorities have selected ‘IPSAS light’ as an accounting framework for a transition to accrual accounting, i.e. the adoption of IPSAS as issued by the IPSASB, in terms of the recognition, measurement and presentation principles, but only select disclosures are included in the format of ‘IPSAS light financial statements’ as a first step towards the probable adoption of the future EPSAS (European Public Sector Accounting Standards) standards.
The IPSAS light implementation in the selected priority areas offers more comprehensive information to management, enhances the evaluation and monitoring of budgetary and fiscal policies, and strengthens accountability. Additionally, it contributes to institutional, administrative, and growth-sustaining structural reforms in Luxembourg.
Support delivered
The Commission facilitated access to tailored expert support, which translated into the following deliverables:
- In-depth analysis of financial statements’ components for the set of priority accounting areas (fixed assets, revenue, accruals and expenses, employee benefits, and financial instruments).
- Accounting policies and draft format of financial statements and reporting templates.
- Proposed draft revisions to the relevant legal and financial regulation for the new IPSAS accounting and reporting rules.
- Technical report with a draft accounting and reporting manual.
- Awareness raising and capacity building programmes.
Results achieved
As a result of the project, the Luxembourg authorities have acquired an overall good understanding of the IPSAS rules, of the overall organisation of an accrual-based “IPSAS light” framework within the Luxembourg central government and of the associated challenges, as well as of the associated benefits in terms of transparency and impact on public finance management and fiscal reporting.
The three key beneficiary institutions within the government of Luxembourg are the State Treasury, the Ministry of Finance and the General Inspectorate of Finance. Representatives from these institutions formed the core project team; other stakeholders in the central government were identified and involved in project activities.
Recommended follow up actions include continuing the conceptual analyses, developing a vision for the implementation of the ‘IPSAS light’ rules and closely following up the developments at the level of the EPSAS project. The vision to be developed relates both to the objectives and ambitions of the project (extent of use of accrual accounting beyond compliance, level of centralisation of the financial reporting chain and level of integration of the IT systems) and the timeline for completion.
More about the project
You can read the documents related to the project here: