1. IPSAS Implementation Azerbaijan Ranjan Ganguli, ECA FM

2. IPSAS Implementation Azerbaijan Background Positive experience of accounting & auditing reform in the banking sector 2004 Law on Accounting  Adoption of IFRSs by Public Interest Entities  Adoption of national accounting standards based on IFRSs by SMEs  Adoption of national public sector accounting standards based on IPSASs by public sector effective 1/1/09 (municipalities, budget organizations and off-budget state funds i.e. the State Oil Fund and the Social Security Fund) A&A ROSC and CAP to assist in corporate sector Ongoing EC-financed project to develop national accounting standards for SMEs based on IFRSs

3. IPSAS Implementation Azerbaijan Azeris asked two key questions Indirect cash IPSAS route Direct accruals IPSAS route Cash statement Disclosure a Disclosure z Flip to accruals IPSAS 1 Full Accruals IPSAS IPSAS statement (IPSAS1) IPSAS a IPSAS z IPSAS a IPSAS z 1.What are the benefits of IPSAS? Recognizing required investment, effort and time, what is the value-added? 2.What route do we take?

4. IPSAS Implementation Azerbaijan Study undertaken to answer questions – Report on the Enhancement of Public Sector Financial Reporting (REPF) 1.Full accruals IPSAS would clearly increase the quality of public sector financial reporting and would likely positively impact decision-making at policy as well as operational levels. 2.Azeri public sector financial reporting is clearly better than cash-based IPSAS in many respects e.g. fixed assets and inventories. Accounting standards based on cash-based IPSAS would jeopardize previous achievements made in many areas. Standards should therefore be developed based on accrual IPSAS.

5. IPSAS Implementation Azerbaijan Proposed transition path to IPSAS Highest priority:  IPSAS 1 Presentation on Financial Statements  IPSAS 2 Cash Flow Statements  IPSAS 11 Construction Contracts  IPSAS 15 Financial Instruments  IPSAS 17 Property, Plant & Equipment Second priority:  IPSAS 6 to 8 Consolidation  IPSAS 9 Revenue from Exchange Transactions  IPSAS 12 Inventories  IPSAS 19 Provisions, Contingent Liabilities & Assets  New IPSAS Revenue from Non-Exchange Transactions  New IPSAS Budget Reporting Direct accruals IPSAS route Full Accruals IPSAS IPSAS statement (IPSAS1) IPSAS a IPSAS z

6. IPSAS Implementation Azerbaijan Need to address pre-conditions Politicians/management understand the change and how information can be used to improve efficiency Accountability - Management to focus on and be held accountable for resources used rather than cash paid. Accounting standards are set independently of government, or jointly with third parties Technical capacity - need to train public sector management, accountants and staff Technological capacity – accounting and IT systems Enforcement capacity - Government auditor supports the reform and has capacity to audit accruals-based accounting systems Accounting reform should follow more general budget reform

7. Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards Azerbaijan CAPSAP Aiming to strengthen all financial management pillars

8. Azerbaijan CAPSAP Project Outline Component 1: Corporate Sector Accountability  Assist adoption of IFRSs by Public Interest Entities  Establish corporate sector institutional framework  Strengthen statutory audit framework Component 2: Public Sector Accountability  Develop National Public Sector Accounting Standards (NASBOs) consistent with IPSAS and establish public sector institutional framework  Strengthen public sector internal control framework  Strengthening the country’s Supreme Audit Institution

9. Azerbaijan CAPSAP Project Outline Component 3: Education  Establish Azerbaijan Center for Professional Accountancy, Training, Education and Research (ACPATER)  Establish accounting and auditing qualifications including university degree programs  Reskill public sector managers and financial management cadre  Develop professional and ethical standards  Maintain lexicon of terminology, guidelines and other relevant materials for academics, professionals and practitioners

10. Azerbaijan CAPSAP Strengthening all financial management pillars Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards

11. ECA Survey of Public Sector Accounting Standards - Istanbul, February 2009 Cash Basis:Countries: a)Cash basis. No standards but national rules b)Cash basis IPSAS in implementation process Kazakhstan c)Cash basis IPSAS implementedKosovo Accrual Basis:Countries: a)Modified Accrual. No standards but national rules Albania, Georgia, Moldova, Bosnia Herzegovina, Montenegro, Kyrgyz Rep., Belarus, Russia b)Full Accrual IPSAS in implementation (early stages) Ukraine, Serbia, Armenia, Turkey, Uzbekistan, Azerbaijan c)Full Accrual IPSAS in implementation (advanced stages) d)Full Accrual IPSAS implementedSlovakia

12. Survey of Public Sector Accounting Standards Please complete and hand-in Cash Basis:Countries: a)Cash basis. No standards but national rules b)Cash basis IPSAS in implementation process c)Cash basis IPSAS implemented Accrual Basis:Countries: a)Modified Accrual. No standards but national rules b)Full Accrual IPSAS in implementation (early stages) c)Full Accrual IPSAS in implementation (advanced stages) d)Full Accrual IPSAS implemented Your name & unit ___________________________ Thanks !