Governmental accounting in Malta towards IPSAS within the context of the European Union
| Author | Rowan Jones,Josette Caruana |
| Published date | 01 December 2016 |
| Date | 01 December 2016 |
| DOI | 10.1177/0020852315576705 |
| Subject Matter | Symposium on The Gordian knot of public sector accounting and the role of IPSASArticles |
International Review of
Administrative Sciences
2016, Vol. 82(4) 745–762
!The Author(s) 2015
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DOI: 10.1177/0020852315576705
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International
Review of
Administrative
Sciences
Article
Governmental accounting in Malta
towards IPSAS within the context
of the European Union
Rowan Jones
University of Birmingham, United Kingdom
Josette Caruana
University of Malta, Malta
Abstract
The central Government of Malta has had an accrual accounting reform in process since
1999. Originally, the accrual accounting reform envisaged developing and implementing
a tailor-made set of accounting standards. These were developed but not implemented.
In 2011 the central Government of Malta decided instead to fully adopt IPSAS. By means
of documentary research, supported by interviews, this study tries to identify the
underlying factors that led to this decision. The institutional theoretical framework is
used to analyse the findings. The findings show that, in Malta, credibility is regarded as
the most important factor, which will be provided by the adoption of internationally
recognised and accepted standards. It is claimed that EU pressure had nothing to do
with the Maltese government’s decision on accounting policy, but an undercurrent of
such potential pressure is experienced.
Points for practitioners
One advantage of an accrual accounting system is that accrual data is generated from
the accounting system, but this accrual data would still need to be reviewed in order to
make it ESA-compliant. The solution proposed by the EU Commission is to revise IPSAS
and minimise the differences with ESA. The feasibility of this solution is questionable
given that the objectives of IPSAS and ESA are different and relate to different types of
reporting. They purport to measure the same thing, that is the deficits and debts of a
government, but they do not. In order for such convergence to be considered, one
financial measure would have to give way to the other.
Corresponding author:
Josette Caruana, University of Malta, Department of Accountancy, Room 326A FEMA, Msida MSD 2080,
Malta.
Email: josette.caruana@um.edu.mt
Keywords
accounting reform, accounting standards, EPSAS, ESA, governmental financial reporting
standards
Introduction
The emergence of International Public Sector Accounting Standards (IPSAS) is
described as the most significant development among the many government
accounting changes that are happening (Sutcliffe, 2003). But the adoption of
IPSAS by governments is completely voluntary because the International Public
Sector Accounting Standards Board (IPSASB) does not have the power to force
any jurisdiction to endorse them (IFAC, 2010). Various governments are still reluc-
tant to adopt accrual accounting, let alone IPSAS. Those countries that have
adopted some form of accrual accounting did not adopt IPSAS in full, rather
they preferred to pick and choose from the accounting standards available.
The interest of the European Union (EU) in IPSAS for its member states
became evident with the advent of the economic crisis as the Council Directive
2011/85/EU of November 2011 is part of the ‘Six-Pack’ legislation put forward by
the EU to strengthen the budgetary frameworks of the member states. Originally,
the proposed EU directive had required EU member states to adopt IPSAS within
three years (EU Commission, 2011); but then this retreated to a requirement for the
EU Commission, Eurostat in particular, to first carry out a study on the suitability
of IPSAS for EU member states. Following its assessment, the EU Commission
(2013) concluded that, as they stand, IPSAS are not suitable for direct adoption.
But IPSAS will be used as the reference point for the development of European
Public Sector Accounting Standards (EPSAS) applicable to EU member states
(EU Commission, 2013).
In this context, one EU member state, Malta, decided to adopt IPSAS for its
central government. The central Government of Malta uses the traditional budget-
orientated cash-based accounting system, and like other countries, it is in the pro-
cess of changing to a more informative accounting system. This process is still
ongoing.
The Ministry of Finance set up the Accrual Accounting Task Force in 1999 with
the remit to take all necessary measures to implement an accrual accounting system
for the central government. The project of this Task Force covered the specifica-
tions for an appropriate computerised accounting system, the required revisions to
financial management legislation and the formulation of accrual accounting stand-
ards for government.
Accounting standards for the Government of Malta (known as MGAS) were
designed, in 2002, based on IPSAS and International Accounting Standards (IAS).
Since 2002, in the absence of a new computerised accounting system that can
handle accrual accounting, the Treasury has been compiling trial accrual-based
financial statements by integrating accrual data collected from the departments
746 International Review of Administrative Sciences 82(4)
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