IPSAS [International Public Sector Accounting Standards] on Social Benefits

Posted by Guohua Huang on the International Monetary Fund’s Public Financial Management blog

Providing social benefits to the public is a critical responsibility of governments. However, concerns have been raised about the financial sustainability of social benefit policies in many countries.

One recent IMF study showed that, without further reforms, spending on age-related programs (pensions and health) would increase by 9 percentage points of GDP in advanced countries and 11 percentage points of GDP in less-developed countries, between 2015 and 2100.

The fiscal consequences are potentially dire. Such spending increases could lead to unsustainable public debts, require sharp cuts in other spending by governments, or necessitate large tax increases that could stymie economic growth.

Even though the sustainability of social benefits is an important policy issue, there is no an international standard on how to appropriately account for the related liabilities and expenses. The International Public Sector Accounting Standards Board (IPSASB) has been criticized for not issuing any standards on this issue.

For example, when assessing the suitability of IPSAS in the EU member states a few years ago, the European Commission stated that the coverage of IPSAS was incomplete, and expressed concerns about its applicability to some important types of government flows, such as taxes and social benefits. IPSASB’s oversight body, the Public Interest Committee, has been recommending IPSASB to focus its resources on social benefits and other key issues of public policy.

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