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Principles
Financial reporting framework
The financial framework used by European institutions, bodies, offices and agencies is a fair presentation framework ([link new-window title="Article%2080%20(2)%20of%20the%20Financial%20Regulation" link="https%3A%2F%2Feur-lex.europa.eu%2Flegal-content%2FEN%2FTXT%2F%3Furi%3DCELEX%3A32018R1046%23080.002" icon="external-link" /]
). A fair presentation framework is a financial reporting framework that requires compliance with the specific requirements of the applicable financial reporting framework and acknowledges that, to achieve fair presentation, it may be necessary for management to:
- provide disclosure beyond these requirements, or
- in very rare circumstances, to depart from these requirements.
According to [link new-window title="Article%2080%20of%20the%20Financial%20Regulation" link="https%3A%2F%2Feur-lex.europa.eu%2Flegal-content%2FEN%2FTXT%2F%3Furi%3DCELEX%3A32018R1046%23080" icon="external-link" /]
, the accounting rules applied by EU institutions and entities included in the consolidation perimeter shall be based on internationally accepted [link new-window title="accounting%20standards%20for%20the%20public%20sector" link="https%3A%2F%2Fwww.ipsasb.org%2Fstandards-pronouncements" icon="external-link" /]
. A deviation from these standards is possible if this is necessary in order to give a fair presentation of the assets and liabilities, charges, income and cash flow.
These accounting rules, which are adopted by the accounting officer of the Commission, also have to be applied by the ECA in preparing its own financial statements.
Accruals basis
While the financial statements are based on accrual accounting, adapted to the specific environment of the Union, the reports on implementation of the budget are primarily based on cash accounting.
In addition [link new-window title="Article%20209%20(4)%20of%20the%20Financial%20Regulation" link="https%3A%2F%2Feur-lex.europa.eu%2Flegal-content%2FEN%2FTXT%2F%3Furi%3DCELEX%3A32018R1046%23209.004" icon="external-link" /]
requires that financial statements for financial instruments and budgetary guarantees comply with the [link new-window title="International%20Public%20Sector%20Accounting%20Standards%20(IPSAS)" link="https%3A%2F%2Fwww.ipsasb.org%2Fstandards-pronouncements" icon="external-link" /]
.
IPSAS standards
The IPSAS are a set of accrual-based standards used for the preparation of general purpose financial statements by governments and other public sector entities around the world. They are issued by the [link new-window title="International%20Public%20Sector%20Accounting%20Standards%20Board" link="https%3A%2F%2Fwww.ipsasb.org%2F" icon="external-link" /]
and aim to enhance the quality, consistency, and transparency of public sector financial reporting worldwide.
The following elements of the IPSAS framework are of particular importance for the ECA’s work on the annual accounts of the EU:
The Conceptual Framework for General Purpose Financial Reporting
IPSAS 1: Presentation of Financial Statements
IPSAS 2: Cash Flow Statements
IPSAS 3: Accounting Policies, Changes in Accounting Estimates and Errors
IPSAS 13: Leases
IPSAS 19: Provisions, Contingent Liabilities and Contingent Assets
IPSAS 23: Revenue from Non-Exchange Transactions
IPSAS 24: Presentation of Budget Information in Financial Statement
IPSAS 25: Employee Benefits
IPSAS 28, 29, 30: Financial instruments
IPSAS 35: Consolidated Financial Statements
IPSAS 36: Investments in Associates and Joint Ventures
IPSAS 37: Joint Arrangements
Besides these standards, the following non-mandatory Recommended Practice Guidelines (RPGs) also have a direct impact on the elements and presentation of the consolidated annual accounts:
RPG 1 - Reporting on the long-term sustainability of an entity’s finances
RPG 2 – Financial statement discussion and analysis
RPG 3 – Reporting service performance information
Resources
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[icon-list-item title="Annual%20accounts%20on%20the%20Commission's%20website" link="https%3A%2F%2Fec.europa.eu%2Finfo%2Fstrategy%2Feu-budget%2Fdocuments%2Fpublications_en" icon="external-link" linking="new-window" /]
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[standards]
[link new-window title="IPSAS" link="https%3A%2F%2Fwww.ipsasb.org%2Fstandards-pronouncements" /]
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[rules]
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[link new-window title="Art%20209%20(4)%20FR" link="https%3A%2F%2Feur-lex.europa.eu%2Flegal-content%2FEN%2FTXT%2F%3Furi%3DCELEX%3A32018R1046%23209.004" /]
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