Implementing New National Accounting System · 2016. 3. 29. · 2 I. Government financial reporting system in Korea “Revenue & Expenditure Report” is being produced by cash basis

Treasury Bureau Ministry of Strategy and Finance

Republic of Korea

Implementing New National Accounting System

Paris, March 2011

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Government financial reporting system in Korea

Legal framework for national accounting system

Three-year roadmap for new national accounting system

Achievements to date

Future tasks

Lessons learned

National Accounting Standard Center

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I. Government financial reporting system in Korea

“Revenue & Expenditure Report” is being produced by cash basis accounting

“Financial statements” is being produced by accrual basis accounting - FY ’09 F/S was first made by new national accounting standards on a trial basis

1. MD&A* Analysis and summary of revenue & expenditure report, financial statements, and performance report * MD&A : Management Discussion and Analysis

2. Revenue & Expenditure Report

Budget realization report of revenue and expenditure on cash basis accounting

3. Financial Statements

Three financial statements* and footnotes on accrual basis accounting * statement of financial position, statement of financial operation and changes in net assets

4. Performance Report

Performance report on program compared to its plan especially using the cost data in F/S

Main components of Financial Report

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II. Legal framework for national accounting system

National Accounting Act and Presidential Decree

◆ Financial reporting framework and components ◆ Main financial reports and other documents to be submitted to national assembly ◆ Establishment of national accounting standards committee

National Accounting Standards

Supplementary Accounting Standards

Practical Guidelines for Particular Accountings

◆ Methods to draw up financial statements ◆ Definition of assets and liabilities and valuation methods

◆ Three supplementary accounting standards in specific areas covering loan, cost, and public pension *Standards for pension liabilities are currently under research

◆ Thirteen practical guidelines for particular accounts including lease, government cash, and depreciation

Comprehensive work plan was made for successful submission of FY2011 financial statements to National Assembly on May 31, 2012 Initiated by MOSF, but concerned agencies and related parties were mobilized Ministry of Public Administration and Security (MPAS), Financial Services Commission

(FSC), Board of Audit & Inspection (BAI), Korean Institute of Certified Public Accountants (KICPA) and major accounting firms

Regular evaluation and feedback through national accounting standards committee Update rolling plan on quarterly basis

III. 3-yr roadmap for new national accounting system

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Strategies Programs

1. Complete methodologies to draw up new financial statements

▶ On-spot inspection and evaluation on Social Overhead Capital (SOC) such as roads, dams, and ports ▶ Completion of accounting methods regarding provisions such as pensions and insurance ▶ Development of financial analysis indicators based on financial statements

2. Strengthen accounting capacity and expertise

▶ Recruitment of officials specialized in accounting ▶ Customized trainings for officials in charge of accounting and settlement

3. Build infrastructure to support new national accounting system

▶ Establishment of National Accounting Standards Center for research and training ▶ Adoption of pre-auditing system of each agency’s financial statements by private CPAs ▶ Inclusion of national accounting in CPA examination ▶ Development of expertise in private accounting firms on national accounting

4. Continue public awareness campaign

▶ Workshops for officials and private sector professionals ▶ Public relation with newspapers and media ▶ Publication of comic books, catalogs, and videos

Goal Establish national accounting system to provide reliable and useful financial information

III. 3-yr roadmap for new national accounting system

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IV. Achievements to date

Converted budget information into accrual accounting information through Korean Financial Management Information System (“KFMIS”) Development of new programs in KFMIS to convert cash basis financial information

in budget realization reports into accrual accounting information

Executed on-spot inspection on government assets On-spot inspection completed on national property, commodities and receivables On-spot inspection is progressing on infrastructure

Enhanced accounting capacity and expertise Extensive trainings conducted for accounting and settlement personnel and KFMIS users

(Aug. – Nov. 2009) Participation in national accounting classes over 12 weeks, 35 hours per session

(800 trainees)

Revised National Property Act, Commodities Management Act, and National Receivables Act to reconcile with new accounting system

Year of 2009

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IV. Achievements to date

Completed opening statement of financial position as of 1 Jan, 2009 Completed in Jan. 2010 based on on-spot inspection in 2008 and 2009 Organized accounting & reporting task force to enhance expertise of financial settlement Created task force (composed of CPA) to support gov’t officials with a lack of accounting

expertise

70 CPAs were dispatched to support financial settlement for line ministries during Feb. June

The task force will also support for FY2010 settlement

Established National Accounting Standards Center In-depth research on national accounting system Interpretation and inquiry service on accounting rules and guidelines Financial indicators development Accounting officials training

Year of 2010

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IV. Achievements to date - continued

Produced consolidated national financial statements 145 separate financial statements by general and earmarked funds (March) 51 financial

statements for each gov’t agency (April) Completion of consolidated national financial

statements (June)

FY2011 F/S is the first that will be reported to National Assembly

Discussed with the Board of Audit and Inspection (“BAI”) for introduction of the national accounting system Identified issues in the financial settlement system reported by BAI’s pilot audit

Discussed improvement of accounting standards and its system

Discussed audit procedures

Year of 2010

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V. Future tasks

Complete accounting guideline on pension

Accounting standards to reflect provision for pensions are necessary

In some countries, certain pension liabilities related to specific professions (i.e., military

and government employees) are recognized as liabilities

Due diligence on Social Overhead Capital (“SOC”)

Promote gradual steps of due diligence and evaluation to reflect SOC assets to statement

of financial position

(Step1) Physical inspection on SOC assets and their acquisition costs

(Step2) Price valuation based on the physical inspection

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V. Future tasks

Develop indexes of financial analysis

Rare analysis indexes in financial reports

Increasing availability and necessity of the national accounting system by developing

indexes

Utilization of financial analysis indexes in evaluation of various government activities

Enhance PR of the national accounting system Other gov’t officials except related personnel have a lack of understanding

Entire officials’ participation is needed for smooth landing of the financial settlement

PR videos or comic books, etc. can be created to help citizens understand

Ⅵ. Lessons learned

Design and implement a comprehensive blue-print

Upgrade fiscal information management system in tandem

Maintain high level of interest and support from top managers in

concerned agencies

Ensure sufficient resources allocated to trainings and preparatory activities in field

Mobilize existing expertise in the private sector

Continue public awareness campaign on benefits of new national accounting system

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National Accounting Standards Center(NASC)

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What is the NASC?

Established in July 2010 to successfully settle the accrual-based national accounting system

The aim of NASC are to utilize the expertise of the private sector and conduct major activities for national accounting effectively.

* Ministry of Strategy and Finance entrusted the Korean Institute of Certified Public Accountants (KICPA) with the duty of establishing the NASC

Organization

(People) 21 professionals including CPAs and 2 administrative assistants

(Organization) 3 teams under the supervision of the director

• National Accounting Standards Team: Develop the National Accounting Standards and review accounting method for national assets and liabilities • Evaluation & Analysis Team: Analyze statistical data related to national accounting and develop financial analysis indicators • International Cooperation Team: Conduct research on national accounting standards of other countries and enhance awareness of accrual-based national accounting

National Accounting Standards Center

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Major Initiatives of NASC for 2011

Maintain and improve the accrual-based national accounting system - Develop a plan for due-diligence and valuation of infrastructures etc.

Develop a plan for utilizing accrual-based accounting information - Develop financial analysis indicators based on accrual-based financial information etc.

Set up a plan for enhancing the reliability of financial statements - Develop implementation guidance on the preparation of financial reports etc.

Respond to changes in domestic & international environments - Conduct research on governmental accounting standards of other countries etc.

Provide training programs and raise public awareness on accrual-based national accounting

- Offer education for public officials in charge of accounting, publish newsletters on national accounting, and hold relevant seminars etc.

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