International Conference

Accrual and Standards: the future of the EU MSs public accounting Rome, 21 November 2016

Chart of Accounts: An Instrument to Address Different Information Needs

Luís Viana Deputy Director of the Budget General Directorate - Ministry of Finance of Portugal

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Fragmented accounting framework

Based in national standards that were replaced by IFRS like standards,

European regulations and accounting directive

The Ministry of Finance (MoF) appointed in January 2013 the National

Accounting Standards Commission (CNC) in order to adapt IPSAS in

the Portuguese Public Sector

Some positive features such as the adoption by most public sector

entities of accrual accounting concepts and the availability of necessary

IT accounting systems shall be highlighted

Introduction

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Public Sector Accounting Functions

Transparency of the

pubic sector net

worth, performance

and reliability of

fiscal statistics

Evaluating the

costs and

measure outputs

of public policies

Financial

accounting

Management

accounting

Controlling the

budget

appropriations

approved by the

legislature

Budgetary

accounting

Cash based appropriations

Modified cash basis in

execution (appropriations,

pre-commitments,

commitments, payables,

payments, receivables,

receipts)

Budgetary statements

Full accrual

Financial statements

(balance sheet, changes in

net worth, income

statement, cash flow

statement and notes)

Full accrual

Management reports (link to

performance budgeting

project under the

implementation of the new

BFL)

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Simplified regime

(small and micro entities)

Ordinance n.º 218/2016, from 9 August

Notes to the

Chart of Accounts

Ordinance n.º189/2016, from 14 July

Annex I: Conceptual framework for

financial accounting (IPSAS based)

Annex II: Accounting standards

Set of 25 financial accounting

standards (IPSAS based)

Budgetary accounting standard

Management accounting standard

Annex III: Chart of Accounts

Decree-Law n.º 192/2015, 11 September: State

Accounting

Entity

(SAE)

Accounting Framework Elements

Implementation manual

(incl. transition)

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A chart of accounts is a systematic coding system for the classification and

coding of transactions and events within the accounting, budgeting and

management systems.

The chart of accounts should include codes for the budgetary process,

along with budget classifications (these may include economic, functional,

administrative, programme and regional classifications), for financial

reporting (assets, liabilities, net worth, revenues and expenses) and for

management reporting (cost centres, types of costs, projects and outputs)

Chart of Accounts

A well-planned chart of accounts can assist in the efficient generation of

budgetary, financial, fiscal and management information for a variety of purposes.

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Multidimensional Chart of Accounts

Approved budget

Budget modifications

Budget execution

Class 0 + Budget classifications

Budgetary

reporting

Budgetary

accounting

Assets

Liabilities

Net worth

Revenues

Expenses

Classes 1 to 8

Financial

reporting

Financial

accounting

Direct and indirect costs

Costing activities

Costing products and

services

Class 9

Management

reporting

Management

accounting

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Budgetary

Accounting

Accounts for Budgetary Transactions - Revenue

Initial Revenue Estimates (011)

Adjusted Estimates (012)

Budget Amendments

(013)

Outstanding Estimates (014)

Issued revenue (015)

Cancelled Liquidations

(016)

Collected Revenue (017)

Refunds (018)

Receipts of financial assets in future periods

(03)

Budgetary accounts plus budget classifications

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Budgetary

Accounting

Accounts for Budgetary Transactions - Revenue

Revenue transaction DEBIT CREDIT

Issued revenue 0152 Revenue issued 014 Budgeted revenue

Cash inflows for the revenue

issued in the year 0171 Cash inflow for the year 0153 Revenue collected

Cash inflows for revenue issued

in past years

0172 Cash inflow related to

previous years 0153 Revenue collected

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Budgetary

Accounting

Accounts for Budgetary Transactions - Expenditure

Initial Budget Appropriations

(021)

Adjusted Appropriations

(022)

Budget Amendments

(023)

Available Appropriations

(024)

Reservation (025)

Commitment (026)

Budgetary accounts plus budget classifications

Obligation (027) Payment (028) Returned

payments (029)

Payments for future periods

(04)

Cash effects of commitments for the next periods (042 and 043)

Obligations payments for future periods

(044)

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Budgetary

Accounting

Accounts for Budgetary Transactions - Expenditure

Expenditure Cycle DEBIT CREDIT

Reservation 024 Avaiable appropriation 0251 Recorded reservation

Commitment 0252 Reservation commited 0261 Commitments

Obligation (payables) 0262 Commitments converted 0271 Payables recorded

Payment 0272 Liquidated payables 0281/0282 Payment

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Chart of Accounts and Reporting

Budgetary

accounting

Chart of accounts

code

Reporting item on budgetary

statements

0261 Commitments

0271 Obligations

0281/0282 Payments

0171/0172 Revenue collected

(…) (…)

Financial accounting

Chart of accounts

codes

Reporting item on financial

statements

43+453+450+4553-

4590-4593-45953 Fixed assets

20422+25 Non-current borrowings

653+657-7623-7627 Impairments

70 Taxes and fees

(…) (…)

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Chart of Accounts Codes ESA 2010 Codes

434 - Machinery and equipment AN 113 – Machinery and equipment

251 – Loans AF 4 – Loans

604 – Capital transfers granted D.9p – Capital transfers, payable

701 – Direct taxes D 51 – Taxes on income

(…) (…)

The multidimensional chart of accounts as a correspondence between

the two codes

We need to define the reporting statements for national accounts

purposes (Cavanagh et al., 2016)

Chart of Accounts and Fiscal Reporting

Balance sheet

Statement of other economic flows

Statement of government operations

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Central Chart of Accounts

Adaptability - The entities have the flexibility to adjust the plan to their specific needs and

can create lower-level subaccounts and mapping them to the Central Chart of Accounts

Local chart of

accounts

Public entities

Central Chart of

Accounts

Ministry of Finance XML file

Local

AccountsDescription

Central

AccountsDescription

11 Cash 11 Cash

11.1 Cash 11.1 Cash

11.1.1 Central cash 11.1 Cash

12 Bank Accounts 12 Bank Accounts

12.1 Bank Accounts in the Treasury 12.1 Bank Accounts

12.1.06056 DGT - 00000006056 12.1 Bank Accounts

12.1.06167 DGT - 00000006167 12.1 Bank Accounts

21 Customers, taxpayers and users 21 Customers, taxpayers and users

21.1 Customers current account 21.1 Customers

21.1.1 National customers 21.1 Customers

21.1.1.00004 José Manuel Silva 21.1 Customers

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Central Chart of Accounts

Trial Balance

Statement of Final Position

(Balance Sheet)

Financial Performance

(Income Statement)

Cash flow Statement

Debts by seniority

Budgetary Performance (Performance statement)

Budgetary Control - Expenditure

Budgetary Control - Revenue

Schedules for notes

Cross validations between the trial balance, budget statements, financial statements and notes

Central Accounting and Reporting System – Main features

Portal for data quality and

integration

Accounting and technical

requirements that software

houses have to comply with

Web services integration with

local systems

Specific requirements for

consolidation purposes

Circular 1381 Chart of accounts of

public entities

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Central Accounting and Reporting System – Outputs

SAE accounting

information

Financial

instruments

Central Accounting

and Reporting System

Outputs

Public entities

accounting

information

Separate Budgetary and Financial Statements (State Accounting Entity, other public entities

from all levels of government)

Consolidated budgetary and financial statements (level of ministry, budget program, general

government subsectors, whole of government)

Management reports

External reporting

Government finance statistics reporting (ESA 2010)

Fixed

assets

PPPs and

Concessions

Tax assets

and liabilities

Cash

holdings

Provisions

and CL

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Many thanks you for your attention!