ED69 : public sector financial instruments : perspectives on proposed changes

Abstract

Purpose: This study analyses the changes being suggested by the IPSASB in ED 69 relating to public-sector-specific financial instruments, in particular, monetary gold, currency in circulation, and Special Drawing Rights (SDRs). The suggestions put forward by both the local and international stakeholders in relation to the ED were analysed, and a comparative analysis was carried out. The overall aim of this study was to assess how the proposed changes in ED 69 on public-sector-specific financial instruments would affect the accountability, transparency, and decision-making of public sector entities, particularly in Malta as an EU member state. Design: A qualitative research method was employed. Semi-structured interviews were carried out with accounting professionals employed within the Treasury Department, a Big-Four Audit Firm, the Central Bank of Malta, and a University of Malta Professor. Furthermore, a documentary analysis was carried out. The suggested changes in ED69 were analysed together with the international responses to such changes. Findings: When analysing the responses to the changes being suggested in ED 69, both the local and international stakeholders presented valid arguments in favour or against these changes. It was agreed that monetary gold should not be classified as a financial instrument, even though it has similar characteristics to a financial instrument. Moreover, currency issued as legal tender should be recorded as a financial liability in the books of the issuer. Finally, it was noted that SDR holdings meet the definition of a financial asset, whilst SDR allocations should be classified as financial liabilities. Conclusion: In Malta, the only public sector entity that holds these financial instruments on its balance sheet is the Central Bank. Given that Malta forms part of the Euro System, the Central Bank of Malta is obliged to follow the ECB Accounting Guidelines. Hence, the suggested changes in ED 69 in relation to monetary gold, currency in circulation, and SDRs may not even apply to Malta. Value: This dissertation could be valuable to the Treasury Department, particularly when applying IPSAS 41 for the Government of Malta. This is only if the Ministries and Governmental Departments hold such public sector-specific assets.