Consolidation of Financial Statements at Different Levels of Government

1 PublicDisclosureAuthorized PublicDisclosureAuthorized PublicDisclosureAuthorized ©2023InternationalBankforReconstructionandDevelopment/TheWorldBank1818HStreetNW WashingtonDC20433 Telephone:202-473-1000Internet:www.worldbank.org ThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent. TheWorldBankdoesnotguaranteetheaccuracy,completeness,orcurrencyofthedataincludedinthisworkanddoesnotassumeresponsibilityforanyerrors,omissions,ordiscrepanciesintheinformation,orliabilitywithrespecttotheuseoforfailuretousetheinformation,methods,processes,orconclusionssetforth.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries. Nothinghereinshallconstituteorbeconstruedorconsideredtobealimitationuponorwaiveroftheprivilegesand immunitiesofTheWorldBank,allofwhicharespecificallyreserved. RightsandPermissions Thematerialinthisworkissubjecttocopyright.BecauseTheWorldBankencouragesdisseminationofitsknowledge,thisworkmaybereproduced,inwholeorinpart,fornoncommercialpurposesaslongasfullattributiontothisworkisgiven. Anyqueriesonrightsandlicenses,includingsubsidiaryrights,shouldbeaddressedtoWorldBankPublications,TheWorldBankGroup,1818HStreetNW,Washington,DC20433,USA;fax:202-522-2625;e-mail:pubrights@worldbank.org. Iconsmadebynoomtah,Freepik,VectorStallandAfianRochmahAfiffromFlaticonatwww.flaticon.com Coverdesign:KoraReichardt TechnicalNote ConsolidationofFinancialStatementsatDifferentLevelsofGovernment December2022 CONTENTS Glossary5 Acknowledgements7 Preface8ExecutiveSummary9 1.INTRODUCTION11 1.1.Context11 1.2.ObjectiveoftheTechnicalNote12 1.3.MotivationsforpreparationoftheTechnicalNote12 1.4.LimitationsoftheTechnicalNote13 1.5.StructureoftheTechnicalNote13 2.CONSOLIDATIONANDCOMPILATIONACCORDINGTOIPSASANDGFSM201414 2.1.ThescopeofconsolidationandcompilationaccordingtoIPSASandGFSM201414 2.2.DelineationoftheeconomicentityaccordingtoIPSAS20 2.3.Delineationofthepublicsector,thegeneralgovernmentsector, andtheirsubsectorsaccordingtoGFSM201422 2.4.ConsolidationprocessaccordingtoIPSAS25 2.4.1.Phase1:Initialsetup,maintenance,andpreparatorywork25 2.4.1.1.Step1:Delineationoftheeconomicentitythroughtheprincipleofcontrol25 2.4.1.2.Step2:UseofaunifiedandharmonizedCoAtoreportinformation26 2.4.1.3.Step3:Applicationofthesameaccountingpolicies26 2.4.1.4.Step4:Applicationofthesamecut-offdateoffinancialstatements26 2.4.1.5.Step5:Developmentandupdateofaconsolidationsystemoralgorithm26 2.4.2.Phase2:Financialdataconsolidation27 2.4.2.1.Step6:Collectionofentities'data27 2.4.2.2.Step7:Checkingoftheconsistencyofthedatacollected27 2.4.2.3.Step8:Performanceofconsolidationadjustments27 2.4.2.4.Step9:Verificationoftheresultsobtained28 2.4.3.Phase3:Financialreporting28 2.4.3.1.Step10:Generationoftheconsolidatedfinancialstatement28 2.5.CompilationprocessaccordingtoGFSM201428 3.INTERNATIONALEXPERIENCES30 3.1.Brazil30 3.1.1.Context30 3.1.2.Consolidationprocess31 3.1.3.Compilationprocess31 3.2.Georgia32 3.2.1.Context32 3.2.2.Consolidationprocess33 3.2.3.Compilationprocess33 3.3.Spain34 3.3.1.Context34 3.3.2.Consolidationprocess34 3.3.3.Compilationprocess35 3.4.Switzerland36 3.4.1.Context36 3.4.2.Consolidationprocess36 3.4.3.Compilationprocess37 3.5.Lessonslearnedandgoodpractices38 4.INTEGRATEDCONSOLIDATIONANDCOMPILATIONPROCESS40 4.1.Phase1:Initialsetupaccordingtothestatisticalframework42 4.1.1.Step1:Delineationofthegeneralgovernmentandpublicsector, andtheirsubsectorsthroughthesectorclassification42 4.2.Phase2:Maintenanceandpreparatoryworkaccordingtoaccounting standardsandstatisticalframework42 4.2.1.Step2:ThedevelopmentofaCoAharmonizedwiththeaccountingandstatisticalframeworks42 4.2.2.Step3:Ensuringtheuseofthesameaccountingpolicies42 4.2.3.Step4:Ensurethesamecut-offdateforfinancialstatements43 4.2.4.Step5:Developmentandupdatingsystemsorbridging algorithmsforconsolidationandcompiling43 4.3.Phase3:Financialdataconsolidationaccordingtoaccountingstandards43 4.3.1.Step6:Collectingofentities'data43 4.3.2.Step7:Checkingtheconsistencyofthedatacollected44 4.3.3.Step8:Performingconsolidationadjustments44 4.3.4.Step9:Verificationoftheresultsobtained44 4.4.Phase4:Financialreportingaccordingtoaccountingstandards44 4.4.1.Step10:Generatingtheconsolidatedfinancialstatementofthepublicsector,thegeneralgovernmentsector,andtheirsubsectors44 4.5.Phase5:Statisticaldatacompilation45 4.5.1.Step11:Bridgingfromaccountingtostatisticaldata45 4.5.2.Step12:Performingstatisticaladjustments45 4.5.3.Step13:ConsistencycheckofthecompiledGFS45 4.6.Phase6:Statisticalreporting45 4.6.1.Step14:Generatingstatisticaloutputs45 5.CONCLUSIONS,RECOMMENDATIONS,CHALLENGES,ANDMITIGATIONMEASURES46 5.1.Conclusions46 5.2.Recommendations47 5.3.Challengesandmitigationmeasures48 Annex1.Questionnai