The Government of Finland and Spain - Case Study Example

The Government of Finland and Spain Introduction Adherence to the regulations of the accounting profession is key to the government of both Finland and Spain. The International Standards Accounting Board is an independent, privately funded accounting standard setter. It assumed a duty of accounting standard setting duty from its predecessor body, IASC. The main objectives of International Standards Accounting Board is to come up with and publish to the public's interest the accounting principles and concepts to put into consideration in the preparation and presentation of financial statements and to ensure their acceptance globally. It also aims at the improvement and coordination of conventions, accounting principles and procedures relating to the presentation of financial statements. Many countries in the world today have deficits and high levels of debts and unstable budgets. This brings forward the importance of high-quality financial reporting procedures by the governments all over the world. Similarity Looking at Finland and Spain governments, it is evident that the two governments possess some similarity in their accounting methods. Finland is a European country while Finland is an Anglo-Saxon country. Both states recognise their governments mandate in accounting, and they have developed bodies in their countries that oversee that the standards of accounting are followed to the letter in the country. In Spain, the Ministry of Economy created the Spanish Institute of Accounting and Auditing (ICAC) whose mandate was to prepare accounting standards for business accounting and audit. The Intervención General de la Administración Del Estado’ (IGAE) has the responsibility to ensure that the accounting standards of accounting are adhered to at the central and local jurisdictions of Spain (Brusca, Isabel, Vicente, and Danny 440). In Finland, the government has also bestowed upon the Finnish Government Accounting Board’s (FGAB) the mandate to see that the accounting standards set and outlined in the constitution are followed by accounting institutions and companies. The similarity between Finland and Spain is that they express some rejection to incorporate new accounting techniques of accounting that have been set by International Public Sector Accounting Standards (IPSAS). Adoption of new accounting techniques is of vital importance because the new developments that are taking place today in the public sector require new public management techniques. These countries are faced with economic crisis because of this reluctance and have been experiencing unstable budgets and inflation in their countries. The increased awareness concerning the growing developments in these countries has made the government receive pressure from the public and politicians to adopt the International Public Sector Accounting Standards (IPSAS). The public and politicians have realized that the government’s reluctance to adopt the accounting standards set by International Public Sector Accounting Standards (IPSAS) is putting them at a risk in terms of their social welfare. According to International Public Sector Accounting Standards (IPSAS), it is mandates that financial information should be released to the public to enable them make informed decisions. Citizens in both the countries require this information to know the budget allocated to them. Investors also require this information in order to make a varied judgement on where to and where not to make investments. The two governments reliance to their tradition accounting standards has denied the public this opportunity. Differences The two countries have some disparities in the accounting standards adopted. Moreover, the manner in which the International Public Sector Accounting Standards (IPSAS) are adopted by these countries differ greatly. The level of adoption of the International Public Sector Accounting Standards (IPSAS) in Spain is much slower than that of Finland. In Spain, a very strong legal culture persists where administrative law is used to administer the public sector. The central government is the accounting regulator and any reforms in accounting standards. Any accounting standards that have to be incorporated in the countries accounting standards have to pass via a process of scrutiny according to Spanish laws. The adoption rate is also slow because the influence from accounting professionals is weaker compared Anglo-Saxon countries (Brusca, Isabel, Vicente, and Danny 440). Looking at Finland, it has a very fast adoption rate as compared to Spain. Finland customs and tradition ensure that there is a common law that provides for the diffusion of accounting standards in the country. During the period of New Public Management, the Finnish government was among the first countries to like this type of accounting in the public sector. Also in this era, the Finnish government began to adopt the accrual-based type of accounting (Oulasvirta 277). This accounting model was more based on historical costs. Stressing on the historical cost principle, Finnish government stated its resources at the amount, which the business was acquired. This ensured that the objectivity of accounts was maximized. Additionally, there were, usually, documents to act as evidence proving the amount paid to purchase an asset or pay the expense. Historical cost adoption by Finnish government meant that its transaction would be recorded at the cost when they occurred. Judgment Both Finland and Spain have been somehow reluctant to adopt new accounting standards that are being developed by internationally recognised bodies. Much as Finland and Spain adore their accounting standards as sovereign in their respective countries, they should also develop an eye for details and have the clue that accounting information is not only for an individual country but also for the larger society. One of the things that Finland and Spain should ensure is that any accounting procedure they choose to take, it should be understandable. This is because any accounting information prepared by these countries is intended for use by other countries and therefore the information should be understandable. The case of these two countries refusing to include new accounting standards that are emerging due to increasing public demand are putting other parties from different countries at a risk of not understanding the information. Though the Finnish government has been slow in adopting the internationally set standards of accounting, it has been on the forefront to evaluate its accounting standards hence has developed a conceptual framework accounting for financial accounting. Though it has been reluctant to abide by all the International Public Sector Accounting Standards (IPSAS), it has borrowed some of the accounting principles from it, which has enabled the government to come up with a better and more understandable accounting framework. The framework has seen the Finnish government remaining to uphold some of their accounting standards such as the one on financial instruments where it discloses the fair value of all the financial assets and liabilities whether they are recognised as entities or not. Summarily, adherence to international accounting standards is of great importance to a country because it is exposed to a variety of investors who are willing to invest in the country. Therefore disclosing financial information at the end of every financial year is very important to the country. Works Cited Brusca, Isabel, Vicente Montesinos, and Danny SL Chow. "Legitimating International Public Sector Accounting Standards (IPSAS): the case of Spain."Public Money & Management 33.6 (2013): 437-444. Oulasvirta, Lasse. "The reluctance of a developed country to choose International Public Sector Accounting Standards of the IFAC. A critical case study." Critical Perspectives on Accounting (2012). Read More