The goal of reform of accounting system is:
-application of International Public Sector Accounting Standards (IPSAS) and achievement of full compliance with the standards by 2020;
–introduction of method of full accrual.
Introduction of International Public Sector Accounting Standards (IPSAS) and achievement of full compliance with International Standards of Accounting and Reporting based on full accrual method represent the guarantee of improvement of reliability of financial reporting of public sector from the side of society, as well as investors.
For the purpose of introduction of IPSAS the State Treasury implements public sector accounting reform activities in the framework of “Project of Financial Support of Public Sector”, in accordance with the “Action Plan of Introduction of International Public Sector Accounting Standards” adopted as guidance based on the Order #701 dated November 3, 2009 of the Minister of Finance of Georgia.
For the purpose of facilitation of implementation of the reform in due timeframe, permanent advisory committee “Council of Standards of Georgian Public Sector Accounting” was established and the regulations of the Council was approved by the Resolution # 38 dated February 19, 2010 of the Government of Georgia. According to the Regulations, the Council is commissioned with review of the issues of accounting and reporting in public sector and development of recommendations.
Prior to introduction of International Accounting Standards (IPSAS) in Public sector based on accrual method, in accordance with the action plan, introduction of modified cash method is in progress. For the pilot organizations, selected with the consideration of specificity of budget organizations, draft instructions for financial reporting and cash flow reporting were developed, which were reviewed on the meeting of the Council. For the purpose of improvement and finalization of the projects, the analysis of financial reports and cash flow reports of 2010 developed by pilot organizations on the basis of modified cash method is carried out.
With the consideration of the results of analysis, the projects will be improved and approved in the form of normative document. Methodology of financial reporting based on modified cash method by budget-funded organizations shall be applied from 2012; as a result, all budget-funded organizations shall draw up the financial report of the first quarter of 2012 based on the new method. Draft changes to be introduced in the Accounting Instructions were also developed, where the specificity of drawing up financial reports based on new methodology has been taken into account. The Instructions shall come into force from January 1, 2012.