Government of Ghana Accounting Policy Study Notes

GOVERNMENT OF GHANA ACCOUNTING POLICY
1. FOREWORD

  • The Government of Ghana has undertaken strategic reforms to enhance public financial management (PFM) practices.

  • These reforms are aimed at fostering greater accountability, transparency, and efficiency in the management of public funds.

  • Key reforms include:

    • Ghana Integrated Financial Management Information System (GIFMIS)

    • Aims to computerize PFM processes:

      • Budgeting

      • Revenue

      • Expenditure

      • Procurement

      • Payroll

      • Fixed assets

      • Debt and cash management

    • This system centralizes financial data, improving real-time monitoring of government finances, reducing reconciliation issues, and enhancing decision-making through better access to financial information. This centralization allows for immediate tracking of budget execution, expenditure patterns, and revenue collection, leading to quicker identification of discrepancies and more responsive fiscal management.

    • Adoption of International Public Sector Accounting Standards (IPSAS)

    • Provides a framework for transparent financial reporting on:

      • Financial performance

      • Financial position

      • Cash flows

    • The shift to IPSAS Accrual Basis accounting ensures that financial transactions and events are recognized when they occur, regardless of when cash is received or paid. This provides a more comprehensive and realistic view of the government's assets, liabilities, revenues, and expenses, enabling better assessment of financial health and intergenerational equity.

    • This contrasts significantly with the cash basis of accounting, which only recognizes transactions when cash is exchanged. Accrual accounting, by capturing all economic events, provides a more complete picture of the government's financial commitments and resources, thus supporting more informed decision-making regarding long-term sustainability and resource allocation. It also enhances the comparability of financial statements regionally and internationally, fostering greater trust among stakeholders and potential investors.

    • Key milestones in PFM reforms include:

    • Passage of the Public Financial Management Act, 2016 (Act 921)

      • This Act provides the legal framework for prudent financial management, establishing robust controls and procedures for public funds. These controls include measures for budget execution, procurement, public debt management, and reporting, designed to ensure fiscal discipline, accountability, and the efficient use of public resources.

    • Public Financial Management Regulations, 2019 (L.I. 2378)

      • Financial Reporting Responsibilities:

      • Specifications under the PFM Act and Regulations outline financial reporting duties for governmental entities.

      • Financial reporting standards and policies are mandated to comply with international standards.

      • The Controller and Accountant-General's Department (CAGD) developed accounting policies for:

      • Central Government (Ministries, Departments, Agencies)

      • Local Government (Metropolitans, Municipal, District Assemblies)

      • Government Business Entities (State Owned Enterprises)

      • These policies are aligned with:

      • PFM Act, 2016

      • IPSAS Accrual Basis of accounting

      • Incorporation of policies is necessary for relevance, reliability, comparability, and understandability of financial information for stakeholders. The adherence to these policies ensures that financial statements are not only relevant for decision-making but also reliable in reflecting the true financial position and performance. This enhanced comparability across different governmental entities and with international benchmarks, combined with clear understandability, is crucial for fostering good governance, enhancing the country's appeal to foreign investors by providing clear financial health indicators, and building greater public confidence in the management of national resources.

2. ACKNOWLEDGEMENTS

  • Appreciation to the Auditor-General, Ministry of Finance, Institute of Chartered Accountants-Ghana (ICAG), and CAGD staff for their support in developing the accounting policies.

3. ACCOUNTING POLICIES TABLE OF CONTENT

  • 1.1.0 General Statement (p. 7)

  • 1.2.0 Public Sector Reporting Mandate and Scope (p. 7)

  • 1.3.0 Basis of Preparation and Authorization for Issue

    IPSAS 1 (p. 7)

  • 1.4.0 Revenue

    IPSAS 9 & 23 (p. 12)

  • 1.5.0 Expenditure (p. 14)

  • 1.6.0 Property, Plant and Equipment (IPSAS 17) (p. 15)

  • 1.7.0 Heritage Assets

    IPSAS 17 (p. 24)

  • 1.8.0 Inventories

    IPSAS 12 (p. 24)

  • 1.9.0 Intangible Assets

    IPSAS 31 (p. 26)

  • 1.10.0 Cash Flow Statement

    IPSAS 2 (p. 27)

  • 1.11.0 Financial Instruments

    IPSAS 28, 30, 41 (p. 28)

  • 1.12.0 Advance Receipts and Other Liabilities (p. 34)

  • 1.13.0 Leases

    IPSAS 13 (p. 34)

  • 1.14.0 Donated Right to Use Arrangements (DRUA)

    IPSAS 13 (p. 35)

  • 1.15.0 Consolidation of Financial Statements

    IPSAS 35 (p. 36)

  • 1.16.0 Provisions, Contingent Liabilities, and Contingent Assets

    IPSAS 19 (p. 36)

  • 1.17.0 Contingent liabilities (p. 37)

  • 1.18.0 Contingent assets (p. 37)

  • 1.19.0 Events After the Reporting Date

    IPSAS 14 (p. 38)

  • 1.20.0 Accounting Policies, Estimates, and Errors

    IPSAS 3 (p. 38)

  • 1.21.0 Presentation of Budget Information in Financial Statements

    IPSAS 24 (p. 42)

  • 1.22.0 Separate Financial Statements

    IPSAS 34 (p. 43)

  • 1.23.0 Employee Benefits

    IPSAS 39 (p. 44)

  • 1.24.0 Borrowing Costs IPSAS 5 (p. 47)

  • 1.25.0 Financial Reporting in Hyperinflationary Economies

    IPSAS 10 (p. 49)

  • 1.26.0 Construction Contracts

    IPSAS 11 (p. 50)

  • 1.27.0 Segment Reporting

    IPSAS 18 (p. 52)

  • 1.28.0 Related Party Disclosures

    IPSAS 20 (p. 54)

  • 1.29.0 Impairment of Non-Cash Generating Assets

    IPSAS 21 (p. 57)

  • 1.30.0 Impairment of Cash Generating Assets

    IPSAS 26 (p. 59)

  • 1.31.0 Disclosure of Financial Information about the General Government Sector (GGS)

    IPSAS 22 (p. 63)

  • 1.32.0 Agriculture

    IPSAS 27 (p. 64)

  • 1.33.0 Social Benefits IPSAS 42 (p. 68)

  • 1.34.0 Service Concession Arrangements: Grantor

    IPSAS 32 (p. 70)

  • 1.35.0 Investments in Associates and Joint Ventures

    IPSAS 36 (p. 73)

  • 1.36.0 Joint Arrangement

    IPSAS 37 (p. 74)

  • 1.37.0 Disclosure of Interest in Other Entities

    IPSAS 38 (p. 76)

  • 1.38.0 Investment Property (p. 77)

4. GLOSSARY OF TERMS

  • Accountings Basis

    Accrual or cash basis of accounting as defined by international standards.

  • Accounting Policies

    Specific principles, conventions, and practices in financial statement preparation.

  • Accrual Basis

    Accounting transactions recorded when they occur rather than when cash is received or paid.

  • Assets

    Resources controlled by an entity from which future economic benefits are expected.

  • Borrowing Costs

    Interest expenses and other costs connected to borrowing funds.

  • Contingent Assets

    Possible assets arising from past events, confirmed by uncertain future events.

  • Financial Assets

    Cash, equity instruments or contractual rights to exchange financial assets.

  • Provisions

    Liabilities with uncertain timing or amount.

  • Revenue

    Gross inflow of economic benefits that increase net assets/equity.

  • Expenses

    Decreases in economic benefits during the reporting period, leading to reduced net assets/equity.

  • Investment Property

    Property held to earn rentals or for capital appreciation, not for production or administration.