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New national accounting system to take hold in three years.

Background

The Ministry of Strategy and Finance adopted the accrual basis accounting and double-entry bookkeeping system to all sectors of national finance in fiscal year 2009. The rationales behind the adoption were 1) to effectively manage national assets and reflect them in national accounting, 2) to clearly show net national assets to help citizens understand the country's current fiscal situation, 3) to promote more responsible budget spending through project specific cost analyses, 4) to use various financial analysis methods of the new accounting system in making fiscal decisions and responding to fiscal situation changes, and 5) to raise transparency and management competence of the government's financial activities through double-entry bookkeeping.

What has been done to adopt the new system

The Ministry of Strategy and Finance has enacted and amended laws and regulations on the National Accounting Act as below:

--Enacting Enforcement Decree of the National Accounting Act on March 8, 2009

--Enacting National Accounting Standards on March 19, 2009, which aimed at providing accounting standards needed for accrual basis accounting and double-entry bookkeeping methods to be applied to national financial activities

--Setting up specific accounting working rules such as loan accounting working rules and accumulating cost working rules on May 11, 2009

--Developing 12 guidelines for accounting practices between June and December 2009, three for financial statements and nine for specific accounts such as government money accounts, transactions excluding tax revenue and expenditure, and fund accounts

--Amending identified cost methods applied to government asset accounting based on the National Accounting Act, which used to be independent of the National Accounting Act

--Adopting resolution on the amendment of National Accounting Standards at the 6th National Accounting Standard Board on November 11, 2009, through which the basis for reflecting national properties at their current economic value was founded

An electronic link between budget and accounting has been set in the Digital Budget and Accounting System (dBrain). Government agencies which do not use the dBrain system have developed agency-specific tools connecting their budgets and accountings.

Field examination of national assets such as national properties, commodities, and state claims, which started in November 2008, has been completed, as two final field investigations confirmed the reliability of the examination. Eight social infrastructures such as roads, railroads, ports, dams, airports, waterworks, and river and fishing port facilities have been under field examination since the second half of 2009, the result of which will be reflected in the government financial statements.

The opening statement of financial position based on the 2008 national assets and liabilities report began drawing up. The statement will be a foundation for determining basic prices for accrual basis accounting.

The government offered online trainings as well as off-the-job trainings to 1,800 government officials in charge of financial settlement and dBrain users.

What will be achieved in three years to fully implement the system

To fully reflect the value of social infrastructures in national accounting, field examinations of the social infrastructures are planned to be completed in 2010, followed by asset evaluation in 2011. The 2011 fiscal year financial statements, which will reflect the value of the social infrastructures, will be submitted to the National Assembly in 2012.

To include provisions such as pensions and insurance in national accounting, study on accounting methods will be completed in 2010, and applied from fiscal year 2011.

To raise professional human resources dealing with the new accounting system, a legal basis for recruiting personnel specializing in accounting will be founded in 2010, followed by actual recruitment beginning in 2012. Incentives will be set in 2011 to motivate government accounting officials and enhance their professional ability.

To help smooth transition to the new accounting system, the government will temporarily run Accounting Settlement Advisory Committee in 2010 with experts from the private sector, which will support drawing-up of government financial statements and examine new accounting methods.

To found a basis for the new system to firmly take hold, the examination for Certified Public Accountants (CPAs) will cover national accounting from 2012, along with the introduction of national certification for government accounting in 2011, given to qualified CPAs. The national certification for government accounting is a response to increasing demand for CPA consultation expected with the adoption of accrual basis accounting. According to the new enforcement decree of the National Accounting Act, funds managing more than 500 billion won are required to submit CAP audit reports along with financial statements.

National Accounting Standards Center, commissioned to develop national accounting standards, will be set up in 2010 based on the National Accounting Act. The center will work on practical interpretation of national accounting standards, inquiries concerning the standards, development of financial indicators based on accrual basis accounting, accounting systems between central and local governments, and study on foreign governments' accounting systems.

To improve accuracy and reliability of government financial statements, the government plans to start an amendment process of the National Accounting Act in the second half of 2010. The amendment will make it possible to mandate the review of government financial statements by private sector accounting experts from 2012. The quality of the private sector accountants will be strictly assessed on the basis of related regulations enforced from the second half of 2012.
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Title Annotation:Policy Issues
Publication:Economic Bulletin (Korea)
Date:Apr 1, 2010
Words:864
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