Accounting Devices and Fiscal Illusions

March 28, 2012

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Timothy C Irwin. Accounting Devices and Fiscal Illusions, (USA: International Monetary Fund, 2012) accessed December 22, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

This proposed SDN surveys the various accounting stratagems which governments have used to meet fiscal targets—thereby sidestepping the need for true adjustment—and suggests remedial actions to limit this type of fiscal non-transparency. Types of creative accounting covered includes, for instance, currency swaps to hide a debt build-up (as in Greece in 2001–07), sale and leaseback of government property (for example, in the United States), assumption of long-term pension obligations in exchange for short-term revenue (Argentina, Hungary, and other Eastern European countries), use of public-private partnerships to defer the recognition of investment spending (for instance, Portugal), and reliance on non-cash compensation (such as pension rights) to reduce measured wage bills (in the United States, United Kingdom, etc.) As is evident from the examples given, these fiscal tricks have recently come under increased international scrutiny, highlighting the importance of good fiscal reporting, accounting, and transparency in general, for avoiding unpleasant surprises, ensuring government accountability, and containing fiscal vulnerabilities.

Subject: Currencies, Economic and financial statistics, Expenditure, Financial statements, Government finance statistics, Labor, Money, Pensions, Public financial management (PFM), Public investment and public-private partnerships (PPP)

Keywords: Accounting, Accounting device, Currencies, Debt, Debt rule, Debt target, Deficit, Deficit device, Deficit indicator, Deficit target, Economic value, Europe, Financial statements, Fiscal consolidation, Fiscal reporting, Fiscal rules, Government finance statistics, Pensions, Public finance, Public investment and public-private partnerships (PPP), Reported deficit, SDN

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2012/002
Stock No:

SDNEA2012002
ISBN:

9781475502640
ISSN:

2617-6750

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