The Importance of developing Government Accounting Systems of an Economic Orientation to facilitate the Evaluation of Assets at the disposal of Government Departments to Capture Privatization Requirements.
The trends of economic policies to privatize public projects with an economic orientation owned by various governments necessarily require the availability of accounting data and information which express the fair value of such projects. By definition, the target data are those which are supposed to be projected in those financial statements prepared in accordance with a set of unique accounting rules and procedures, the existing government accounting pattern fail to project to serve the decision-making purposes at the senior management level.
It has come to the notice of the General Auditing Bureau that among the projects the Governments incline to privatize, there are several being managed on the cash accounting basis as far as the registration of accounts and bookkeeping are concerned. It therefore follows that the relevant financial statements do not project data on the assets and liabilities of such projects in the State's Final Account. Equally, the results of operations whether it be a profit or loss do not appear as well. Moreover, with this cash accounting basis, there will be no room for registration of capital for these projects since their finance is annually provided for by the state's public budget. Another disadvantage is that the existing accounting pattern does not distinguish between the revenue and capital expenditure which aim in economic projects to marry revenue to expenditure in order to arrive to the appropriate net profit or loss. Moreover, the existing accounting system does not account for the depreciation of the fixed assets.
For all these reasons put together, the structure and content of the final account under the existing accounting system and the related financial statements differ greatly from those prepared for the private economic projects.
Having these bottlenecks in hand, senior personnel are encountered with a serious problem when considering the privatization of such projects. This problem is manifested in the difficulty to determine the capitals of these projects.
As opposed to this accounting system, the accrual accounting basis used by the Government owned privatized companies provide final accounts and balance sheets fully comprehensive and truly express the fair values of assets and liabilities. Such a facility provides the convenience for the determination of the
Because of the continually changing socio-economic and political environment which constitutes the individuals' needs and interests, the accounting pattern should also be in a continual systematic change in order to achieve the very objective of its adoption. Very simply, this means the provision of the necessary data needed for planning economic policies and utilization of resources together with the guidance it provides in the making of economic decisions.
Bearing in mind that the governments of developing countries own prestigious projects and departments of an economic nature which provide critical services to their citizens and own substantial assets at their disposal, the need has arisen for the presence of clear basis for the evaluation of such assets, determination of their productive life-time and the cost of replacing such assets.
An accounting system of such advantages will provide the government with proper guidance on how to deploy the assets in order to achieve optimum results. The need for an accounting system of such merits becomes desperately required at the supreme decision - making level where decisions are being made to privatize economic projects and government departments.
However, the attainment of the required accounting system can not be possible without the amendment and development of the existing government accounting system. Once the existing accounting system has been amended and developed to cope with the expectations of the changing economic environment, it should then be able the achieve a multiplicity of objectives of which we cite the following:
Naturally, the amendment of the existing accounting system will require as well the amendment of the standing financial directives pertaining to budgetary and accounting matters. These normally include the entry of government revenues and expenditures, the book-keeping processes and the other relevant financial rules, all to achieve the required objective which can be attained by making the necessary review and incorporation of the targeted amendments into the existing accounting systems a whole or in the form of additional statutory accounts.
Kingdom of Saudi Arabia
General Auditing Bureau