Royal Government of Cambodia
In 2019 the Royal Government of Cambodia appointed an international expert to review their asset accounting framework and based on that develop a range of accounting policies as well as develop a road map for the implementation of accrual based IPSAS. The Government structure of Cambodia is quite fragmented with approximately 2,000 agencies including 25 capital and provincial governments operating through a single treasury account.
The project was undertaken by David Edgerton FCPA who had previously undertaken similar projects for the governments of Vanuatu and Fiji. Like many other developing South East Asian countries the government operates a single treasury account and effectively is a single reporting entity with little information about the existing assets, who controls the assets, where they are located or what is their current condition.
The outputs from the project included development of a range of governance framework documents including –
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Introduction to asset accounting under accrual IPSAS
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Overview of Corporate Governance and Asset Management
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Non Current Assets Policy
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Valuation Methodology and associated guide
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Asset Hierarchy to support both asset accounting and asset management
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Example financial statement disclosures: asset accounting under accrual IPSAS
The real challenge however was developing a strategy and road map that would enable the government to satisfy the Government’s timeline for the implementation of accrual IPSAS. Like many other countries the National Accounting Council (NAC) has established an incremental transition evolving through cash accounting, modified cash, modified accrual and finally full accrual.
As acknowledged globally, the asset accounting aspects of first-time adoption of accrual IPSAS is traditionally the most challenging and time consuming. The process involves -
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Establishing the underlying framework (policies, asset hierarchy, valuation methodology, asset register data needs, etc)
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Development of a strategy and roadmap that addresses all aspects including leadershop, change management, data, support systems, etc
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Formation of a central team and subsequent mentoring and training
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Asset identification, data collection, registering and valuation
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Set up of Chart of Accounts, initial entries and preparation of financial statements.
The process of the asset identification, data capture and valuation, especially when existing asset registers do not exist, can be extremely time consuming, challenging and costly. Given the limited funds available to the Government an essential element of the strategy was to examine alternative valuation strategies with an aim of identifying the lowest cost option.
The strategy selected was a very clear winner over other approaches and relied upon the development of an internal Asset Management Valuation Unit (AMVU) who would be trained and mentored in asset valuation and through the use of Asset Valuer Pro would undertake the valuation of all of the government’s assets. Given the size and complexity of the portfolio the workload was split into six annual tranches with initial focus on the central government assets followed in subsequent years by the similar assets held by the 25 provincial and associated district governments and communes.
Despite the cost of the training and mentoring the cost of this strategy when compared to the traditional approach of relying on external valuers was about the same in the first two years. However, as the asset classes valued expanded, the cost of this strategy dropped slightly while the traditional approach of relying on external values escalated quickly. After five years the annual cost of the strategy using Asset Valuer Pro reduced to approximately one-fifth of the cost of using external valuers.
