In 2005, the Ministry of Finance launched the accounting and financial statements reform in the public sector including budgetary institutions, public and municipal enterprises, institutions and organisations, public and private limited liability companies and public institutions with a significant impact on the State and/or municipality in adopting decisions. Also included were the Bank of Lithuania, state social security funds, other state monetary funds, and the State and municipalities as separate legal entities (further called the accounting reform).
The purpose of the accounting reform is to pass on the handling of accounting in the public sector by applying the accruals principle. Guidelines for the reform in accounting were approved by Resolution No 718 of 29 June 2005 of the Government of the Republic of Lithuania — On the Concept of Accounting and Financial Statement System Reform in the Public Sector and Setting up of the Coordination and Supervisory Commission (Official Gazette, 2005, No 81-2966; 2006, No 88-3460). Pursuant to the activity plan for implementation of the reform, the public sector accounting and financial reporting standards (26 in total) will be prepared before the end of 2008 as well as the general plan of accounts in the public sector, the specimen manuals of accounting and the manual on consolidation.
By its Resolution No 1065 of 30 October 2006 (Official Gazette, 2006, No 118-4463) the Government of the Republic of Lithuania approved the Concept of Public Sector Financial Reporting of the Republic of Lithuania, and the Ministry of Finance prepared the Draft Law of the Republic of Lithuania on Public Sector Financial Reporting. This law will specify the structure of accounts of a public sector entity that will consist of a set of financial accounts and a set of budget performance reports, and it will include requirements on drawing up of these sets and responsibility for drawing up and presentation of the set of accounts. It is envisaged that the entities of the public sector will have to handle accounting and draw up reports in pursuance with the Standards of Public Sector Accounting and Financial Reporting and the general plan of accounts starting from 1 January 2009.