RESTRICTED  
  
WT/BFA/W/373  
 
15 September 2015  
(15-4704)  Page: 1/5  
Committee on Budget, Finance and Administration    
 
 PROPOSAL FOR ALLOCATION OF CURRENT ACCUMULATED BUDGET SURPLUS 
 
 
1  INTRODUCTION 
1.1  Legal basis background 1.1.  This report aims to explain the differenc e between pre-IPSAS (International Public Sector 
Accounting Standards) and post-IPSAS financial stat ements and to provide the guidelines for the 
use of budgetary results vis-a-vis  financial/accounting results as required by WTO Financial 
Regulations and IPSAS principles. 
1.2.  According to WTO Financial Regulation 9, the WTO's proposed budget expenditures are 
financed every year by income that consists of contributions from Members and Observers, and 
miscellaneous income.
1 WTO Financial Regulation 23 states that budgetary savings shall be 
transferred to the Surplus Account. This Regulation also states that if at the end of a financial 
period the Surplus Account shows a credit balance,  the Director-General shall make the respective 
proposals for the use of its balance to the Committee on Budget, Finance and Administration. 
These proposals may be2:  
a. application as income against the budget for the second financial period following that in 
which the surplus occurs, thereby reducing Members' contributions; 
b. transfer to the Working Capital Fund; or 
c. use for any other purpose decided upon by the General Council. 
1.3.  This was the scenario before the introduction of IPSAS. In 2012, the Members decided to 
introduce IPSAS, new accounting rules that demand  proper provisions for long-term liabilities 
which were previously not reported. 
2  USE OF BUDGETARY SURPLUS IN THE PAST 
2.1  Pre-IPSAS uses of budgetary surpluses 2.1.  In May 2008, the General Council approved a renovation/building plan on the basis of an 
agreement between the WTO and the Swiss Confeder ation on the long-term housing needs of the 
WTO.
3 Since that time, much of the available pre-IPSAS budgetary surplus for the period       
2007-2010 has been allocated to various aspects of this building project. The budgetary surplus for 2011 of CHF 739,756 was not used for the building project and remained unused since then.  
2.2.  An overview of the utilization of WTO's surplus from 2006 until 2011 is given in the following 
table. 
                                               
1 WT/BFA/W/344/Rev.1: Committee on Budget, Finance and Administration - Revision of the WTO 
Financial Regulations. 
2 WT/L/156/Rev.3. 
3 WT/BFA/W/170: Agreement between the Swiss Conf ederation and the WTO on the long-term housing 
needs of the WTO.  WT/BFA/W/373 
 
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Table 1 Pre-IPSAS surplus 
Surplus Account 
2006  2007  2008  2009 2010 2011  
(in '000 CHF) 
Surplus of the year 7,306  12,052  2,839  998 10,527 740  
Balance of previous year -310 6,996  12,052  2,839 1,037 10,527  
Use of surplus   -6,996  -12,052  -2,800 -1,037 -10,527  
1. Application against Member contributions  - -5,496  -4,000  -2,800 -   
2. Replenishment WTO Operating Fund - -1,500  - - -   
3. Members' Transition Operating Fund - - -8,052  - -1,037 -10,527  
Unused surplus 6,996  12,052  2,839  1,037 10,527 740  
2.2  Post-IPSAS accumulated surpluses/deficits 
2.3.  The table below shows how the IPSAS princi ples affected the budgetary surplus since 2012. 
Table 2 Post-IPSAS surplus 
Reconciliation Budget and Financial 
Results (in 000' CHF)   2012  2013  2014 Total  
 WTO yearly Budget Savings  11,328  10,090  14,476  35,894  
 WTO miscellaneous income  2,224  -181  304  2,346  
 Other Income/Expenditures  1,311  4,140  -26  5,425  
 Overall Budgetary Surplus  14,863  14,049  14,754  43,665  
 Extraordinary revenues   -   19,491   2,794  22,285 
 Acquisition of PP&E 1) 5,430  2,048  1,922  9,400 
 Depreciation and amortization of PP&E -1,097  -4,068  -4,919  - 10,084  
 Pension benefits actuarial valuation    -25,386  -24,687  -13,231  -63,304 
 ASHI benefits actuarial valuation   -13,707  -11,907  -11,497  -37,111 
 Financial Result (IPSAS)   -19,897  -5,075  -10,177  -35,149  
1) Property, Plant and Equipment. 
 
2.4.  With the adoption of IPSAS in 2012, the fi nancial position of the WTO has to reflect the 
estimated liabilities related to pension (WTOPP) an d After Service Health Insurance (ASHI) benefits 
as well as other less significant accounting adjustments. 
2.5.  At the end of 2012, the performance result obtained in accordance with IPSAS showed a 
financial deficit of CHF 19,896,416 while th e budget performance showed a surplus of 
CHF 14,862,592. The divergence between budgetary re sult and financial result occurred also in 
2013 and 2014.  
3  PROPOSAL FOR UTILIZATION OF THE BUDGETARY SURPLUS 
3.1.  The Director-General proposes to allocate the pre -IPSAS budgetary surplus of 2011 of 
CHF 739,756 to establish a Building Renovation Fund. The background information and the analysis on the justifications for establishing a Bu ilding Renovation Fund are reported in document 
WT/BFA/W/369. 
3.2.  The Building Renovation Fund shall use specif ic guidelines that are reported in the annex A. 
According to them, the Building Renovation Fund shall be financed by an annual allocation from 
the regular budget and any other source decided upon by the General Council. As an initial 
additional source of funding, the Building Renovation Fund may also receive the remaining balance of the MTOF of CHF 1,700,680. In case of extr a available regular budget resources during the 
financial year, these may also be used to contribute to the Building Renovation Fund. 
3.3.  Concerning the post-IPSAS budgetary situation for the years 2012, 2013 and 2014, in 
compliance with the Financial Regulation 32 and IPSAS an alignment of budgetary and financial WT/BFA/W/373 
 
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  results must be carried out. In 2012, 2013 and 2014, the additional actuarial costs for long-term 
employee benefits were reported in the financial statements determining an accumulated deficit.  
3.4.  The issue of the sustainability of the empl oyee benefits long-term liabilities therefore became 
obvious. Actuarial costs, specifically related to ASHI, must be addressed with a properly structured 
method (i.e. ASHI reserve fund) which is cons istent with the recommendations of the ASHI 
working group report (document WT/BFA/W/370) . The assets represented by the 2012, 2013 and 
2014 budgetary surpluses need to be set aside for ASHI related expenses and liabilities. 
3.5.  Specific guidelines to address this issue of ASHI sustainability and the management of ASHI 
assets are still being developed as part of the WTO long-term ASHI strategy. Additionally, it is 
understood that Members would want evidence of genuine cost control measures being implemented prior to full committing to more permanent funding allocations. However, the 
proposal is that the available budgetary surpluses be set aside pending agreement on the 
long-term ASHI strategy.  
4  RECOMMENDATIONS 
4.1.  The Secretariat proposes that the Committee adopt the following decisions related to a 
Building Renovation Fund: 
a. the Committee agrees that the Building Renovation Fund be established in 
2015, to be initially funded from the Members' Transition Operating Fund's 
closing balance of CHF 1,700,680; and 
b. in addition, the Committee recommends to the General Council that the credit 
balance of the Surplus Account as at 31 December 2011, in the amount of 
CHF 739,756, be transferred to the Building Renovation Fund.  
4.2.  The Secretariat proposes that the Committee adopt the following decision related to the 
alignment of budgetary and financial results: 
The Committee agrees that in accordance with Financial Regulations and IPSAS 
principles, an amount of CHF 43,665,433,  corresponding to budgetary surpluses 
from the years 2012, 2013 and 2014 be allocated to cover the long term cost 
estimates of the same years in order to align budget and financial results.  
 
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 WT/BFA/W/373 
 
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  ANNEX A – GUIDELINES OF THE BUILDING RENOVATION FUND 
The Building Renovation Fund would be subject to the following guidelines: 
a. the funds shall only be used to finance extraordinary maintenance, repair, improvement, 
and enhancement building and infrastructure costs, including the upgrading of existing 
facilities;  
b. the Secretariat shall maintain an up-to-date list detailing estimated expenditures that 
may be financed from the Building Renovation Fund. The list shall be presented to the 
Committee regularly; 
c. use of the fund shall be subject to approval of the Committee; 
d. the Secretariat shall report on fund activities as part of the annual financial report; 
e. funds shall be transferred to the Buil ding Renovation Fund as follows:  
i. annual financing from the regular budget; and 
ii. any other source decided upon by the General Council;  
f. the closure of the Building Renovation Fund shall be decided by the Committee. Any 
remaining unused funds shall be returned to the Surplus Account upon closure of the 
fund.   
  WT/BFA/W/373  
 
- 5 - ANNEX B – HISTORICAL EVOLUTION 
Table 1 Evolution Surplus Account 2006-2014 
SURPLUS ACCOUNT 
 (in CHF) 2006 2007  2008  2009  2010 2011  2012  2013  2014 
WTO Budget Savings 2,533,738 8,056,332  1,060,459  1,712,176  - 351,288  11,327,563  10,090,428  14,476,362 
1. Apellate Body and its Secretariat 576,367 453,037 119,234 223,814 -72,390 -555,543 31,271 516,084 271,088 
2. WTO Secretariat 1,957,371 7,603,295 941,225 1,488,362 72,390 906,832 11,296,292 9,574,344 14,205,274 
WTO Budget Income 1,389,051 1,886,875  2,009,230  -714,208  1,309,499 -502,025  2,223,754  -181,499  304,081 
1. Excess contributions of Members - 478,696 375,053 - - - 1,466,150 51,258 53,653 
2. Excess miscellaneous income 1,389,051 1,408,179 1,634,178 -714,208 1,309,499 -502,025 757,604 -232,757 250,428 
Budget Surplus Subtotal 3,922,789 9,943,207  3,069,690  997,968  1,309,499 -150,737  13,551,317  9,908,929  14,780,443 
Other Income and Expenditures 3,383,417 2,108,509 -230,669 - 9,217,820 890,493 1,311,276 4,139,738 -26,270 
Write-off of pre-1988 contributions in 
arrears - - - - -604,059 - - -   
Write-off publ ications and 
adjustments for inventory -2,401 -231,455 -129,073 - -138,202 -39,430 -10,145 -66,345   
Finance cost - - - - - - - -19,954   
Provision for contribution in arrears 3,385,818 2,339,964 -101,596 - 9,960,081 929,923 1,321,421 4,226,037 -26,270 
Budgetary Result (surplus) 7,306, 206 12,051,716 2,839,020 997,968 10, 527,319 739,756 14,862,593 14,048,667  14,754,173 
Balance of previous year -309,983 6,996,223 12,051,716 2,839,020 1,036,988 10,527,319  
 
 
IPSAS RESTATEMENT Use of surplus   -6,996,223 -12,051,716 -2,800,000 -1,036,988 -10,527,319 
1. Application against Member 
contributions - -5,496,223 -4,000,000 -2,800,000 -   
2. Replenishment WTO Operating 
Fund - -1,500,000 - - -   
3. Members' Transition Operating 
Fund  - - -8,051,716 - -1,036,988 -10,527,319 
Unused surplus/deficit 6,996,223 12,051,716  2,839,020  1,036,988  10,527,319 739,756  -19,156,660  -5,074,751  -10,176,288 
 
 
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