. /.  RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/BFA/W/223 
14 February 2011 
 (11-0726) 
Committee on Budget, Finance and Administration  
  
 
CHANGE OF METHOD IN PROVISIONS FOR CONTRIBUTIONS  
IN ARREARS 
 
 
I. INTRODUCTION 
1. The WTO Secretariat is changing the accounting methodology for calculating provisions for 
contributions in arrears following recommendations of  the External Auditor.  This document presents 
for information the change in methodology and its impact on the WTO 2010 financial statements that 
will be presented later this year. 
II. PREVIOUS APPROACH FOR PROVISIONS OF UNPAID CONTRIBUTIONS 
2. The WTO Financial Regulations stipulate that " A Provision for contributions in arrears shall 
be maintained.  It shall be funded through the Surplus Account "
1. 
3. Until the end of 2009, the Secretariat calculat ed a provision for the amount of outstanding 
contributions from Members at year-end.  The full amount outstanding was provisioned, irrespective of whether the Member's outstanding contribution was overdue by one day or 40 years.  At the same 
time, the Secretariat did not calculate a provisi on for the amount of outstanding contributions from 
Observers. 
III. RECOMMENDATIONS BY THE EXTERNAL AUDITOR 
4. While the Financial Regulation states that a provision shall be established, the External 
Auditor believes that the Secretariat should establis h its level following an assessment of the risk of 
non-payment. 
5. The External Auditor, in its 2008
2 and 20093 reports, recommends that the provision for 
contributions in arrears should not cover 100 per cent of the arrears, especially when contacts with the 
Members concerned and past experien ce allowed the date at which th e arrears would be settled to be 
foreseen.  The External Auditor therefore re commended that the provision for outstanding 
contributions should be calculated taking into account  the Organization's assessment of the risks of 
non-payment.  This implies setting up a 100 per cent provision for amounts owed whose absorption 
appeared uncertain and to adopt a lower rate of pr ovision in other cases.  It was also recommended to 
use the same approach for outstandi ng contributions from Observers. 
IV. NEW APPROACH FOR PROVISION FOR OUTSTANDING CONTRIBUTIONS OF 
MEMBERS AND OBSERVERS 
6. The Secretariat has revised its accounting methodology for calculating provisions for 
contributions in arrears.  The revised methodolo gy is based on the number of years of outstanding 
                                                      
1 Financial Regulations of the WTO (WT/L/156/Rev.1) – Regulation 17. 
2 Report of the External Auditor on 2008 Financial Statement (WT/BFA/W/188) – Paragraphs 43-48. 
3 Report of the External Auditor on 2009 Financial Statement (WT/BFA/W/216) – Paragraphs 38-43. WT/BFA/W/223 
Page 2  
 
  contributions aligned to the principles estab lished by the General Council on Administrative 
Measures.  The ageing of arrears increases the risk of non-payment and therefore the level of the 
provision needs to be higher in that case.  The same applies to Observers.  
7. All outstanding contributions from Members and Observers with more than 3 years of 
outstanding contributions at year-end will continue to  be provisioned at 100 per cent.  The level of the 
provision is reduced in the other cases as presented on the table below: 
Members & Observers with 
outstanding contributions Level of 
the provision 
> 3 years 100 % 
> 2 years 75% 
> 1 year 50% 
≤ 1 year 0% 
 
8. This new methodology is being implemented for the preparation of the 2010 financial 
statements.  Outstanding contributions from Memb ers and Observers amount to CHF 24,853,220 as at 
31 December 2010.  The provision for outstanding contributions, using the revised methodology, 
amounts to CHF 15,795,300 as at 31 December 2010.  The provision amounted to CHF 25,855,428 as 
at 31 December 2009.  Therefore the 2010 financia l statements will disc lose a decrease in the 
provision for outstanding contributions of CHF 10, 060,128.  This amount will be included in the 
balance of the Surplus Account at the end of the year.  These amounts will be certified by the External 
Auditor in the first semester of 2011. 
 
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