The Vatican has announced the release of its annual financial statements and said it represented the first step towards full adoption of International Public Sector Accounting Standards (IPSAS).

The financial statements were presented at a meeting of the Council for the Economy on Tuesday by the Prefect of the Secretariat for the Economy Cardinal George Pell, the Church’s finances chief.

Those are consolidated and externally audited statements of the Holy See and the Governorate of Vatican City State for fiscal year 2014.

"The auditor confirmed that a clear audit certificate had been issued," the official announcement expressed.

It is understood that EY is the external audit firm hired by the Vatican in late 2013 to review its books. Contacted by The Accountant, EY was not immediately available to confirm if the audit contract is still in force. Neither was available the Vatican’s press office.

In the official announcement the Vatican also stated that 2014 was "a year of transition to new Financial Management policies" based on IPSAS.

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In November 2014 Cardinal Pell distributed a manual to all Vatican offices explaining the changes, scheduled to start as of 1 January 2015.

Cardinal Pell said the purpose of the manual was to bring financial management practices "in line with international standards". He also said this would help "all Entities and Administrations of the Holy See and Vatican City State prepare financial reports in a transparent manner".

According to the Vatican, the financial statements include all assets and liabilities. A deficit of €25.6m ($28.1m) was reported for the Holy See, up from €24.4m in the previous year.

It also said that the deficit following previous accounting rules would have amounted for €37.2m and attributed the improvement to "favourable movements in investments held by the Holy See".

As far as the financial statements of the Governorate of Vatican City State are concerned, a surplus of €63.5m was reported, up from €33m last year.

"While rapid progress is being made in implementing reforms requested by the Holy Father, the complete transition to the IPSAS is likely to take several years. The 2015 Budgets and the 2015 Statements are the first important steps," the announcement expressed.