GAAP,GFS and AASB 1049: perceptions of public sector stakeholders

Efforts by Australian standard‐setters to harmonise public sector financial reporting resulted in AASB 1049, which sought to bridge the divide between generally accepted accounting principles (GAAP)‐based and government finance statistics (GFS)‐based financial statements. However, whether AASB 1049 has resulted in information that is considered appropriate for the public sector has not been examined. We explore this issue by comparing the requirements of AASB 1049 with the responses from a survey of public sector stakeholders on the appropriate accounting treatment and presentation of selected financial items. The analysis suggests consensus with AASB 1049 on presentation issues but less consensus on accounting treatments.     

A comparison of debt measures in fiscal statistics and public sector financial statements

This paper examines the differences between measures of debt used to analyse a government's financial position. It compares the statistical and accounting approaches and presents a way of reconciling the two statements: thereby identifying possible convergence between GPFS and GFS. In doing so, it contributes to the ongoing international debate on harmonization of public sector accounting standards, such as IPSAS/EPSAS and GFS.     

MIND YOUR ACCRUALS: PERCEIVED USEFULNESS OF FINANCIAL INFORMATION IN THE AUSTRALIAN PUBLIC SECTOR UNDER DIFFERENT ACCOUNTING SYSTEMS

This study examines the usefulness of three accounting systems (cash, Generally Accepted Accounting Principles (GAAP) accrual, and Government Finance Statistics (GFS) accrual) for public sector decision‐making. From a survey of internal users, external users, and preparers in Australia, we find that GAAP accrual information is perceived to be relatively more useful and understandable than the other two systems for most decisions examined. The relatively higher ratings for GAAP accrual information differ from earlier studies and may reflect an experience or familiarity effect whereby perceptions of usefulness are enhanced because respondents have become more used to the system. This effect might also explain the lower ratings for GFS accrual.     

MEETING THE CHALLENGE: ACCOUNTING FOR CHANGE

This paper examines the challenge mounted against long established management accounting practices by Kaplan (1983) and Johnson and Kaplan (1987) from a public sector perspective. It seeks to determine the extent to which this challenge to the private sector - of a lack of innovation in management accounting practice in the face of a rapidly changing environment - holds true for public sector organisations. Furthermore, by drawing on substantive studies of management change in both the private sector and the public sector, this paper assesses (a) the tsunsfeubilitv of ideas and practices from the private to the: public sector (b) the need to study process of change and (c) the potential role of strategic management accounting as an innovative practice in addressing the agenda for change which confronts the public sector.     

The Transformation of an Accounting System During Organisational Change: A Longitudinal Study

Accounting can both shape and be shaped by organisational reality (Nahapiet, 1988). This paper focuses on the shaping of an ABC (activity based costing) system in a public sector authority during a period of rapid change from 1993 to 1998. The reasons why management invested substantially in such a system are outlined, and are compared and contrasted with the views of the employees. Over time the ABC system became locked in as the transfer pricing system to meet the needs of a new style of business unit accountability where quasi–profit centres were set up within a public sector authority. A new CEO eliminated the profit–centre concept and returned to budgetary control as the primary form of financial accountability. At this stage ABC became side–lined but was still useful for strategic decisions relating to out–sourcing and improving lines of business, more in line with its initial objectives. Finally, the paper explores why ABC ceased to exist. It is a rare case of a longitudinal study of an accounting technology in a public sector organisation and provides insights into the moulding of accounting by organisational change.     

The translation of accrual accounting and budgeting and the reconfiguration of public sector accountants’ identities

Under the umbrella of New Public Management (NPM) and managerialism, the last three decades have seen a widespread transformation of public sector accounting and budgeting from a cash to an accrual basis. Much of the ensuing research, however, has focused more on technical evaluations of these programmes and less on informing our knowledge of the interaction between such programmes and accountants. As public sector accountants (PSAs) are central entities in such programmes, the purpose of this paper is to focus on the reconfiguration of their identities. Using the theoretical lens of Actor-Network-Theory (ANT) and its concept of translation, this study seeks to explain how PSAs’ identities were transformed through the introduction of Accrual Output-Based Budgeting (AOBB) in two German states. Our analysis shows that the change of accounting regime was not a straightforward one, but rather involved that accountants faced particular challenges responding to several interessement devices that were used to enrol them into the new practices. We link this behaviour to a Weberian facet of the PSAs’ identity, which prevented serious project stagnancy and ‘strategies of total resistance’, but also precluded many accountants from enrolling easily into AOBB, or even developing enthusiasm. The paper suggests that several groups of accountants, rather than one, experienced different challenges in aligning with AOBB and that each assumed their compromises and investments in developing with accrual accounting.     

Decision Usefulness of Cash and Accrual Information: Public Sector Managers’ Perceptions

This study examines the usefulness of accrual accounting information for internal decision‐making contexts in the Western Australian public sector. Based on questionnaire responses of public sector managers, it was found that accrual accounting is perceived to be more useful than cash accounting in 16 of the 19 decision situations. These results suggest that the perceived usefulness of the accrual accounting system has improved with the passage of time. It may well be that perceptions of the usefulness of information derived from an accounting system will change over time as users gain familiarity and experience with a system.     

Transforming frameworks of accountability: The case of water privatization

The U.K. Government's belief in the innate inefficiency of traditional public sector provision of goods and services has inspired a number of initiatives which have resulted in management of public sector enterprises being confronted by an increasingly commercial environment, tighter financial controls, increased competition, and in some cases transfer to the private sector through privatization. This paper is concerned with investigating the ways in which accounting and accounting information has contributed to and shaped processes of organizational change in one area of the public sector, the ten Regional Water Authorities of England and Wales. In the early 1980s, the Water Authorities were subject to pressures from new Government financial controls and performance aims to become more efficient. These pressures intensified when the Government announced its intention to privatize them in 1986, and continued up to 1989 when privatization took effect. Since privatization the Water Authorities have been subject to “yardstick” competition under a new regulatory framework, and comparative judgements by the financial markets. In considering these changes, the paper examines the constitutive role of accounting in articulating changing organizational priorities, and in promoting first a vocabulary of costs and subsequently a vocabulary of profits as languages of organizational motive.     

The U.K. private finance initiative: An accounting retrospective

The Private Finance Initiative (PFI) in the U.K. has been the subject of considerable interest in government, professional and academic literature. This reflects its importance as one of the classic forms of Public Private Partnership, its adoption in other jurisdictions, the scale of infrastructure investment under PFI legislation and the extent of controversy that has accompanied its development and application. The financial reporting of PFI schemes has been one element of this controversy in view of its potential to limit public sector financial accountability by off-balance sheet financing and the potential for alternative interpretations of its accounting treatment. It is now an appropriate time to review the turbulent history of accounting for the PFI as U.K. public sector accounting is now based upon International Financial Reporting Standards. This has resulted in the redundancy of previous accounting guidance issued by the UK ASB and the Treasury which, at the time of being abandoned, contained unresolved inconsistencies.This paper uses a triangulation method of investigation linking the input to, and output from, the regulatory process to an analysis of public domain evidence of press coverage and letters submitted to the standard setter and interviews with key participants to the standard-setting process. This approach shows that hidden pressures were influential in the process of developing PFI accounting regulation. Different interpretations of the ASB's principles-based Application Note and the Treasury's more rules-based Technical Note created de-facto alternative accounting treatments. The pressure, from organisations such as the Financial Reporting Advisory Board, for reform of PFI accounting was only released by the government's decision to switch the U.K. public sector to IFRS-based accounting.     

IPSAS or IFRS as the Framework for Public Sector Financial Reporting? New Zealand Preparers’ Perspectives

The last 30 years have seen public sector accounting in many countries undergo considerable change. More recently, some governments adopted accrual accounting and International Public Sector Accounting Standards (IPSAS), some adopted modified International Financial Reporting Standards (IFRS) while others continued with cash‐based accounting. New Zealand (NZ) has, for more than two decades, followed a sector neutral approach to financial reporting and standard setting where the same accounting standards were applied to all entities in all sectors: for‐profit, not‐for‐profit and the public sector. This period included the adoption of IFRS by for‐profit entities with minor modifications for the public sector. The suitability of IFRS for the public sector has been questioned and, recently, standard setters in NZ decided to adopt a sector‐specific standard‐setting approach with multiple tiers for each sector. The for‐profit sector will continue to follow IFRS but reporting standards for the public sector will be based on IPSAS. In this period of change we sought the views of preparers of public sector financial reports regarding the users of such reports and their preferences for the public sector reporting framework. We also sought the views of the preparers regarding the usefulness of each financial statement for users, and whether the benefits of reporting by their organisations exceeds the costs. The findings indicate support for maintaining IFRS as a basis for reporting in the NZ public sector. However, IPSAS modified to NZ conditions is also perceived as an acceptable option by respondents in this study. The income statement is, in the opinion of the respondents in this study, the most useful statement while cash flows appear to hold little value. A high proportion of respondents believe that the benefits of reporting exceed the costs, which contradicts the view that such reports are mainly compliance documents that provide little value. This finding contributes to the continuing debate on costs versus benefits on the recent introduction of IPSAS as the reporting framework for the public sector and the perceived appropriateness of IPSAS in public sector reporting.     

Beyond Self‐Evident: Recognising the Problematic Political Context of Accrual Accounting Adoption in South Korea

This paper responds to a recent call by researchers that we need to move beyond both advocacy of and technical arguments about the value of accrual accounting to more fully recognise the institutional forces, key change agents and the local political fields. We draw on elements of institutional theory and the practice theory of Pierre Bourdieu to explore the ‘problematic’ aspects of institutional forces, key organisational change agents and the local political field associated with the adoption of accrual accounting in the South Korean public sector. We found that accrual accounting was driven by many factors including a local financial scandal, the advocacy of a civil society group and the ambitions and the ideology of key actors. The contribution of this paper is that it shows how the practices of accounting cannot be separated from their political and personal context.     

Polish Public Sector Accounting in Transition: Evidence From the Mid 1990s

The Polish public sector is still under transition that began at the turn of 1989/1990. In the mid-1990s a new significant development in public sector accounting took place. A substantial differentiation of the accounting system was introduced. New elements and relationships appeared, along with general domination of the Accounting Act, tax regulations and the Budgetary Law. The system of basic regulation of accounting and reporting has also changed. There were also some changes in the auditing system. The enactment in 1994 of the Accounting Act has brought to light the political character and political importance of financial information in Poland. This paper presents the current mode of public sector accounting regulation and its relationship with the overall system of Polish accounting regulations. Much attention has been devoted to specific principles of public sector accounting and financial reporting in the public sector, and to government accounting. Some political contaminations and consequences of the current accounting system have been pointed out.     

New development: Importance of accounts receivable in Colombian state entities and their impact on the preparation of financial information

ABSTRACT

The article shows the importance of accounts receivable in the financial structure of state entities (purely government entities and state companies), and the challenge of standardizing accounting policies in order to prepare a national consolidated balance sheet. The focus is on Colombia. The research is qualitative, based on an analytical link between the nature of state entities, liquidity management and measurement in the preparation of financial information. Evidence is provided about the opportunities and limitations of the accounting regulation frameworks established for the public sector in Colombia. The author identifies future fields of research on public sector accounting and its role in accountability.     

The diffusion of management accounting innovations in the public sector: a research agenda

There have been numerous studies of the transformation of the public sector. This paper has a different focus: the dissemination and adoption of management accounting practices within the new public sector. The aim of the paper is explore the manner and means of diffusion, the obstacles to adoption and to establish a research agenda. The paper discusses findings of a survey on diffusion sent to public sector financial managers. The results of the survey indicate, inter alia, that adoption of accounting innovations by public sector organisations is largely affected by government influence. This study has interesting findings, but also points to the need for a new research agenda on the diffusion of management accounting practices in the public sector.     

Adapting not Adopting: 1958 - 74. Accounting and Managerial 'Reform' in the Early NHS

This paper examines accounting and managerial reform in the public sector National Health Service (NHS) hospitals in the UK from 1958-74. This period is often regarded as one of 'consolidation' (Klein, 1995; Webster, 1998) after the 'turmoil' of the early years of the NHS, though there were a number of attempts to improve 'efficiency' through initiatives largely rooted in commercial practice. There was a deeply embedded respect for local self governance rather than central 'command and control' (Harrison, 1988; Klein, 1995) and more ambitious reforms were avoided. Accounting practitioners and senior civil servants appeared to be content to adjust existing accounting processes rather than embrace major change. The paper concludes with a review of possible factors mitigating against more radical accounting innovation.     

Public and Private Sector Accounting - The Non-identical Twins

A debate in this journal, spanning severa1 years, over the accounting treatment of public assets has concentrated attention on the appropriateness of the Public Sector Accounting Standards Board's decision to apply private sector accounting concepts to the development of public sector accounting standards. The Case is examined here and it is shown why private sector accounting standards must be appropriately adapted to suit a very different and varied operating environment in the public sector. These differences have been largely ignored, with resulting problems for public sector accounting standards.     

Evaluating the Implementation of a Mandatory Dual Reporting System: The Case of Indonesian Local Government

Informative and transparent financial information in the public sector is crucial for improving public sector management and eradicating corruption. Given this, Indonesia has reformed its public sector accounting, reporting and accountability systems by implementing a dual reporting system known as ‘cash towards accrual’, following similar reforms in developed countries. Drawing on the experience of five local governments (districts) in Indonesia, this study finds that the implementation of the dual reporting system has helped local governments to produce transparent and informative reports. However, the accrual‐based contents of the dual reports produced by the new reporting system are underused for decision making. In addition, there has been a significant increase in costs associated with the implementation of the new accounting regime in the jurisdictions studied. The study also finds that the ability of the users to use information generated by the new accounting system is more important than just a legal and mandatory requirement to use the new system.     

Public‐Sector Accounting: A Common Reporting Framework?

Those debating the issue of public-sector accounting typically fall into two camps: one camp argues that there should be no distinction between the public sector and the business sector; the other argues that some business-sector practices are inappropriate for the public sector. This paper identifies an important omission in each of these arguments and calls on each camp to clarify its position.     

CONNECTING ACCOUNTING AND EDUCATION IN THE UK: DISCOURSES AND RATIONALITIES OF EDUCATION REFORM

In this paper we analyze the processes which have structured the emphasis upon budgeting and accounting in the Local Management of Schools initiative by outlining the inter-relations between the discourses of neo-liberal government and economics, and the apparent “need” for the expansion of accounting and budgeting systems in the public sector and particularly education in the UK during the past six years.At the heart of our analysis is the contention that accounting and budgeting systems have been promoted throughout the UK public sector by connections to a discourse of managerial enterprise and economic rationality. The intersections between accounting techniques, and economic and managerial notions of decision making, responsibility and market organization have provided the complex discursive formation within which the accounting and budgeting innovations introduced under LMS have been presented and represented as “necessary” elements of proper public sector organization. The colonization of accounting into the education sector has been made possible by a series of seemingly unquestioned linkages, associations and reductions, upon which we offer a commentary, between the discourse of economic rationality and the techniques of accounting.     

The HM ‘Treasure's Island’: The Application of Accruals-based Accounting Standards in the UK Government

Since the 1990s, UK has been progressively adopting a governmental accounting reform purporting to interpret and mimic accounting standards and practices from the private sector. Since 2009, the UK set of accounting standards applicable to the whole of governmental entities is based upon the HM Treasury's official interpretation of the international accounting standards initially designed for commercial enterprises, the latter standards having extensively inspired the International Public Sector Accounting Standards. This article analyses some representational concerns raised by its application of a balance sheet accounting approach to the public administration, pointing to consolidation perimeter, current value measurement of assets and liabilities and the case of public–private partnerships. This theoretical analysis develops relevant implications for representation and control of public spending and borrowing in UK and in general.