`Sector Neutrality' and NPM'Incentives': Their Use in Eroding the Public Sector

Despite New Zealans public-sector reformers' claims that financial reporting changes promote competitive neutrality and improved accountability and transparency, privatisation-favouring "incentives" were designed into the system at a hidden detailed level. That distorted system has been encompassed within the accounting profession's standard-setting activities through standard-setters' erroneous claims, in Australia and New Zealand, that the accounting profession's conceptual framework and accounting standards are sector-neutral. These claims help to conceal the fact that the public-sector financial management system has been designed to be partial, with its incentives structured to erode the public sector and favour privatisation.     

Application Of The Reporting Entity Concept To Universities

The Australian Accounting Research Foundation's Statement of Accounting Concept 1 "Definition of the Reporting Entity" refers to dependent users and outlines three factors to be considered in determining whether dependent users exist. This study applies these factors to the tertiary education sector and concludes that public-sector universities can legitimately be deemed reporting entities and should produce financial reports that fully comply with Australian accounting standards and concepts. In the light of this conclusion, the universities' annual reports are examined to determine whether there has generally been compliance. The study finds that 90% of the sampled university reports deviate from Australian accounting standards.     

美国财务舞弊症结探究

美国近期刮起的财务舞弊案风暴不仅使投资者和债权人损失惨重 ,也使社会公众对美国公司界丧失信心。这一连串的恶性财务舞弊案凸显出美国制度安排的结构性缺陷 ,迫使人们反思这些舞弊案的症结所在。本文提出 ,华尔街本末倒置的盈利预期、公司界扭曲的股票期权激励机制、独立董事摆设性的督导模式、管理咨询机构有失偏颇的出谋献策、准则制定机构对规则基础游戏规则的偏好 ,以及会计职业定位紊乱重心偏离审计业务 ,是导致美国财务舞弊屡禁不止的六大病因。     

Infrastructure Accounting for Local Authorities: Technical Management and Political Context

Internationally, there has been mounting interest in the subject of accounting for infrastructure assets and their deterioration. In New Zealand, the adoption of full accrual accounting across the public sector from 1989 has meant that local authorities have been grappling for some time with the problem of how best to account for these assets in a manner which is relevant for both managers and elected representatives. This paper reviews methods of accounting for infrastructure in New Zealand local authorities, and explores how infrastructure assets and related expenses might be accounted for in a manner which is consistent with both the New Zealand accounting profession's conceptual framework and the requirements of democratic decision making over the allocation of resources.     

The PSASB: The Accounting Profession in Regulatory Space

This study uses the "regulatory space" construct to examine the role of the organised accounting profession in expanding and enhancing the domain of accrual accounting to Australian public-sector financial reporting, through the advent, operations and output of the PSASB as its participant in regulatory space. To fully understand the role of the accounting profession, its actions and impacts are placed in historical and political contexts that also give consideration to the roles of other participants in regulatory space.     

The PSASB: The Accounting Profession in Regulatory Space

This study uses the "regulatory space" construct to examine the role of the organised accounting profession in expanding and enhancing the domain of accrual accounting to Australian public-sector financial reporting, through the advent, operations and output of the PSASB as its participant in regulatory space. To fully understand the role of the accounting profession, its actions and impacts are placed in historical and political contexts that also give consideration to the roles of other participants in regulatory space.     

The real effects of financial reporting on pay and incentives

This paper discusses two real effects of financial reporting on pay and incentives: (1) Better earnings leads to better incentives, and (2) If pay is mismeasured, pay can be misused. The first real effect follows from the fact that incentives are often based on earnings, and the effectiveness of earnings-based incentives is positively related to the quality of earnings. Greater use of earnings in incentives provides better incentives at a lower cost. The second real effect has to do with how well the accounting system measures the expense of various pay components. Complex calculations are required to value complex pay components such as options, post-employment benefits, and performance-vested equity, and these calculations have historically not been done correctly. The incorrect accounting leads to these pay components being misused. I conclude by discussing how accounting and disclosure of pay and incentives can be improved.     

The Pivotal Role Of Accounting Concepts In The Development Of Public Sector Accounting Standards

Perhaps the most important decision made by the Public Sector Accounting Standards Board was taken soon after it was formed in 1983. That decision was to adopt a conceptual approach to the development of public-sector accounting standards. This paper explores the implications for the reform of public-sector financial reporting practices in Australia.     

GAAP as a symbol of legitimacy: New York State's decision to adopt generally accepted accounting principles

In this paper, we draw on economic and sociological theories in order to explain public sector incentives to adopt generally accepted accounting principles (GAAP), using the state of New York's decision to adopt GAAP for external financial reporting. We argue that the state's decision to adopt GAAP was an attempt to regain legitimacy for the state's financial management practices. Institutional interests demanding New York use GAAP were part of the sociological phenomenon called institutional isomorphism. Power relations and organizational politics related to the state's budgetary process also significantly influenced the state's decision to adopt GAAP. However, although professional élites made strong statements that GAAP adoption would improve the state's financial management practices, we found no compelling evidence that producing GAAP financial information has significantly altered the state's financial management practices.     

Financial Reporting Practices of China's Listed Firms

The long‐term success of financial markets depends on the widespread availability of reasonably detailed and reliable financial information. Individual investors depend critically upon companies' regulatory filings and voluntary disclosures to assess their long‐run risks, payoffs, and, ultimately, their intrinsic values. However, a recent string of accounting frauds involving Chinese firms listed on overseas markets has drawn attention to the accounting and governance risks associated with investing in Chinese firms. This article provides a brief overview of the information environment of Chinese capital markets and the primary forces that affect the incentives of Chinese listed companies to provide timely and accurate financial reports. The evidence reviewed here indicates that the adoption of world‐class standards and regulation, although necessary, is not sufficient to generate incentives for transparency. The long‐term health of China's capital markets will also depend upon other reforms that are designed to accomplish the following: (1) improve the protection of investor rights through an effective, independent judiciary court system that promotes civil lawsuits, and through credible regulatory enforcement; (2) strengthen market development activity, especially with respect to foreign investors; and (3) limit political rent‐seeking behavior and deter politicized business decisions, especially in China's state‐owned enterprises. Together, such reforms have the potential to improve corporate governance in China and better align the incentives of the state and majority shareholders with those of minority shareholders, while increasing the ability of accounting to serve a contracting function and the demand for timely information for valuation purposes.     

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.     

Tainted portfolios: How impairment accounting rules restrict security sales

Contrary to claims that fair value accounting exacerbated banks’ securities sales during the recent financial crisis, we present evidence that suggests – if anything – that the current impairment accounting rules served as a deterrent to selling. Specifically, because banks must provide evidence of their ‘intent and ability’ to hold securities with unrealized losses, there are strong incentives to reduce, rather than increase, security sales when market values decline to avoid ‘tainting’ their remaining securities portfolio. Validating this concern, we find that banks incur greater other‐than‐temporary impairment (OTTI) charges when they sell more securities. We then find that banks sell fewer securities when their security portfolios have larger unrealized losses (and thus larger potential impairment charges), and these results are concentrated in banks with homogenous securities portfolios, expert auditors, more experienced managers, and greater regulatory capital slack. Overall, our results suggest that – contrary to critics’ claims – the accounting rules appear to have reduced banks’ propensity to sell their securities during the financial crisis.     

What Is A Public-Sector Asset?

Accounting standards and government pronouncements specify particular definitions of public-sector assets for general-purpose financial disclosure, or for particular applications. It would be unfortunate if this situation of mandated definitions stifled further exploration and discussion of the nature, definition and identification of public-sector assets. As the trend to commercialisation generates further hybrid forms of public-sector reporting entities, a more "multicultural" approach to asset definition and recognition may be necessary to service users' decision needs and public-sector objectives. This paper explores implications for the practical definition of public-sector assets.     

Measurement Challenges and Consequences in the Australian Public Sector

Among the transformations in accounting and measurement practice that have swept through the public sector in the past decade, the widespread adoption of some variant of cuwent or replacement cost accounting for non-cuwent assets has attracted keen research attention (eg, Walker 1993, Walker et a1 1997). This paper addresses two key issues. First, it explains why cuwent cost accounting style measurement has proliferated in the budget- funded public sector while becoming largely1 extinct in the private sector. Second, it argues that the significance of measurement choices in the public sector extends beyond the appearance and composition of public-sector financial statements, and may have significant implications for contracting and outsourcing choices.     

金融风险的信息质量特征与我国金融会计制度改革

本文着眼于巴塞尔新资本协议第三次征求意见稿提出的金融风险监管和信息披露框架,以我国金融会计制度的国际化协调为切入点,分析了信用风险、市场风险和操作风险等金融风险的构成要素,指出现有监管信息系统和会计体系存在的问题.同时,本文还评价了我国新<金融企业会计制度>等规范对金融风险的披露和监管特征,分析了新制度对银行类上市公司所产生的影响,并提出了建立以风险计量会计披露为核心的监管体系的构想.本文最后对协同新巴塞尔协议的监管原则,建立完整的银行业信息披露框架,形成动态信息披露机制提出了一些建议.     

Changes in accounting and financial information system in a Spanish electricity company: A new institutional theory analysis

This paper reports on the results of an intensive case study that investigated changes in the accounting and financial information system of a large Spanish electricity company (Sevillana). Sevillana was acquired by the Endesa Group upon the deregulation of the Spanish electricity sector (SES). Drawing on data from multiple sources including interviews, observations, discussions and documents, the paper aims to theorize the change in the accounting and financial information system. An integrated accounting and financial information system was imposed by the Endesa head office on Sevillana and other Endesa subsidiaries to support organizational changes designed in response to regulatory requirements. The institutional senvironment also interacted with market forces and intra-organizational power relations to either directly or indirectly influence the changes in the accounting and financial information system. Given the interplay between these forces, the paper draws on and extends the New Institutional Sociology (NIS) theory [DiMaggio, P.J., Powell, W.W., 1983. The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. Am. Sociol. Rev. 48, 147–160; Powell, W.W., DiMaggio, P.J., 1991. The New Institutionalism in Organizational Analysis. The University of Chicago Press, pp. 183-203] to understand the dynamics of the change.     

Security Design

We explain why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. We show that, in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow partitioning because it makes informed trade more profitable. This approach seems capable of shedding light on corporate incentives to issue debt and equity, as well as on financial intermediaries' incentives to issue multiple classes of claims against portfolios of securitized assets.     

AAS 29 And Public-Sector Reporting: Unresolved Issues

The latest Australian accounting standard on public-sector accounting (AAS 29) requires government departments at all levels to comply with private-sector accounting and reporting principles and standards. But this commercially oriented framework may appear alien to departmental managers and may not accommodate many of the unique characteristics of departmental financial accountability. The underlying concepts and terms which take their meaning from the commercial world of profit-driven markets may be misunderstood, misinterpreted or lead to unintended welfare and distributional consequences. This article examines some of the underlying terms that may be misinterpreted and the possible consequences of their operation in the departmental context.     

Accounting System Reform in Japanese Local Governments

The New Public Management (NPM), of which the change from cash accounting to accrual accounting is considered an important tool, has been in fashion in many developed countries. Japanese governments, however, have preserved control of expenditures on a cash basis, though recently financial management reforms in local government have begun to adopt NPM ideas. Using a contingency framework which views the reform of accounting sub-systems (management accounting, financial accounting and auditing) as stimulated by a combination of internal and external pressures, this paper explores why Japanese local governments managed to survive without accrual accounting and the prospects for further reform in the future. It is suggested that system change itself can be accomplished by internal pressures, in the form of mandated policies, alone but that sustained external pressures by citizens are required in order to achieve the intended outcomes of accounting reform.