ACCOUNTING STANDARDS FOR THE PUBLIC SECTOR IN AUSTRALIA

The need for better financial reporting by public sector entities as a means towards greater accountability has been widely canvassed. This paper discusses the development and application of accounting standards in Australia in this context. The responses of the accounting profession, through its standard setting process, and of the Commonwealth and several State governments are described and the conclusion reached that these developments will mean significant improvement in the information content of public sector financial reports.     

The socializing effects of accounting in flood recovery

Natural disasters require authorities in charge of recovery, to be accountable to all those involved in the process, including victims. Accounting systems can be used to track and account for the fair and transparent management of disaster specific funds, giving visibility to the recovery process and its outcomes. However previous studies suggest that the process of accounting, with its individualizing effects, may create “distance” between the accountor and the accountee, thereby undermining accountability.This paper investigates the social aspects of the accounting system used by authorities in charge of the recovery from the devastating Italian flood of November 2010. We found that accounting procedures activated after this disaster not only gave visibility to flood damages and recovery actions, but also favored a sense of inter-dependency between all of the players involved. Accounting fostered dialogue, mutual understanding, trust and solidarity among victims, who played a crucial role in enabling the overall accountability process. Our paper provides evidence of the socializing effects of accounting in natural disaster contexts, thereby opening up an interesting area for further research in the streams of critical accounting.     

All in the Mind: Citizen Satisfaction and Financial Performance in the Victorian Local Government System

While a significant body of literature exists on local government efficiency, much less is known about its effectiveness, especially financial performance and resident satisfaction. To address this gap in the empirical literature, the present paper uses system‐wide official annual data on resident satisfaction in the Victorian state local government system in Australia to investigate the relationship between annual net operating results and overall citizen satisfaction. In addition, in order to garner a deeper understanding of this relationship, we evaluated the assumption in the ‘near‐to‐zero balance’ public accounting literature that local residents prefer an insignificant annual balance in operating performance compared to substantial annual losses or surpluses. We found that there is a significant negative association between overall satisfaction and its components and financial performance for Victorian local government as a whole. However, this association is largely restricted to rural councils with surpluses. By contrast, we find no relationship between satisfaction and near‐to‐zero balances. We conclude by considering the implications of our findings for both the public accounting literature and local government policymaking.     

Assessing financial reporting comparability across institutional settings: The case of pension accounting

The drive for comparability of financial information is to enable users to distinguish similarities and differences in economic activities for an entity over time and between entities so that their resource allocation decisions are facilitated. With the increased globalisation of economic activities, the enhanced international comparability of financial statements is often used as an argument to advance the convergence of local accounting standards to international financial reporting standards (IFRS). Differences in the underlying economic substance of transactions between jurisdictions plus accounting standards allowing alternative treatments may render this expectation of increased comparability unrealistic. Motivated by observations that, as a construct, comparability is under-researched and not well understood, we develop a comparability framework that distinguishes between four types of comparability. In applying this comparability framework to pension accounting in the Australian and USA contexts, we highlight a dilemma: while regulators seek to increase the likelihood that similar events are accounted for similarly, an unintended consequence may be that preparers are forced to apply similar accounting treatment to events that are, in substance, different.     

The Usefulness of Financial Reporting in Spanish Local Governments

Since 1992, accounting for Spanish local governments has been undergoing substantial change. The application of a new regulation has introduced the double entry system, an approximation to the accounting terminology used in the private sector and the presentation of financial statements beyond the purely budgetary reporting. In this context, the paper attempts to examine the extent to which the new regulation has achieved the objectives of financial reporting, who the users of the information could be, what the usefulness of the financial statements is and what they are used for in local governments. The results prove that the financial reporting of local governments can be useful for potential users like audit institutions, financial institutions or creditors. However, there is a long way to go before we can say that the information is used to the maximum. This implies that further progress is necessary in the use of financial information in local governments, and fundamentally it is necessary to introduce techniques of financial analysis traditionally used in business entities.     

A Trusteeship Theory of Accounting for Natural Capital Assets

One of the problems encountered in implementing accrual accounting in the government sector is that of accounting for natural capital assets provided freely to government and which are used as public goods. Professional accounting standards require that these assets be valued and included in the government's statement of assets and liabilities. The problem is not encountered in business accrual accounting because business neither acquires assets freely nor provides services to the public on a non-commercial basis.
Various issues surrounding accrual accounting for natural capital assets used as public goods are examined in this article. The nature and characteristics of such assets, and the distinctions between private goods and public goods markets, are first explained to set the context for examination of the issues. Then the issues as to whether natural capital assets should be treated as assets for accounting purposes and included in the government's statement of financial position are analysed according to FASB standards; it is concluded that they are not assets. Rather, it is proposed that these assets used for the provision of non-commercial services to the public should be treated in a separate category as public goods assets which are held in trust by the government on behalf of the nation, for the benefit of current and future generations and for the preservation of the natural ecology of the nation. Commercial valuations are not relevant for these assets and they need not be valued in financial terms for their good management.     

Towards the Harmonisation of Local Accounting Systems in the International Context

In recent years efforts to modernise and regulate public accounting systems have been carried out in most countries, driven essentially by the interest in establishing a Public Accounting capable of satisfying the required needs for attaining efficient management of public resources, as well as for demonstrating accountability to stakeholders. In this paper we aim to analyse the degree of local government accounting harmonisation, demonstrating in a general way that their accounting systems show very little homogenisation, accounting diversity being, in fact, one of their principal characteristics. In this context, we refer to the benefits and problems involved in reducing the differences between accounting systems and in increasing the comparability of financial reporting.     

Quality of information disclosure,property rights,and bank loans: A bank heterogeneity perspective

Using the context of the financial reform and the development of the non-state sector in China in the past decade, we examine the roles that the quality of information disclosure and property rights play in the allocation of different types of bank credit. We find that foreign banks and policy banks exercise “financial discrimination,” and that local commercial banks, large state-owned commercial banks, national joint-stock banks, local city commercial banks, and rural commercial banks not only exercise financial discrimination but also provide significant “financial support” to non-state-owned enterprises by providing more lending opportunities and larger loans. However, when enterprises commit information disclosure violations, the local commercial banks, national joint-stock banks, local city commercial banks, and rural commercial banks reverse their credit decisions and begin to exercise financial discrimination against non-state-owned enterprises. At the same time, large state-owned commercial banks continue to provide financial support to non-state-owned enterprises. We also find that the quality of the information disclosed by enterprises has a moderating effect rather than an intermediary effect on the relationship between property rights and bank loans. Overall, the results of this paper shine new light on the market-oriented reform of the banking industry, and provide new empirical evidence for the presence of financial discrimination in the supply of bank credit. Our findings also have practical implications for solving the financing difficulties of non-state-owned enterprises.     

Drought,resettlement and accounting

Drought, an insidious form of natural disaster, occurs frequently in the United States. The droughts of the 1930s were a national emergency which combined with economic depression to cause widespread rural poverty and distress. Governmental responses to the crisis were many and included the establishment of experimental resettlement projects for dislocated families. Operated by liberal, socially progressive agencies, these projects attempted to re-establish farm families on more productive land in less arid areas. One such project was the Red River Valley Farms Project in North Dakota. Here, business and home planning, budgeting and record keeping by client families was compulsory. Drawing on the notion of the ‘heroic bureaucracy’, this historical study reveals accounting as a key facilitative technology in the recovery phase of a disaster. The comprehensive accounting records maintained by each family contributed to their successful resettlement and provided the government agency with copious data for monitoring the performance of the project, measuring the progress of its participants, and identifying where support was most needed.     

Efecto en la calidad de la información ante cambios en la normatividad contable: caso aplicado al sector real mexicano

The purpose of this paper is to examine whether changes in accounting standards improve value relevance of financial information on listed companies in Mexico. The research was conducted for the period 2000-2013 using a sample of 141 companies that report to the Mexican stock exchange using the methodology of panel data. Our findings show that changes in local regulations (generally accepted accounting principles) to internationally approved standards (financial reporting standards and international financial reporting standards) increase the value relevance and therefore the quality of information. The study shows that the accounting information with international financial reporting standards is more trustworthy for foreign and national investors.     

Conservative financial reporting, debt covenants, and the agency costs of debt

Considerable research has documented the role of debt covenants and conservative financial accounting in addressing agency conflicts between lenders and borrowers. Beatty, A., Weber, J., and Yu, J. [2008. Conservatism and debt. Journal of Accounting and Economics, forthcoming] document interesting, but mixed, findings on the relation between debt covenants and conservative accounting, and the extent to which the two contracting mechanisms act as substitutes or complements. In this paper, I discuss the economic roles of financial reporting, debt covenants, and conservatism within the debt contracting environment, and attempt to fit BWY's findings within this context.     

Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting

EU Regulation 1606/2002 requires application of International Financial Reporting Standards (IFRS) by groups listed on European stock markets. In Spain, listed groups are now obliged to prepare consolidated financial information under IFRS, and legislative changes to bring local rules into line with international standards have been tabled.In this context, the potential impact of IFRS is fraught with uncertainty. Our study of IBEX-35 companies focuses on the effects of the new standards on comparability and the relevance of financial reporting in Spain. We address these objectives by seeking significant differences between accounting figures and financial ratios under the two sets of standards (i.e. Spanish accounting standards and IFRS).The results obtained show that local comparability has worsened. The study reveals that local comparability is adversely affected if both IFRS and local accounting standards are applied in the same country at the same time. Reforms to bring local rules into line with international standards are therefore urgent. We also find that there has been no improvement in the relevance of financial reporting to local stock market operators because the gap between book and market values is wider when IFRS are applied. While there has been no gain in terms of the usefulness of financial reporting in the short-term, improved usefulness may be achieved in the medium to long-term.     

极端气候对商业银行风险承担的影响——来自中国地方性商业银行的经验证据

深化对气候相关金融风险的认识,对于促进绿色低碳发展,防范系统性金融风险具有重要意义。本文以2004—2018年期间281家中国地方性商业银行为样本,实证检验了极端气候对银行风险承担的影响及其机制。研究发现,极端强降水气候显著提升了银行风险承担,极端高温和极端低温气候对银行风险承担不存在明显影响。极端强降水主要通过给银行信贷主体带来经济损失,影响违约概率和银行信贷资产质量,进而影响银行风险承担水平;提高灾前的保险保障水平、强化碳减排机制以及确保银行资本的充足性均有利于弱化极端气候对银行风险承担的影响;相较于以地级和省会城市工商业和居民为主要服务对象的地方性商业银行,极端强降水对以“三农”为主要服务对象的县域地方性商业银行风险承担的影响更大。因此,提升商业银行应对极端气候风险意识,提高气候灾害保险保障水平,强化碳减排机制和银行资本充足管理,均有利于降低极端气候对银行风险的影响。     

Examining dual accounting systems in Europe

After adoption of International Financial Reporting Standards (IFRS) for consolidated financial statements by European-listed companies, a number of European countries still require the use of local standards in the preparation of legal entity financial statements. This study investigates whether this requirement can be explained by a low demand for high-quality financial reporting and an orientation of accounting toward the fulfilment of regulatory needs in these countries. Specifically, using accounting quality as an indicator of the focus of accounting on capital providers' needs, we compare accounting quality between countries permitting and prohibiting the use of IFRS in individual financial statements. Consistent with our expectations, we find that countries requiring the use of local standards in the preparation of legal entity financial statements exhibit a significantly lower level of accounting quality, both prior to and after IFRS adoption. We interpret these results as evidence that these countries have local standards more oriented toward the satisfaction of regulatory needs, rather than investors' needs. Furthermore, since differences in accounting quality persist after the implementation of IFRS, results suggest that firms in these countries face a lower demand for high-quality financial reporting.     

The quality and conservatism of the accounting earnings of local governments

Our aim is to provide insight into the usefulness of accounting earnings for measuring the economic performance of local governments across Australia. Specifically, we explore whether (i) accrual accounting provides useful information, and (ii) earnings of local governments are conservative. We find that accrual accounting by local governments provides useful information as measured by the ability to predict one-year-ahead operating cash-flows. We find no conservatism in the financial reports of the average local government. This, we posit, is due to a lower level of demand for high-quality accrual-based financial reports from these entities. Consistent with this argument, both the quality of accruals and the degree of conservatism increase for local governments for which we predict a demand for higher-quality financial reporting.     

AN EPISTEMIC COMMUNITY AS INFLUENCER AND IMPLEMENTER IN LOCAL GOVERNMENT ACCOUNTING IN AUSTRALIA

This paper explicates the dual role of epistemic communities as influencers of accounting policy within regulatory space and as implementers who effect change within the domain of accounting. Set within the context of New South Wales in Australia, and the challenge of the financial sustainability of its local councils, the study was informed by documentary sources, and used data from interviews and a survey. Accounting and finance professionals, as an epistemic community, played a pivotal role in formulating accounting policy and in embedding fair value measurement of infrastructure assets.     

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.     

Factors determining residents’ preparedness for floods in modern megalopolises: the case of the Tokai flood disaster in Japan

This study examines how flood risk perception and home ownership affect residents’ preparedness for floods, focusing specifically on the case of the Tokai flood disaster in Nagoya City, one of Japan’s biggest metropolises, in 2000. The greatest rainfall ever recorded in Nagoya City (566.5 mm) occurred on 11–12 September 2000; as a result, a local river burst its banks and flooded the city. A survey was conducted of residents of the affected area in Nagoya City and its adjacent region. The respondents were asked to rate the extent of their experience with, anticipation of, and preparedness for floods before and after the Tokai disaster in terms of taking special measures against floods. The results showed that the degree of preparedness for floods was determined by the level of fear of floods and the amount of damage sustained during the Tokai flood, especially for homeowners. However, the residents’ preparedness did not depend on their anticipation of floods. These findings show that preparedness for floods depends on ownership of a home, fear of flooding, and the amount of damage from previous floods rather than on previous experience with and anticipation of floods.     

环境灾害冲击对银行违约率的影响效应研究:理论与实证分析

本文通过模型模拟和基于中国数据的实证检验,分析了环境灾害损失冲击对于银行违约率的影响。本文模型模拟的结果显示,环境灾害冲击会显著提升银行体系的违约率水平,同时伴随着企业融资溢价水平的提升以及整个经济活动的萎缩;实证研究发现:环境灾害损失冲击会导致银行违约率水平显著提升。且与理论分析一致,本文实证发现宏观经济不确定性水平、企业的资本折损以及全要素生产率的下降在环境灾害影响银行违约率的过程中发挥了显著的传导作用。进一步研究发现,环境灾害冲击及其导致的银行违约率上升还会降低银行的风险偏好水平,降低放贷规模和主动风险承担,并反作用于实体企业,提升企业的融资约束和成本。本文的研究结论丰富了基于中国视角的环境物理风险研究,刻画了环境灾害损失对于银行风险的影响及其后续效应,为政策部门防范气候环境风险提供了借鉴。     

Measuring the Degree of International Harmony in Selected Accounting Measurement Practices

This research assesses empirically the extent to which selected accounting measurement practices of companies from France, Germany, Japan, the UK and the US are harmonised in the context of major international efforts to enhance the comparability of company financial statements. The findings suggest that significant differences continue in accounting measurement practices between companies originating in each of these countries. The results of the study have important implications for international standard-setters, investors, creditors and those interested in international accounting.