Accrual Accounting

Topics: Private sector, Public sector, Financial statements Pages: 27 (9967 words) Published: June 18, 2013
DO PRIVATE SECTOR FINANCIAL STATEMENTS PROVIDE A SUITABLE MODEL FOR PUBIC SECTOR ACCOUNTS? Paper to be presented at the European Group of Public Administration annual conference on “Public Law and the Modernising State” in Oeiras (Portugal), 3-6 September 2003-08-09 By Andy Wynne

Head of Public Sector Technical Issues
Association of Chartered Certified Accountants
Andy Wynne
Technical Department
ACCA 29 Lincoln’s Inn Fields
London WC2A 3EE
tel: +44 207 396 5778
• IFAC Public Sector Committee issued their standard on the cash basis of accounting and the ASB (UK) issued its draft interpretation for public benefit entities (not-for-profit organisations) earlier this year. In each case the private sector model of accounts was followed closely. • What is the experience in the UK of producing full accrual based accounts for public sector organisations? Have the increased value of these accounts been realised in practice? • Who is the defining class of user for the accounts of public sector entities? • What are the main objectives of public sector financial reporting? What are the key financial aspects which should be reported on in the accounts? • Should public sector organisations clearly account for the level of their borrowings or debt? How should this be measured? • How should public sector organisations account for aspects not found in the private sector, for example, heritage assets, military equipment, social policy obligations and taxation? • Should public sector organisations be required to report on the extent to which they have adequately maintained their operational assets? • What is the relative importance of financial accounting statements and budget out-turn reports in terms of public sector accounting? The views expressed in this paper are the views of the author only and do not necessarily represent the view of the ACCA Council. Andy Wynne

Head of Public Sector Technical Issues with ACCA. Responsible for public sector developments and in particular co-ordinating ACCA's responses to public consultation documents. Extensive experience of accounting and auditing across the public sector in the UK and Africa. Worked in internal audit in a large district council, then for a small NHS consortium. Later, worked for six years in a chartered accountancy practice in England providing financial services to a wide variety of public sector organisations. ACCA is the largest, fastest growing, global professional accountancy body, with over 300,000 members and students in 160 countries. ACCA's mission is to provide quality professional opportunities to people of ability and application, to be a leader in the development of the global accountancy profession, to promote the highest ethical and governance standards and to work in the public interest. ACCA has over 5,000 members working in the UK public sector. 1

There are two main schools of thought on public sector accounting each of which is linked to a view of the role of the public sector more generally. The first, traditional school holds that the public sector is necessary to manage the wider economy and to try and overcome some of its negative aspects, especially its inequitable and cyclical nature. The alternative, and currently dominant, view is that the public sector is a necessary evil for the provision of a restricted range of goods and services. According to this view, public sector accounting is part of the process of enabling competition and maximising efficiency and so ensuring that the public sector is managed at minimal cost to society. These two schools of thought can be seen as contestable paradigms or ideologies which have each secured dominance at various times over the history of public sector accounting over the last 150 years or so. Under the traditional model of public administration...

References: Barton, A. D. (2000) ‘Accounting for public heritage facilities – assets or liabilities of the government?’. Accounting, Auditing and Accountability Journal, 13(2) pp 219—35
Carlin, T
Chan, J. L. (2003) 'Government Accounting: An Assessment of Theory, Purposes and Standards ' Public Money and Management, April
Chow, D
Christensen, T. and Laegreid, P. Eds, (2002) New Public Management
Coombs, H.M and Edwards, J.R
Department for International Development (March 2001) ‘Understanding and Reforming Public Expenditure Management - Guidelines for DFID’ London: Department for International Development
Devlin, P., Godfrey A.D
Director of Audit (November 2002) ‘Report for the Year Ended 30 June 2002’ Government Audit Bureau, Mauritius
Evans, M
Froud, J., Haslam, C., Sukhdev, J, Shaoul, J., & Williams, K. (1998) ‘Persuasion without Numbers? Public Policy and the Justification of Capital Charging in NHS Trust Hospitals’ Accounting, Auditing and Accountability Journal, (1), pp 99-125
George, S
Global Reporting Initiative (2002) ‘Sustainability Reporting Guidelines 2002’ Global Reporting Initiative
Government Accounting Standards Board (1987) ‘Concepts Statement No.1: Objective of Financial Reporting’ GASB
Hepworth, N. (2003) ‘Preconditions for Successful Implementation of Accrual Accounting in Central Government’ Public Money & Management 23(1), pp 37-43
Hobsbawm, E
Hood, C. (1991) ‘A Public Management for all Seasons’ Public Administration, 69 Spring pp 3-19
IFAC Public Sector Committee (2000a) ‘IPSAS 1 – Presentation of Financial Statements’ IFAC
IFAC Public Sector Committee (2003) ‘Cash Basis International Public Sector
Accounting Standard: Financial Reporting Under the Cash Basis of Accounting’ IFAC
Institute for Fiscal Studies (April 2001) ‘The Government 's Fiscal Rules’ Briefing Note No. 16, IFS
Jones, G
Jubillee Research (May 2003) ‘Did the G8 Drop the Debt?’ CAFOD and Jubilee Debt Campaign
Likierman, A
Likierman, A. (2000) ‘Changes to Managerial Decision-Taking in U.K. Central Government’ Management Accounting Research, 11(2) pp 253—261
Luder, K
Martin, B. (2000) ‘New Fig Leaf? The Challenge of the New Washington Consensus’, Bretton Woods Project and Public Services International
Mautz, R
McKendrick, J. (2003) ‘Modernisation of the Public Accounting Systems in Centran and Eastern Europe Countries – the case of Romania’ 9th CIGAR Conference, Bodo, Norway
Mellett, H. (1997) ‘The Role of Resource Accounting in the UK Government’s Quest for “Better Accounting”’ Accounting and Business Research, 27(2) pp 157—68
Micallef, F
Page, M. and Spira, L. (1999) ‘The Conceptual Underwear of Financial Reporting’ Accounting, Auditing and Accountability Journal 12(4) pp 489 – 501
Pallot, J
Pallot, J. (1992) ‘Elements of a theoretical framework for public sector accounting’ Accounting, Auditing and Accountability Journal, 5 (1) pp38-59
Perez, C.C
Perrin, J., (1998) 'From Cash to Accruals in 25 Years ' Public Money and Management, 18 (2), pp. 7-10
Public Audit Forum (2002) ‘The Whole Truth: or Why Accruals Accounting Means Better Management’, Public Audit Forum
Robinson, M. (1998) ‘Accrual Accounting and the Efficiency of the Core Public Sector’. Financial Accountability & Management, 14(1) pp21—38
Rowles, T
Scheutze, W.P. (2001) ‘What are assets and liabilities? Where is the True North?’ Abacus, 37 (1) pp 265-280
Schick, A. (February 1998) ‘Why Most Developing Countries Should Not Try New Zealand Reforms’ The World Bank Research Observer, 13(1) pp 123-131
SIGMA (September 2001) ‘Financial Management and Control of Public Agencies’ SIGMA Papers: No
Stanton, P. & Stanton, J (1998) ‘The Questionable Economics of Governmental Accounting’ Accounting, Auditing and Accountability Journal, 11(2), pp 191-203
Sutcliffe, P
Treasury (1995) ‘Better Accounting for the Taxpayer’s Money: The Government’s Proposals for Resource Accounting and Budgeting in Government’ Cm. 2929, HMSO
Van Peursem, K
Watts, J., (2003) ‘Japan Slumps into cosy retirement’ 1 August The Guardian
Williamson, J
Zakiah, S. (2003), ‘Government Accounting and Reporting in Malaysia’ 9th CIGAR Conference, Bodo, Norway.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Cash and Accrual Method of Accounting Essay
  • Essay on How to Setup Use and Balance Your Ap Accrual Accounts
  • Transition to the Accrual Accounting Research Paper
  • Cash Based Accounting & Accrual Based Accounting Essay
  • Cash basis accounting vs accrual basis accounting Essay
  • Accounting and Finance: Essay on Accrual Basis
  • Essay on Article Review-Accrual Accounting
  • Adjustment For Accruals And Prepayment Essay

Become a StudyMode Member

Sign Up - It's Free