From go to woe: How a not‐for‐profit managed the change to accrual accounting

Abstract

Purpose

The aim of this paper is to examine the process of change in an Australian not‐for‐profit organization, from a cash‐based to an accrual‐based accounting system. Its particular focus is the relationship between the image portrayed by accrual accounting adoption and the technical realities of the new system.

Design/methodology/approach

Data were gathered from interviews, documents and meetings, and were contextualized and interpreted using institutional theory.

Findings

The decision to change to accrual accounting was made at the top of the organizational hierarchy in response to institutional pressure to present a corporate image. The implementation of the new system was poorly conceived, inadequately resourced, and hampered by an authoritarian structure that effectively ignored the technical incompetence and training needs of many accounting staff. This resulted in an accounting system half way between cash and accrual, and very different from the system as it had been promoted. The process caused conflict at all levels of the organizational hierarchy.

Research limitations/implications

Accounting in not‐for‐profit organizations is an under‐researched area offering potential for fruitful research in a changing institutional landscape. This institutional approach, while offering just one interpretation of the qualitative data gathered in this project, provides valuable insights about the process of change.

Practical implications

Not‐for‐profit organizations play a vital economic and social role, and need carefully to assess their responses to ongoing institutional pressures. In implementing change, they face the challenge of balancing the promotion of an institutionally acceptable image and the need for technical efficiencies.

Originality/value

The examination of change in an organization provides a rich context for the exploration of the dynamic, problematic process by which a new accounting practice is embedded and institutionalized.

Citation

Irvine, H. (2011), "From go to woe: How a not‐for‐profit managed the change to accrual accounting", Accounting, Auditing & Accountability Journal, Vol. 24 No. 7, pp. 824-847. https://doi.org/10.1108/09513571111161611