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Has the management of infrastructure assets (IAs) improved with the use of the accrual method in local government?

Allan Molland (School of Accounting and Law, RMIT University, Melbourne, Australia)
Robert Clift (School of Accounting and Finance, Victoria University, Melbourne, Australia)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 18 July 2008




The purpose of this study was to investigate how senior accounting staff in Victorian local authorities are recording and reporting infrastructure assets (IAs) with their relevant depreciation in General Purpose Financial Reports (GPFRs) and the decisions made from this information. IAs are long‐lived assets such as roads, drains and bridges. The introduction of Australian Accounting Standard No. 27 Financial Reporting by Local Governments (AAS27), which applies to all Australian local authorities require IAs to be reported in the balance sheet and depreciation to be charged in the operating statement in order to reflect the loss of service potential in the operating period concerned. Before AAS27, the purpose of public sector accounting was to demonstrate that funds have been raised and expended strictly within the authority of the annual budget on a cash basis. The efficiency and effectiveness of decision‐making by users of this cash‐based information was impaired with this short‐term charge/discharge objective. The study was carried out to determine if information provided in an accrual accounting environment would be more efficient and effective for decision making by users than cash‐based information.


The study included a comprehensive literature review then interviews with 15 chief financial officers from Victorian local authorities. These authorities represented inner metropolitan, outer metropolitan, rural city, large rural and small councils.


The study reported the implications for change to accrual accounting method in accounting for IAs and the efficiency and effectiveness for decision making by both internal and external users. The question answered is whether the information provided by accrual accounting is used in the management of IAs. In some areas, it has been used and the benefits show from both an efficiency and effectiveness perspective. Concerns with this issue were identified by academics, parliamentary inquires, accounting authorities and local government interest groups.


This study is a comprehensive review of how senior local government accounting management are using the information generated from AAS27 on IAs and what value it has in their decision making.



Molland, A. and Clift, R. (2008), "Has the management of infrastructure assets (IAs) improved with the use of the accrual method in local government?", Asian Review of Accounting, Vol. 16 No. 2, pp. 97-108.



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Copyright © 2008, Emerald Group Publishing Limited

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