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Open Access
Article
Publication date: 1 December 2023

Claudio Columbano, Lucia Biondi and Enrico Bracci

This paper aims to contribute to the debate over the desirability of introducing an accrual-based accounting system in the public sector by examining whether accrual-based…

Abstract

Purpose

This paper aims to contribute to the debate over the desirability of introducing an accrual-based accounting system in the public sector by examining whether accrual-based accounting information is superior to cash-based information in the context of public sector entities.

Design/methodology/approach

This paper applies a quantitative research method to assess the degree of smoothness and relevance of the accrual components of income recorded by 302 entities of the Italian National Health Service (INHS) over the period 2014–2020.

Findings

The analysis reveals that net income is smoother than cash flows as a summary measure of economic results and that accounting for accruals improves the predictability of future cash flows. However, the authors' novel disaggregation of accrual accounts reveals that those accounts that contribute the most to making income smoother than cash flows – noncurrent assets and liabilities – are also those that contribute the least to predicting future cash flows.

Originality/value

The disaggregation of accrual accounts allows to identify the sources of the informational benefits of accrual accounting, and to document the existence of an informational “trade-off” between smoothness and relevance in the context of public sector entities.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 35 no. 6
Type: Research Article
ISSN: 1096-3367

Keywords

Open Access
Article
Publication date: 19 December 2022

Elisa Bonollo

Since the 1980s, governments worldwide have been implementing the move from cash to accrual accounting. Scholars initially considered the appropriateness of this accounting reform…

5385

Abstract

Purpose

Since the 1980s, governments worldwide have been implementing the move from cash to accrual accounting. Scholars initially considered the appropriateness of this accounting reform to be self-evident, but later they have expressed critical views. This paper systematises the existing literature intending to reflect on the adverse effects of adopting accrual accounting in the public sector and identify implications for future research.

Design/methodology/approach

The present study builds on a systematic literature review of 106 academic articles published between 1980 and 2021. It is based on the “preferred reporting items for systematic reviews and meta-analyses” (PRISMA) method. Synthesising research through a transparent, rigorous and replicable process makes it possible to identify and discuss the adverse effects of adopting public sector accrual accounting.

Findings

Significant issues are linked to organisational impacts and accountability. Resistance to change is the main negative consequence and is more likely in countries that have chosen to adopt accrual accounting without maintaining cash accounting. The new accounting rules make accounting information more complex and arbitrary for citizens and politicians. How these criticalities should be addressed deserves further investigation.

Originality/value

This paper offers a comprehensive literature review on the drawbacks of adopting accrual accounting in the public sector. It could provide a general lesson to be applied to policymakers of other jurisdictions currently considering this transition to prevent the adverse effects and act proactively.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 35 no. 6
Type: Research Article
ISSN: 1096-3367

Keywords

Open Access
Article
Publication date: 4 August 2023

Ivana Pajković, Nives Botica Redmayne and Vesna Vašiček

This study analyses to what extent politicians use public sector entities' financial statements along with the politicians' perceptions of the usefulness of such statements in the…

1059

Abstract

Purpose

This study analyses to what extent politicians use public sector entities' financial statements along with the politicians' perceptions of the usefulness of such statements in the politicians' decision-making. The authors analyze financial statements' use and usefulness when the statements are prepared on a modified accrual basis and in the setting where there is the intention of full accrual accounting adoption. In addition, this study provides information about the use of the individual components of financial statements and investigates the reasons why the statements may not be used.

Design/methodology/approach

This study was conducted using a questionnaire. The authors surveyed politicians that are members of Croatian public sector bodies. To conduct this research, the politicians were contacted by telephone over the period from February to April 2022.

Findings

The findings of this study are of potential interest to researchers, regulators and policy makers. The findings show that most politicians use financial statements, but the politicians' perception of the statements' usefulness when the statements are prepared on a modified accrual accounting basis is greater than the politicians' actual use of the statements. The findings also show that in the process of making decisions, politicians use the selected financial statements that contain information of interest to the politicians; that the politicians tend to gravitate to the use of reports on revenue, expenses, receipts and expenditure prepared on modified accrual bases which are closer to budgetary reporting; that the politicians use the information that supports the politicians' sphere of responsibility as enforced by legislation.

Originality/value

This study provides insights into the use and usefulness of financial statements in public sector setting where modified accrual accounting is used to prepare the statements and reports. This study provides additional evidence on the significance of legal setting to the financial reporting in public sector.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 35 no. 6
Type: Research Article
ISSN: 1096-3367

Keywords

Open Access
Article
Publication date: 2 April 2019

Fuad Fuad, Agung Juliarto and Puji Harto

This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals…

7109

Abstract

Purpose

This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals quality, earnings smoothing, timely loss recognition and earnings persistence.

Design/methodology/approach

It analyzes the hypothesis of accounting quality changes in post-IFRS convergence by using the univariate and multivariate statistics. Particularly, the authors rely on panel data analyses using industrial companies’ data from 2008 until 2014, comprising 3,861 firm-years observations, in Indonesia.

Findings

The results indicate that there is no conclusive evidence that all accounting quality dimensions including accruals quality, earnings smoothing, timely loss recognition and earnings persistence increased in post-IFRS convergence.

Practical implications

The findings of this study may help regulators and standard setters to consider future adoption of IFRS, mostly to figure out the best “formula” to increase the usefulness of accounting information in post-IFRS convergence.

Originality/value

Rather than doing piecemeal work, the current study focuses on IFRS convergence on a broader aspect of accounting quality dimensions. It also focuses on the convergence process of IFRS as an alternative of full adoption, which has been the focus of many research studies.

Details

Journal of Economics, Finance and Administrative Science, vol. 24 no. 48
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 10 July 2017

Nan Hu, Rong Huang, Xu Li and Ling Liu

Existing literature in experimental accounting research suggests that accounting professionals and people with accounting backgrounds tend to have a lower level of moral reasoning…

12641

Abstract

Purpose

Existing literature in experimental accounting research suggests that accounting professionals and people with accounting backgrounds tend to have a lower level of moral reasoning and ethical development. Motivated by these findings, this paper aims to examine whether chief executive officers (CEOs) with accounting backgrounds have an impact on firms’ earnings management behavior and the level of accounting conservatism.

Design/methodology/approach

The authors classify CEOs into those with and without accounting backgrounds using BoardEx data. Using discretionary accruals from several different models, they do not find that CEOs with accounting backgrounds are more likely to engage in income-increasing accruals. However, the authors find that CEOs with accounting backgrounds exhibit lower levels of conservatism, proxied by C-scores and T-scores (Basu, 1997). This finding suggests that CEOs with accounting backgrounds recognize bad news more quickly than good news, consistent with the accounting principle of “anticipating all losses but anticipating no gains”.

Findings

The authors show that firms whose CEOs have accounting backgrounds exhibit lower levels of accounting conservatism. However, these firms do not exhibit higher levels of income-increasing discretionary accruals. This study documents the impact of CEOs’ educational backgrounds on firms’ accounting choices and confirms prior findings in experimental accounting research using large sample archival data.

Originality/value

This paper is the first study that investigates the impact of CEOs’ accounting backgrounds on firms’ financial reporting policy. The findings may have some policy implications. If accounting backgrounds of CEOs can make a significant difference on firms’ behavior, it is reasonable to make CEOs accountable for the quality of financial reporting. This paper is one of the first to empirically test inferences drawn by experimental accounting research. There has been a gap between archival and experimental accounting studies. The authors propose that interesting research questions can be addressed by filling in such a gap.

Details

Journal of Centrum Cathedra, vol. 10 no. 1
Type: Research Article
ISSN: 1851-6599

Keywords

Open Access
Article
Publication date: 2 July 2020

Tjerk Budding and Jos Klink

The involvement of politicians in the introduction and use of financial management techniques in the public sector deserves more attention. This paper analyses the influence of…

1182

Abstract

Purpose

The involvement of politicians in the introduction and use of financial management techniques in the public sector deserves more attention. This paper analyses the influence of members of Parliament (MPs) on the development of financial management regulations for Dutch central government executive agencies.

Design/methodology/approach

This paper uses desk research and analyses formal evaluation reports, as well as minutes of meetings of Parliament to analyse the influence of MPs on the changes in financial management regulations.

Findings

MPs' influence on the change of prescriptions seems to have been small. The authors observe that modifications were most often already formulated in general evaluation reports by the Ministry of Finance, in advance of parliamentary debates. The analysis also reveals that the criteria to be met by the executive agencies became more detailed in the initial years of the agency model and became more global in recent years.

Research limitations/implications

This paper aims to contribute to the literature on the influence of politicians on financial management regulations.

Practical implications

The paper shows that the influence of MPs on the prescriptions is quite small in daily practice and therefore, their role in the legislative process, as far as financial management techniques are concerned, is limited.

Social implications

The results show that politicians are both in charge of, as well as subject to NPM-inspired financial management regulations, whereas their influence on the rules is small. The authors advise to further analyse this, as well as to explore how their role can be enlarged.

Originality/value

The interplay between politicians and financial management techniques in general, and the influence of MPs on the legislative process in specific, is an underresearched area. This paper aims to contribute to this literature and shows that the influence of MPs on the development of financial management regulations is limited. Several changes were made in these prescriptions in a period of more than 25 years, whereas discussions in the Parliament hardly played a role in these modifications.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 32 no. 3
Type: Research Article
ISSN: 1096-3367

Keywords

Open Access
Article
Publication date: 8 August 2022

Mahdi Ghaemi Asl and Mohammad Ghasemi Doudkanlou

This study aims to identify and compare the measurement models of earnings management (EM) appropriate to the Iranian Islamic banking system. The importance of reported profit…

1147

Abstract

Purpose

This study aims to identify and compare the measurement models of earnings management (EM) appropriate to the Iranian Islamic banking system. The importance of reported profit figures has motivated business executives, who also perform financial reporting, to manipulate these figures. These measures are referred to as “earnings management,” which negatively influence the quality of reported earnings and financial statements' reliability.

Design/methodology/approach

In this study, four methods, namely, Jones (1991), modified Jones (Dechow et al., 1995), Kasznik (1999) and Kothari et al. (2005), were used to measure the EM index in 25 Iranian Islamic banks (IBs) registered with the Tehran Stock Exchange and/or the Central Bank of Iran. The study covered the period 2005–2020. Following the aforementioned methods, this research implemented templates that were repeatedly tested in subsequent studies using accruals to discover EM.

Findings

The results show that the Kasznik (1999) model is the preferred and compatible model with the Iranian Islamic banking system's accrual behaviour due to the consistency of the measurement coefficients with theoretical and previous research findings. Therefore, total accruals, including discretionary accruals and non-discretionary accruals, have the most correspondence with (1) property, machinery and equipment; (2) the change in cash flow from operating activities; and (3) the difference of change in revenue (ΔREV) and change in net receivable accounts (ΔREC).

Originality/value

This is the first investigation in the Iranian Islamic banking system. The research contributes to the Iranian Islamic banking system literature on the implements of EM, which could be appealed to in the context of developing countries like Iran. Finally, this study highlights the different EM capabilities in Islamic banking systems similar to the Iranian banking arrangement.

Details

ISRA International Journal of Islamic Finance, vol. 14 no. 3
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 2 April 2021

Lucia Biondi, Fabio Giulio Grandis and Giorgia Mattei

Within the stream of research on public sector accounting standards, heritage asset accounting represents a difficult and challenging issue. This paper intends to join the debate…

3878

Abstract

Purpose

Within the stream of research on public sector accounting standards, heritage asset accounting represents a difficult and challenging issue. This paper intends to join the debate on heritage reporting by carrying out a critical review of the Consultation Paper (CP) “Financial Reporting for Heritage in the Public Sector” issued by the International Public Sector Accounting Standards Board (IPSASB) in order to highlight its strengths and weaknesses and to make recommendations.

Design/methodology/approach

To this end, the current study adopts document analysis as a qualitative research method by referring to Italy as a typical and critical case study. Moreover, the authors actively took part in the Italian working group on heritage assets reporting, so they are well-informed people about the Italian point of view as well as the broad discussion underpinning the Italian response.

Findings

Evidence demonstrates that, although the proposals included in the CP represent a new step towards an organic regulation of heritage asset reporting, if these preliminary views are confronted with the reality of an emblematic context, as in the Italian case, much room for improvement remains regarding the definition, recognition, measurement and disclosure of such assets.

Originality/value

The originality of the paper lies in its contribution to overcoming the current controversial aspects of heritage assets reporting and the issuing of an accounting standard. In doing so, the authors also attempt to answer the call made by Anessi-Pessina et al. (2019) to investigate in detail an individual country experience to better understand the state of the art in national and international accounting standards on heritage assets.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 33 no. 5
Type: Research Article
ISSN: 1096-3367

Keywords

Open Access
Article
Publication date: 18 October 2018

I Made Pradana Adiputra, Sidharta Utama and Hilda Rossieta

The purpose of this paper is to provide empirical evidence about the influence of the size of local government, the quality of local government financial statements, the level of…

18559

Abstract

Purpose

The purpose of this paper is to provide empirical evidence about the influence of the size of local government, the quality of local government financial statements, the level of local government response to the disclosure of financial information and the local political environment on the transparency of local government in Indonesia.

Design/methodology/approach

The study sample consisted of 34 regional governments (provinces) in Indonesia in 2016, using purposive sampling and multiple regression analysis.

Findings

The results showed that the quality of financial reporting through the audit opinion and political environment have a significant positive effect on the transparency of local government in Indonesia. On the other hand, the size of the local government and local government response rate on the regulation do not affect the transparency of local government in Indonesia.

Originality/value

The agency, legitimacy and institutional theory have an important role in the underlying local government transparency practices in Indonesia. The results of this study should be used as the basis of thought and study to determine the factors that affect the performance of local governments from the financial and non-financial aspects.

Details

Asian Journal of Accounting Research, vol. 3 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 30 December 2022

Lasse Olavi Oulasvirta

This study aims to fill the research gap regarding the usability of group reporting information in the central government. It answers the question of how the consolidated…

2320

Abstract

Purpose

This study aims to fill the research gap regarding the usability of group reporting information in the central government. It answers the question of how the consolidated information should be formed to benefit the real needs of governmental information users.

Design/methodology/approach

The empirical research is based on a survey and interviews among key internal preparers and users in the central government sector in the case country, Finland.

Findings

Results show that the private sector approach regarding consolidation is not appropriately transferable to the central government sector. The key stakeholders identified several economic and financial reporting needs that exceed what formal Consolidated Financial Statement (CFS) can offer. Consolidation is needed but not according to the extensive full control approach, but rather following the budgetary approach consolidating units of the legal person of the government, and further using the partial control approach for consolidating by discretion essential special purpose SOEs.

Research limitations/implications

Respondents and interviewees represented governmental internal organisations, free experts, auditors and financial managers from the group entities. Politicians and citizens were not directly represented.

Practical implications

Research gives applicable insights into central governments planning and developing group reporting for information needs in a favourable cost-benefit ratio. Findings benefit the development of EU's EPSAS (European Public Sector Accounting Standards) project which is still incomplete.

Social implications

Research recommends governments to make a thorough analysis before deciding on a new financial reporting system. A critical analysis prevents governments to waste money and resources on a reporting system not fulfilling the real needs of information users.

Originality/value

The value of this research is that the private sector approach in consolidation was not taken as granted. This study investigated critically and empirically the real need for consolidated information serving steering and overseeing purposes of the government's group entities.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 35 no. 6
Type: Research Article
ISSN: 1096-3367

Keywords

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