Mind Your Accruals: Perceived Usefulness of Financial Information in the Australian Public Sector under Different Accounting Systems

Abstract

Australia, like many other countries, has experienced significant reforms inpublic sector accounting and reporting over the last two decades. Central tothese reforms has been the adoption of accrual accounting. However, eventhough a considerable passage of time has lapsed since the adoption of accrualaccounting, the debate on its usefulness for the public sector still flourishes(e.g., Pallot, 1998 and 2001; Ellwood, 2003; Keuning and van Tongeren, 2004;Torres, 2004; van der Hoek, 2005; and FEE, 2007). The major contention revolvesaround the usefulness of applying the commercially-based accrual accountingsystem (Generally Accepted Accounting Principles (GAAP) accrual) to the publicsector in pursuance of ‘sector neutrality’. More recently, in Australia, questionshave been raised as to whether it is more appropriate to use an alternativeaccrual system based on the International Monetary Fund (IMF) GovernmentFinance Statistics (GFS) at both the whole-of-government sector1and individualdepartment levels. While it is common practice to prepare national financialinformation for fiscal analysis using the GFS-accrual system,2the application ofsuch a system to the department level is still debatable. Show more