A. Visit Saudi Digital Library using your student ID/ You can also search from Google and choose at least 5
research articles on accounting in which you are interested and would like to investigate. You might have
observed that every article starts with an Abstract, explain in your words what is an abstract and how does
it help other researchers.
B. Write the title and author of each article and summarize the finding of each author in all the 5 articles and
write a critical comment on them.
C. Develop one Question/ Topic of your own based on all the comment you made from the summary above.
2. Research proposals includes: 1. Title, 2. Abstract, 3. Issues, 4. Objectives, 5. Literature, 6.
Method, 7. Benefits.
Write down a research proposal on the question developed in Q1. (1.5 Marks)
3. Data collection depends upon the choice of research method adopted like: 1. The research
question, 2. Data access and 3. What the researcher wants to do.
Develop at least 10 questions on the objectives you created in your proposal to collect data/
4. The trade-off between reliability and construct validity has been referred to between
internal/external validity. Explain them. (0.5 Marks)
re v is ta
Accrual financial reporting in
the Public Sector: Is it a reality?
Isabel Brusca Alijarde
Universidad de Zaragoza, Spain. Departamento de Contabilidad y Finanzas. Facultad de
Ciencias Económicas y Empresariales. E-mail: firstname.lastname@example.org
Vicente Montesinos Julve
Universidad de Valencia, Spain. Departamento de Contabilidad. Facultad de Ciencias
Económicas y Empresariales. E-mail: Vicente.Montesinos@uv.es
Información financiera de devengo en el sector público:
¿es una realidad?
Resumen: La modernización de la contabilidad pública ha llevado consigo la implantación de información financiera basada en el principio de
devengo. No obstante, en algunos países europeos, como por ejemplo España, el presupuesto continúa elaborándose mediante el criterio de caja o
caja modificada y por consiguiente ambos sistemas coexisten. Esto puede
convertirse en un problema para la implantación real del principio de devengo. Este artículo analiza las diferencias que existen en la práctica entre
el resultado presupuestario y el resultado económico, con el objetivo de
evidenciar si realmente existen diferencias significativas entre uno y otro y
poner así de manifiesto en qué medida la contabilidad de devengo ha sido
implementada de forma real.
Abstract: Although modernization of governmental accounting has led to the implementation
of accrual financial reporting, budgets in most continental European countries, including Spain,
continue to be based on cash or modified cash methods. Consequently, cash-based and accrualbased financial information coexist. This may create problems for the full implementation of accrual
financial statements. This paper analyzes the differences in practice between the results disclosed
in financial and budgetary statements under both bases of accounting in order to identify to what
extent accrual accounting has been implemented and to verify whether budgetary and accrualbased financial figures are significantly different. The research findings show that there is a high
correlation between the current budgetary result and the economic result and, therefore, that in
practice the accrual principle has not been implemented effectively.
Keywords: Public sector accounting, accrual accounting, local government, financial reporting.
Palabras clave: contabilidad del sector público, contabilidad de devengo, gobierno local, reportes financieros.
Rapport d’accroissement financier dans le secteur public :
une réalité ?
Résumé : La modernisation de la comptabilité publique a mené avec elle
l’implantation d’information financière basée sur le principe d’exercice. Cependant, dans certains pays européens, comme l’Espagne, par exemple,
le budget continue d’être élaboré selon un critère de caisse ou de caisse
modifiée et par conséquent les deux systèmes coexistent. Cela peut devenir un problème pour la mise en place réelle du principe d’exercice. Cet
article analyse les différences qui existent dans la pratique entre le résultat
budgétaire et le résultat économique, pour mettre en évidence s’il existe
réellement des différences significatives entre l’un et l’autre et démontrer
ainsi dans quelle mesure la comptabilité d’exercice a été mise en place
de façon réelle.
Mots-clés : Comptabilité du secteur public, comptabilité d’exercice, gouvernement local, rapport financier.
Informação financeira de acréscimo no setor público: É
Resumo: A modernização da contabilidade pública tem levado consigo
a implantação de informação financeira baseada no princípio da especialização dos exercícios. No entanto, em alguns países europeus, como a
Espanha, por exemplo, o orçamento continua sendo elaborado mediante
o critério de caixa ou caixa modificada e, em consequência, ambos os sistemas coexistem. Isto pode virar um problema para a implantação real
do princípio da especialização dos exercícios. Este artigo analisa as diferenças que existem na prática entre o resultado orçamentário e o resultado
econômico, com o objetivo de evidenciar se realmente existem diferenças
significativas entre um e outro e mostrar assim em que medida o regime
contabilístico do acréscimo foi implementado de maneira real.
Palavras-chave: Contabilidade do setor público, regime contabilístico
do acréscimo, governo local, relatórios financeiros.
Departamento de Contabilidad y Finanzas (At. Isabel Brusca). Facultad de Economía y Empresa. Gran Vía, 2-3a planta.
Brusca Alijarde, I., & Montesinos Julve, V. (2014). Accrual Financial Reporting in the Public Sector: Is it a Reality? Innovar, 24(54),
Clasificación JEL: M41.
2012; APROBADO: Septiembre 2013.
In recent years, most Organisation for Economic Co-operation and Development (OECD) countries have introduced important reforms into their public
accounting systems following New Public Management (NPM) perspectives and principles. These reforms have a two-fold objective: To improve
public service management and to increase the transparency and accountability of governments (Caperchione, 2006; Chan & Xiaoyue, 2002; Lapsley,
1999). Reforms of government accounting generally focus on implementing
accrual-based information systems, conforming to generally accepted accounting principles (GAAP), and progressively bringing procedures in-line
with the business accounting model (Hood, 1995; Lüder & Jones, 2003;
OECD, 2002). Australia, New Zealand and the UK are leaders in the initiative for the convergence of the two types of accounting systems (Barton,
2009; Broadbent & Guthrie, 2008; Ryan et al., 2007).
As Lapsley, Mussari and Paulsson (2009) point out, in the world of public
sector accounting, the adoption of accrual accounting is self-evident and
has been encouraged by the recommendations of international organizations such as the International Public Sector Accounting Standards Board
(IPSASB) and the OECD. However, the literature shows that there are many
differences between countries (Adam, Mussari & Jones, 2011; Pina, Torres &
Yetano, 2009) and that, in the implementation of accrual accounting, many
problems and ambiguities arise (Arnaboldi & Lapsley, 2009). This paper
focuses on one of these ambiguities: The duality of financial and budgetary accounting systems, which is a barrier
to implementing accrual accounting in practice.
In most continental European countries, budgets are based
on cash or modified cash methods so that cash-based and
accrual-based financial information coexist. This is the
case, for example, in Italy, France, Portugal, Belgium and
Spain. Even though a reconciliation of these two types of
information is sometimes required by legal standards, the
use of different recognition criteria for budgets and for financial statements can be confusing. This is why accrual
statements have a secondary role in most countries where
the two recognition bases coexist. Budgetary information
drives the management of public entities because legal requirements refer only to this information.
Guthrie (1998) points out that this duality can cause
confusion for managers because they receive conflicting
signals from two parallel sets of accounting figures. On
the other hand, Pina et al. (2009) maintain that the dual
system implemented in continental European countries
may be one reason for the dissemination of accrual accounting, because it does not require the introduction of
deep organizational changes and answers citizens’ democratic demands for higher responsiveness, transparency
This paper aims to analyze the extent to which there has
been a real implementation of accrual accounting in a
dual system, taking into account the effect on the operating statement in Spanish local governments. In Spain,
accrual-based financial statements have been prepared
since 1992, but budgets are still based on the modified
cash basis. As a consequence of this duality, even when
public managers have to prepare both types of information—and they do—for management and legal purposes,
priority is given to budgetary figures and reports (Brusca
& Montesinos, 2011) because the parliamentary debate is
based on these figures. In fact, accrual-based financial figures are only used for accountability purposes.
This study contributes to the extensive literature about
implementing accrual accounting and the problems and
ambiguities it causes. It aims to show, through an empirical study, that the implementation of accrual accounting
has many problems in practice and that although entities always try to follow the accounting standards from a
formal point of view, the implementation may not be effective. The paper offers a two-fold extension of previous
accounting literature. First, it focuses on an ambiguity that
has received little attention in the literature and, second,
it offers an empirical perspective of the implementation
and the problems that it can have in practice. It can be
considered as a study of the outcomes of a reform process for Spanish local governments that has already taken
nearly 20 years, and complements others papers that demonstrate problems of accrual accounting in other countries,
such as those of Arnaboldi and Lapsley (2009) for the UK,
or Anessi-Pessina and Steccolini (2007) for Italy.
The theoretical bases of this research—that is, the assumptions to be verified, the variables considered in the empirical analysis, and the design of the model which represents
their functional relations—are built on the logic of the accounting model: How economic or accrual and budgetary
results are determined, and the main items that constitute
the differences between both results.
The theoretical background of accounting behavior in
public organizations, especially agency and institutional
theories, has been a useful tool for explaining and analyzing the variables and circumstances that boost the
adoption of accrual accounting rules and practices in
Finally, in order to obtain useful research results, we have
taken into consideration, for the period and variables of
the study, existing previous analyses for other countries
such as Italy. This enables an international comparison of
the main findings of the paper.
The results show that the implementation of the accrual
system in local entities has been more formal than real.
The problems that remain unresolved are generally recognized, such as the treatment of asset depreciation. The
paper enriches the literature about the problems of accrual
accounting, showing that although entities may wish to
comply with the standards, managers are not necessarily
interested in the information obtained through the accrual
method and such information is little used in practice.
The rest of the paper is organized into five sections. First
we review the literature and the state of the art. We look
at the use of accrual and cash bases in accounting and
budgeting. What benefits and risks can the adoption of accrual imply, especially when it coexists with the cash basis?
We go on to describe the situation of the Spanish local
government system, referring particularly to the accrualbased statement of revenues and expenses, the statement
of budget execution, and the conceptual differences between them. The fourth section provides a description of
the empirical research: Objectives, sample and methodology. The results are presented in the fifth section. A final
section draws some conclusions and discusses the implications for accounting practitioners and researchers.
r e v. i n n ova r vo l . 2 4 , n úm . 5 4 , o ct ub r e - di ci e m b re 2014
re v i s ta
The modernization of governmental accounting reflects
the common direction of reforms towards the implementation of accrual financial reporting in conformity with
GAAP, using the business accounting model as a reference.
The actions taken include accrual accounting reforms, in
some cases accompanied by accrual budgeting, performance management systems, results-oriented and performance budgeting, and performance benchmarking.
and the information can be the main vehicle for accountability to external users. In the public sector, however, the
relationships between principals and agents are complex
and open-ended or not explicitly defined, and are thus not
easily monitored (Broadbent & Laughlin, 2003). Each individual is presumed to be motivated by self-interest and will
not use the information unless it somehow contributes to
their own economic wellbeing. As a consequence, agents
will need reasons to use the information. From the stakeholders’ perspective, Zimmerman (1977) points out some
problems that can arise in the control of the agent by the
principal in this case. Because of the small probability of a
voter influencing an election, each voter will incur a small
Within accrual accounting, the main objectives of financial
reporting are to provide information useful for accountability and decision-making purposes. From a theoretical
perspective, some theories can be used in order to explain
the introduction of accrual accounting and reporting in
local government. For example, according to agency theory,
local government information can be used for monitoring
and linking managerial action with principals (citizens),
According to institutional theory, local governments may
introduce accrual accounting and reporting to meet external requirements and to provide an impression of rationality and efficiency, seeking legitimacy, but will not use
the system to improve internal performance (Brignall &
Modell, 2000; Modell, 2001, 2004; Scott, 1987). When the
process of accrual basis adoption is assessed in the light of
the institutional approach, a “decoupling” can be found, as
Implementation of Accrual Accounting
in Governments with a Dual System
re v. i n n ova r vol . 2 4, nú m . 5 4, oc tu br e-d ic i e m b r e 2 014
accrual and cash-based information still co-exist in financial reporting by public entities (Archel, Husillos & Spence,
2011). As a result of this circumstance, an interesting discussion can be opened from a theoretical perspective, with
the first question focused on identifying where the dominant discourse is now really located: Is it accruals, supported by academics, big firms and professional bodies,
or is it cash-based reporting, supported by traditional behavior and practices?
Accrual accounting is an international tendency and most
governments around the world see this as an objective for
their accounting systems, although there are differences in
the implementation process between countries (Adam et
al., 2011; Lüder & Jones, 2003; Pina et al., 2009). Lapsley
et al. (2009) argue that the adoption has been self-evident because of the pressures on governments to demonstrate their effectiveness and efficiency and to discharge
their responsibilities, bearing in mind that accrual financial
statements can be considered as a tool to this end. The
International Public Sector Accounting Standards Board
(IPSASB) has had an important role in these processes, especially in connection with the issue of the International
Public Sector Accounting Standards (IPSASs) based on the
However, there are some arguments in the literature that
indicate the need to be careful when extending business
accounting to public sector entities, to prevent it leading
to ‘perverse outcomes’ (Broadbent & Guthrie, 2008;
Christiaens & Rommel 2008; Ellwood, 2003; Ellwood &
Newberry 2007; Federation des Experts Comptables Européens, 2003; Guthrie, 1998; Lapsley, 2009; Lapsley et al.
2009; Newberry, 2007). Another trend even questions the
advisability of introducing accrual accounting in the public
sector, arguing that the benefits claimed are not being verified in practice, while the costs of shifting to accrual accounting are accepted as being substantial (Wynne, 2008).
From a practical perspective, the implementation of accrual accounting systems overcomes many conflicts and
ambiguities, as pointed out by Arnaboldi and Lapsley
(2009). The authors highlighted the recognition and valuation of assets or the non-neutrality of accrual accounting
as examples. Lapsley et al. (2009) identified similar problems relating to heritage assets, infrastructure assets, community assets, and capital maintenance and erosion.
Furthermore, many authors argue that the adoption of full
accrual accounting has expanded the opportunities available to governments to utilize accounting measurement
discretion for the purposes of managing reported financial results (Stalebrink, 2007). For example, Vinnari and
Nasi (2008) consider that the heterogeneity of accrual
accounting applications may lead to creative accounting
solutions, especially in the public sector context, with the
consequence that accounting information is not sufficiently transparent, users may be misled, and accounting
does not properly fulfill its accountability functions.
The literature shows that relevant questions still remain
unanswered, such as the recognition and valuation of infrastructure and heritage assets (Adam et al., 2011; Christiaens, 2004; Jorge, Carvalho & Fernandes, 2007), and the
usefulness of accrual financial statements has not been
fully demonstrated (Arnaboldi & Lapsley, 2009; Jones &
Pendlebury, 2004; Pilcher & Dean, 2009).
One additional problem that persists in many European
continental countries is the duality of budgetary and financial reporting systems, which can lead to a degree of
ambivalence about implementing accrual accounting and
also using accrual financial statements.
Coordination Between Accrual and Budgetary
Systems: International Experiences
Australia, New Zealand and the UK use accrual accounting
both for financial reporting and for budgets. In the Netherlands, local governments are also using the modified accrual basis to prepare their budgets (Van der Hock, 2005).
The same situation can be found in most German local
governments, where important innovations are being introduced with resource-based and output-oriented budgeting
(Lüder, 2008; Ridder, Bruns & Spier, 2005), although at the
moment caution prevails, especially in the Federal Government (Jones & Lüder, 2011). In Denmark, the introduction
of accrual accounting in budgets was tried out in several
municipalities in 2006-2007 and there is now a general
process of change involving the adoption of the accrual
basis in the budget. Similarly, in Finla ...
Purchase answer to see full