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Abstract

The public sector has undergone a series of reforms, reforms that have had a great influence on the development of public accounting and reporting system. We consider that the most important issue that has resulted from these reforms refers to the introduction of consolidated financial reporting in the public sector. The public sector consolidated financial statements represent a challenging topic of worldwide research and also, became a debated issue both for international regulatory body (IPSASB) and for governments. However, the objective of this article is to analyze if there is a need for consolidated financial statements in the public sector and to outline the activity of the international regulatory bodies regarding the issuance of specific standards regarding this current topic. So as to reach this main objective of the research we explore the scientific literature regarding this issue and we followed the steps taken by regulators in the development of standards regarding consolidated financial statements that can be globally used. This theoretical paper emphasizes the importance of the introduction and presentation of consolidated financial statements by public sector entities and reveals the link between these types of reports prepared by entities from private sector and public one. The main conclusion of this conceptual paper is that public sector entities should prepare these consolidated reports and the regulators and governments play an important role in taking and introducing these practices into the public sector. So, we believe that there can be no excellence in accounting without excellence in reporting or vice versa.
Procedia Economics and Finance 15 ( 2014 ) 1289 – 1296
Available online at www.sciencedirect.com
2212-5671 © 2014 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/3.0/).
Selection and peer-review under responsibility of the Emerging Markets Queries in Finance and Business local organization
doi: 10.1016/S2212-5671(14)00590-5
ScienceDirect
Emerging Markets Queries in Finance and Business
The need for public sector consolidated financial statements
Andreea Cîrsteaa,*
aBabes-Bolyai University, Teodor Mihali 58-60, 400591 Cluj-Napoca, Romania
Abstract
The public sector has undergone a series of reforms, reforms that have had a great influence on the development of public
accounting and reporting system. We consider that the most important issue that has resulted from these reforms refers to
the introduction of consolidated financial reporting in the public sector. The public sector consolidated financial statements
represent a challenging topic of worldwide research and also, became a debated issue both for international regulatory body
(IPSASB) and for governments. However, the objective of this article is to analyze if there is a need for consolidated
financial statements in the public sector and to outline the activity of the international regulatory bodies regarding the
issuance of specific standards regarding this current topic. So as to reach this main objective of the research we explore the
scientific literature regarding this issue and we followed the steps taken by regulators in the development of standards
regarding consolidated financial statements that can be globally used. This theoretical paper emphasizes the importance of
the introduction and presentation of consolidated financial statements by public sector entities and reveals the link between
these types of reports prepared by entities from private sector and public one. The main conclusion of this conceptual paper
is that public sector entities should prepare these consolidated reports and the regulators and governments play an important
role in taking and introducing these practices into the public sector. So, we believe that there can be no excellence in
accounting without excellence in reporting or vice versa.
© 2013 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of Emerging
Markets Queries in Finance and Business local organization
Keywords: public sector, consolidated financial statements, literature review, accounting standards, private sector
* Corresponding author. Tel.: +4-074-227-6361; fax: +0-000-000-0000 .
E-mail address: andreseverin@yahoo.com.
© 2014 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/3.0/).
Selection and peer-review under responsibility of the Emerging Markets Queries in Finance and Business local organization
1290 Andreea Cîrstea / Procedia Economics and Finance 15 ( 2014 ) 1289 – 1296
1. Introduction
Throughout recent years, the public sector was marked by a series of reforms that had a big influence on the
accounting and reporting system. It was mainly due to an increasing internationalization of capital markets
based on the background of a rapid development of economic globalization (Nistor, Stefanescu, 2012). The
most important reform that took place in the public sector is the movement from cash-based accounting system
to the accrual one. All these reforms could be seen as a revolution that occurred in the public sector
organizations introduced by the NPM, fact also sustained by the researchers such as: Guthrie et al. (1998),
Guthrie and Humphrey (1996), Pallot (1992), Jones et al. (2001), Grossi and Gardini (2012). The introduction
of accrual accounting in public sector entities actually represents a first step towards the introduction of a new
reporting system in the public sector, namely the consolidated reporting system. Although, this consolidated
reporting system of public sector is not yet globally widespread, both governments and regulatory bodies in
many countries make sustained efforts for the preparation and presentation of some consolidated reports at the
public sector entities level. However, the opinions concerning the introduction of accrual accounting and the
presentation of such reports in the public sector are both pros and cons. Some researchers believe that copying
private sector practices and their application in the public sector is not exactly ideal, claiming that the
objectives of the public sector, that differ from those of the private sector, should always be taken into account.
Moreover, the direction towards which the accounting system in the public sector is going has been questioned,
Chan (2003) asking himself if it is really necessary for governments to imitate without a critical sense the
practices of the private sector. Also, Christiaens (2002) argues that the introduction of private sector methods
and the lack of a conceptual framework for governmental accounting leads to the arrising of a number of
problems rather than solving them. However, although there are some retentions regarding the introduction of
these practices, we believe that they are also necessary in the public sector because the whole public sector
might be considered as a group of companies, and therefore a reporting system that gives us an overview of the
public sector as a whole is needed.
Therefore, the purpose of this article is to investigate whether in the public sector the adoption and
presentation of the consolidated financial statements (CFS) are more related to the information needs in the
public sector. This research also focuses on the advantages and disadvantages of introducing and presenting the
consolidated financial statements in public sector. Basing on this background, this paper will now develop as
follows. After a brief overview of the literature on the public sector consolidated financial statements, section
two highlights the main changes that determined the introduction and presentation of CFS in the public sector.
Then, part three presents the activity of the international regulatory bodies regarding the issuance of specific
standards regarding public sector consolidated financial statements, while section four summarizes the findings
and presents the limits of the research, and the future prospect of research, too.
2. Literature review
The literature regarding the private sector consolidated financial statements is rather vast, which cannot be
said about the literature regarding the public sector consolidated financial statements. Therefore, the public
sector consolidated financial statements literature is sparse, and this lack of works about this topic is due to the
novelty aspect of this issue in the public sector. So, if we compare the public and private sector consolidated
reporting literature, it is undoubted that the main contributions to the concept of consolidation and to the
development of this reporting system were brought by the private sector literature.
Although we believe that there are some differences between the two sectors, public and private, and
between their goals, too, these practices that are applied in the private sector can be taken over by the public
sector, as a financial reporting system.
Some relevant contributions to the development of the literature on the consolidated financial statements in
the public sector were brought by some authors, namely: Grossi and Pepe (2008), Grossi (2008, 2009), Walker
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Andreea Cîrstea / Procedia Economics and Finance 15 ( 2014 ) 1289 – 1296
(2009, 2011), Wise (2010), Christiaens, Rommel and Van Cauwenberge (2008), Bergmann and Bietenhader
(2008), Tagesson (2008).
Grossi and Pepe (2008) try to underline the reasons which resulted in the appearance of consolidated reports
in the public sector, the characteristics of consolidation, but also the similarities and differences between
accounting principles and standards used for the preparation of consolidated financial statements in the public
sector in 7 countries.
Walker (2009), believing in the benefits of implementing the consolidated financial statements in the public
sector, from a theoretical perspective, highlighted the practices of consolidated financial statements in the
public sector (especially in Australia), considering in this context, the general case of presenting consolidated
financial statements covering the entire government and public administration. Walker (2011) also tried to
identify the problems that occurred in the practice from Australia in the last two decades since 1988, and he
suggested some ways to solve these problems by referring to the decisions that might be taken in routine
circumstances by the users of these reports.
Wise (2010) examined the current literature related to the antecedents to public sector accountability
performance by introducing a new variable, namely preparer-commanders’ opinions about the usefulness of
whole of government consolidated financial reporting and tried to find an answer to the question of whether the
consolidated financial information is useful for government resource allocation decisions, not only for decision-
making purposes.
Christiaens, Rommel and Van Cauwenberge (2008) examined the whole of government accounting
framework as developed by IPSAS, trying to find answer to the following questions: What will be the
consequences of applying IPSAS as a conceptual framework for Whole of Government Accounts? What type
of accounting information will result from the application of IPSAS concept?
Grossi (2008, 2009) aimed at analyzing the impact and the possible effect on the consolidated financial
reporting accounting and reporting system of Italian local government and he considers that CFR is a possible
stimulus for the full implementation of accrual accounting and reporting. Through a complex study, Grossi
identified the most common problems, obstacles to consolidated financial statements implementation at the
local level, namely:
lack of homogeneity of the accounting of local administrations and municipal companies;
lack of expertise and know-how (insufficient knowledge about the consolidated reports);
lack of staff;
no obligation to completion;
difficulties in obtaining necessary data and documents over time;
limited transparency of annual reports of the local government; and
lack of appropriate software.
Bergmann and Bietenhader (2008) studied, using a survey, the current situation in Switzerland regarding the
consolidated financial reporting in public sector (the differences in practice and views on the consolidation
introduction or not). Among the reasons for not presenting such cases they mentioned: the lack of interest or
political pressure; the high costs of implementation; the lack of legal obligations; and technical problems.
Through a theoretical research involving a literature review and the expression of personal views Tagesson
(2008) argues that consolidated reporting is needed in the public sector as a whole, but also for local
administrations, and in the same time, he shows his support for proportionate consolidation in accordance with
the method of acquisition.
All these studies represent a key factor in the development of the literature regarding this issue, arousing the
interest for this topic to other researchers and practitioners.
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3. Consolidated financial statements – a real need for public sector
The introduction and presentation of consolidated reports in the public sector are closely connected with the
adoption of an accrual-based accounting system, idea also approved by some researchers (Guthrie, 1998). So,
recognizing the importance of consolidated financial statements we will concentrate on the need of this
reporting system for the public sector and on the changes that determined the introduction of such a reporting
system. Lately, this issue is in the focus of many governments and regulatory bodies, and therefore many
countries starting with the implementation of accrual based accounting system in the public sector began to
prepare consolidated financial statements (Luder and Jones, 2003; Stalebrink and Sacco, 2006). The importance
given to this subject is based on public sector need for a new financial reporting system which is able to
provide a more comprehensive and accurate image over the entire public sector as a single entity. It is desired,
and it also is also needed a reporting system that can provide more information to users at local, regional as
well as central level. The development and growth of decentralized entities determined a series of debates about
the need for consolidated financial reporting (Wise, 2006; Newberry, 2007) and it can be considered one of the
main causes for introducing consolidated financial statements in the public sector. Given that public sector
accounting lately suffered a series of significant changes, changes that led to the introduction of a new financial
reporting system, namely the consolidated financial statements, we appreciate that these reforms represent
some benefits that the public sector can take advantage. The changes that have had an important impact on the
public sector refer to the New Public Management, the transition from an accrual to cash accounting, the
imitation of private sector practices and the decentralization.
All these reforms that took place in the public sector do nothing but to arouse some controversies about the
direction towards which goes the entire public accounting system. Thus, Barton (1999) doubts on the
introduction of accrual accounting in the public sector, and this because of the significant differences between
the two sectors, differences regarding each sector objectives, and resource allocation system. Also, Benito et al.
(2007) underlined the necessity of not ignoring the peculiarities of the public sector, and the way the public
accounting system has to adapt to the specific information needs of the sphere, while Chan (2003) tried to
answer the question whether it is really necessary for governments to imitate without a critical sense the private
sector practices. So, in the prior literature we can observe that researchers are quite apprehensive regarding the
application of accrual accounting, and regarding the imitation of practices from the private sector. In fact, the
transition from cash accounting to accrual accounting requires not only a change in the accounting system, but
also a change in conception (OECD, 2002). All these changes that have revolutionized the public sector
actually caused the introduction of consolidated reporting in the public sector, reports which can provide an
overall image over the financial position and economic obligations of public institutions at local, regional and
central level.
The financial statements can be considered as the main vehicle of information available for all users
(Muniain, 2003). Whether discussing the public or private interest, the accountability is a requirement of New
Public Management (NPM) postulates. The financial statements are considered a key accountability tool for
different users (Nistor, Stefanescu, 2012), even if we talk about individual financial statements or consolidated
financial ones.
The accrual accounting is considered to offer more useful information and to improve the government’s
transparency, accountability and performance evaluation. Although there are a lot of pros on the preparation
and presentation of consolidated financial statements in the public sector, there are also opinions that consider
that these consolidated reporting are not an example of best practices in government accounting. So, Milley
(2002) noted that it is very difficult to see any value adds from the whole of government financial report, while
Chow et al (2007) doubts about the value of a consolidation project in the public sector, highlighting the
problems faced by the private sector entities regarding the consolidating accounting, the difficulties
encountered in adapting consolidation accounting techniques for the public sector and the value of the accrual
accounting in the public sector context. Furthermore, Montesinos and Brusca (2008) sustain that the
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preparation of consolidated financial statements is a very difficult task which may need a long time, but it
contributes to better understanding the government’s financial position.
Consolidated financial reports are seen as one of the most significant accounting techniques of the public
sector accounting reforms (Chan, 2003; Chow et al., 2007; Walker, 2009), and taking into consideration this
aspect many governments consider that there are sufficient reasons for moving as quickly as possible to the
preparation and presentation of such reports. The reasons which led to the development of these reports refer to
the belief that public finances have become more transparent and financial statements of the whole public
sector have provided a more real image on the financial position and performance. These consolidated reports
can actually meet the needs of both internal and external accountability, but they also represent a feedback in
the decision making process (Chow et al., 2007, Benito et al., 2007). The main role of consolidated financial
statements is to meet the needs of a wider variety of users and to simplify the financial reporting system in the
public sector.
At the same time, we can emphasize other arguments in favour of the preparation of consolidated financial
statements in the public sector, such as: the ability of these reports to provide a more complex overview of the
position, performance and state of the public sector as a whole, which cannot be provided by the individual
financial statements of each entity forming the group and the ability of these reports to provide greater
transparency and accountability regarding the public sector. As we mentioned above, we focused our attention
on some of the advantages resulting from the preparation and presentation of consolidated reports. These
advantages refer to the fact that the information provided to users is more transparent; we can make
comparisons between countries; these reports are much easier to interpret and manage to create an overall
picture of the economic condition of the entire public sector.
Simultaneously, the preparation of public sector consolidated financial statements causes a series of
problems that should be over passed, namely: the lack of homogeneity of the financial statements prepared by
controlled entities, the public sector standards must be different from those for the private one, the lack of
professionals and the lack of the obligation for presenting consolidated reports.
4. IPSASB – an important actor in the development of public sector consolidated financial statements
The IPSASB is an independent standard-setting board which plays an important role regarding the
regulation of public sector entities. The objective of IPSASB is to develop high-quality international public
sector accounting standards for use by public sector entities around the world for preparation of general
purpose financial statements. A number of 32 standards for public sector were issued by IPSASB, whose
purpose is to improve the quality and transparency of public sector financial reporting. Therewith, IPSASB
sustains that the adoption of IPSAS by governments will improve the transparency, quality and comparability
of financial information reported by public sector entities around the world. The Committee and other
important international organizations encourage both the adoption of IPSAS and the harmonization of national
requirements with these international referentials. Although, the IPSAS are based on the International
Accounting Standards, they are adopted to the needs of the public sector. IPSAS unlike IFRSs are not
mandatory for public sector entities, but they were applied by many states. So, one thing is certain, namely
international accounting standards become an international accounting culture (Whittington, 2008). Regarding
the standards on the consolidated financial statements, IPSASB issued three standards, namely:
IPSAS 6 Consolidated Financial Statements and Accounting for Controlled Entities, requires all controlling
entities to prepare consolidated financial statements which consolidate all controlled entities on a line by line
basis. A detailed explanation of the concept of control as it applies in the public sector and a brief guidance
on determining whether control exists for financial reporting purposes are also included in this standard.
IPSAS 7 Accounting for Investments in Associates, asks all investments in associate to be accounted for in
the consolidated financial statements using the equity method of accounting, except when the investment is
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acquired and held exclusively with a view to its disposal in the near future and thus, the cost method is
required.
IPSAS 8 Financial Reporting of Interests in Joint Ventures, requires proportionate consolidation to be
adopted as the benchmark treatment for accounting for such joint ventures entered into by public sector
entities. Also the equity method is allowed as an alternative treatment for accounting joint ventures.
Given that the main objective of the IPSASB is to maintain alignment with IFRSs for its standards that are
based on an underlying IFRS, and that in May 2011, the IASB issued the following standards for which the
IPSASB has equivalent standards: IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements;
IFRS 12, Disclosure of Interests in Other Entities; IAS 27 (revised 2011), Separate Financial Statements;
and IAS 28 (revised 2011), Investments in Associates and Joint Ventures, it is time for revising IPSAS 6-8.
Therefore, some projects have been initiated by IPSASB in order to examine the existing standards and the
standards issued by IASB and to adapt them to the specificity of the public sector. One of the projects on the
agenda refers to the revision of IPSAS 6-8, standards underlying the preparation and presentation of
consolidated financial statements in public sector. So, in June 2011 a Project Brief named Revision of IPSASs
6-8 was approved by IPSASB and this project has as main objectives to:
Revise IPSAS 6 - Consolidated and Separate Financial Statements and relocate guidance relating to
consolidated financial statements in a separate standard;
Revise IPSAS 7 - Investments in Associates;
Revise IPSAS 8 - Interests in Joint Ventures; and
Locate all disclosures relating to interests in other entities in a separate standard.
However, professional regulatory bodies, and governments are the main organisms that contribute to the
implementation and development of these consolidated reports in the public sector. This importance given to
the preparation of consolidated financial statements can be seen from the importance given to projects on this
the issue, and the experience of countries that have already introduced these reports.
5. Conclusions
Along with the reforms that have happened lately in the public sector the question that aroused is "Is there a
need for consolidated financial statements in the public sector?". To find an answer to this question, we must
first answer some other questions such as: Given that public and private sectors are based on different
objectives, the private sector practices regarding the preparation and presentation of consolidated financial
statements can be copied in the public sector?, Can these differences be overcome and is it possible for us to
apply the same standards for both sectors?. These reforms are part of a wider global recognition of the
necessity to improve financial management and the quality of financial information among public and private
sector organizations. Given that the issue of consolidated financial statements in the public sector is a topic at
the beginning of its development, it can be seen that the literature is not very extensive, rich. We can observe
that professional regulatory bodies, and governments play a very important role in the implementation and
development of these consolidated reporting in the public sector. The consolidated financial statements are
useful instruments which are able to provide a clear and overall image of the whole public sector to both
internal and external users. Although public sector consolidated financial statements are produced by a reduced
number of countries, they began to play a special role in public sector accounting, and so the governments of
many countries believe that there are many reasons to introduce and prepare whole of government financial
statements as soon as possible. Due to the need of public sector for an increasing financial and political
accountability, consolidated financial statements is the answer to fulfill this need.
The purpose of financial statements consists of the presentation of a true and fair view of an entity’s
financial performance, financial position, equity and cash flows and so, the consolidated reports represent a
significant way to demonstrate how the public sector, both at individual entity and whole-of-government level,
meets its financial management responsibilities. The presentation of financial statements that have the accrual
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Andreea Cîrstea / Procedia Economics and Finance 15 ( 2014 ) 1289 – 1296
accounting at their basis is considered as providing more useful information to users of public sector than cash
accounting. As mentioned above, IPSAS are based on private sector standards, standards that are based on the
decision-making approach, but they are also adapted to the specificity of the public sector. It can be seen a
growing interest from both practitioners and researchers for the adoption of a single set of standards for all the
public sector entities and for the implementation of a new financial reporting system in the public sector. All
these above mentioned facilitate the comparability between countries and provide a more transparent picture
regarding the status and the direction undertaken by the governments of different countries.
The reform determined important changes in the accounting and financial reporting system, changes that
refer to the introduction of accrual-based accounting, moving from cash-based accounting and the presentation
of consolidated financial statements. Walker (2009) states that the preparation of a unique set of consolidated
statements comprising the whole of government is supported worldwide, idea that we totally agree. Although
there are some difficulties in developing public sector consolidated financial statements, we conclude that these
reports improve and bring value to the public sector reporting system regarding the financial performance and
thus allow increased the accountability on public resources. Certainly, the experience of countries that have
already implemented these practices will be copied by other states, which make sustained efforts in order to
introduce these is in a short time.
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... The public-sector consolidated financial statements represent a challenging topic of worldwide research and has also become a debated issue both for the international regulatory body (IPSASB) and for governments (Cîrstea, 2014). ...
... However, CFS is a relatively recent development within the public sector, and still, there are only a limited number of countries that have introduced CFS in the public sector at the central and local level (Grossi and Pepe, 2009). Although few countries have implemented the CFS (Cîrstea, 2014), independent bodies and experts are able to offer the necessary input to carry out the changes; for example, the International Public Sector Accounting Standards Board (IPSASB). In some countries (e.g. ...
... In other words, what are the main benefits that CFS provide? Cîrstea (2014) recognizes that CFS can bring many advantages to the public sector. Specifically, they increase the transparency and accountability of the government and public property agencies. ...
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... Consolidated Reporting of Government finance has recently become a very popular subject, with most of the discussions being focused on regulatory perspectives and reporting performance improvement. D. Matis and A. Cîrstea [14] point that the public sector consolidated financial statements might be considered a topic of current interest that is gradually developing. This issue of consolidated financial statements in the public sector has been of major interest lately even for researchers from different academic areas. ...
... This issue of consolidated financial statements in the public sector has been of major interest lately even for researchers from different academic areas. As the topic of consolidated financial statements in the public sector is going to be implemented in different countries and it is under the process of developing in other countries, from the information we have now there is no study that might have analyzed the specialized literature in the field of consolidated financial statements in the public sector [14]. ...
... Cirstea, A. considera que existen algunas diferencias entre el sector privado y público, y entre sus objetivos, y que las prácticas que son aplicadas en el sector privado pueden ser tomadas por el sector público, para reportar la información financiera (Cîrstea, 2014). ...
... Indeed, when they are correctly interpreted and applied, IPSAS provide information users with a clear and more accurate view of PSEs' financial position and financial performance and thereby help to improve their decision-making. Furthermore, IPSAS implementation permits the comparability between different countries around the world, providing a reliable picture of each government's status and direction (Cîrstea, 2014). It also enhances the credibility of government financial reporting by reducing errors and fraud, facilitating controls and ensuring consistency in the financial statements (ACCA, 2017;Deloitte, 2019). ...
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Purpose The purpose of this paper is to assess the extent of central government financial information disclosed in accordance with accrual-based International Public Sector Accounting Standards (IPSAS) and to investigate the environmental factors affecting this level, drawing on the contingency theory framework. Design/methodology/approach This study uses a self-constructed checklist of 116 items to measure the IPSAS disclosure level by 100 public sector entities from different countries across the globe during the period 2015–2017. Panel regressions have been used. Findings The results show significant differences in compliance levels with IPSAS disclosures across nations. They reveal a positive influence of the degree of government openness (political culture), quality of public administration and management and prior experience with International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) in the public sector on this level, whereas government financial condition is a nonsignificant factor. Practical implications The research findings are potentially relevant to academics, researchers, practitioners, standard-setters and government policymakers. By examining the influencing factors of IPSAS disclosure level, this paper paves the way for further investigation of this topic with a more extensive set of micro and macroeconomic variables whether at the central or local government level in other jurisdictions Originality/value This study provides new insights into the assessment of the transparency and completeness of government accrual-based financial statements. Based on the contingency theory, this paper is the first to empirically investigate the factors affecting the level of disclosure under accrual-based IPSAS by central government entities in a cross-country analysis.
... As highlighted in literature, the introduction of methods and reporting used in the private sector in the public sector is one of the postulates of NPM. In particular, the consolidated financial statement is seen as one of the most significant reports of the public sector accounting reform (Cirstea, 2014;Chan, 2003;Chow et al., 2007). In this sense the financial control criteria has been translated from private to public sector consolidated report. ...
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Eurostat and EPSAS Expert Working Group are engaged to outline the suitability of International Public Sector Accounting Standards (IPSAS) in the process of the public sector accounting harmonisation. Part of the process is referred to the scope of the consolidated financial statements and the possible criteria to identify the public sector group's reporting entity, that is the boundaries of the group. This last point is of relevance as recalled by the recent EPSAS Conceptual Framework Reflection Paper, under which public sector reporting entities should provide financial report based on decision-making and accountability considerations. The chapter aims to contribute to the debate on consolidated financial statements both from the theoretical and empirical points of view.
... This can have a positive effect on the bureaucratic culture of public administrations, as well as helping co-ordination and integration strategies after the inevitable fragmentation involved in NPM (Christensen & Laegreid, 2007). As concluded by Cîrstea (2014Cîrstea ( , p. 1295, CFS 'improve and bring value to the public sector reporting system regarding the financial performance and thus allow increased the accountability on public resources'. ...
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Portugal and Spain have reformed their national standards to adapt them to the International Public Sector Accounting Standards (IPSAS). This paper explains the process of implementing the IPSAS for consolidated reporting in the two countries and the advantages and disadvantages which have emerged. The results highlight the role of the IPSAS in improving the quality and use of consolidated financial statements (CFS) and will be of interest to other countries that are intending to implement the IPSAS.
... En este sentido, las reformas de la contabilidad pública (particularmente por partida doble e International Public Sector Accounting Standards, Ipsas) han buscado mejorar los discursos de transparencia, calidad y comparabilidad de la información nanciera presentada por las entidades públicas en el mundo contemporáneo (Cîrstea, 2014). Este tipo de contabilidad, que implica un cálculo del espacio y el tiempo (histórico), selecciona aquello que interesa hacer evidente en el sistema capitalista y excluye lo que no le es útil informar. ...
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... The government is implementing accrual-based SAP with the aim of improving the quality of financial information presentation from the government, both in terms of transparency and accountability (Beest, Braam, & Boelens, 2009;Cîrstea, 2014;Pina, Ivanov, & Torres, 2016;Surepno, 2015) The implementation of accrual-based SAP, which is imprinted in Government Regulation 71 of 2010, has consequences for compulsory and enforceable because of the true nature of legislation. The implementation of accrual accounting is a mandatory behaviour, which means that the government apparatus must apply accrual accounting in the management of state finances (Afdalia, Pontoh, dan Kartini, 2014;Suhendro, Sylvia Veronica, and Nauli, 2015). ...
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This study aims to understand an accounting system change of a local government in Indonesia. This study is a qualitative and interpretive case study. Data collection is done through interviews of key actors who were involved in the process of accrual accounting institutionalization and documentation.The result of this study shows that the institutional isomorphism occurs on the implementation of accrual accounting at the local government. Coercive isomorphism are shown by the finding that the adoption of accrual accounting was affected by the central government, namely by issuing the regulations such as Government Regulation no. 71 of 2010 and Regulation of the Minister of Home Affairs no.64 of 2013. Normative isomorphism was found on the findings of consultant and academic involvement in the implementation of accrual accounting. Mimetic isomorphism was found when the local government conducted benchmarking to the other local governments that became the best practice in the accrual accounting implementation in Indonesia. In reality these three forms of institutional mechanism were interact each other, then contribute in influencing the practices and the actors during the accrual accounting institutionalization process in the local government.
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This paper attempts to evaluate the trade investment strategies and its impact on financial performance. To meet objective of the study data were collected from annual reports of the company and inserted into excel worksheet. The collected data were analyzed using accounting ratios. The statistical tools Mean, Standard deviation, and covariance were also used and these results were presented in tabular form to get better understanding of results. The study found that associates and joint ventures were generating good amount of return, and overall return on investment is double than the investment at cost which shows good investment strategies adopted by company from return viewpoint. The study concludes that the long term fundamental position of company is sound alone and that also maintained by trade investments, but performance and operational efficiency is not up to the mark in alone, so company had invested in such a way that increases overall performance and operational efficiency of business in consolidation.
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The purpose of our paper is to identify the level of accounting harmonization in Romania for both public and banking sector with international referential (IPSAS and IFRS) focusing on financial reporting requirements, by providing both vertical and horizontal analysis beginning with the year 2001 up to present. Unlike prior studies conducted on the same topic, which measure the general accounting harmonization for private sector, our paper is focused on specific economic fields – public vs. banking sector – thus providing a different approach of accounting harmonization. The research methodology used for achieving our goal was based on both static and dynamic analysis of the degree of similarity and dissimilitude between national and international accounting frameworks, by using appropriate statistical tools (e.g. Euclidian distance, Jaccard and Spearman coefficients). Our results reveal continuous improvements in accounting regulations in both sectors along time, but banking sector was always much closer to international standards than the public one. Considering the controversies between cash and accrual basis accounting which affected harmonization in public sector, as well as the latest challenges for banking sector due to IFRS adoption, we appreciate the overview image of accounting development in Romania provided by our empirical results as valuable for a wide range of users: academics, researchers, practitioners for both public and banking sector.
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The publication of International Public Sector Accounting Standards (IPSASs) in the field of governmental financial reporting has raised the necessity for a wideranging discussion about the harmonization of public sector accounting systems. The article has a double aim: to show the adoption or not of IPSASs in local and central government and to analyse the level of convergence between the different countries studied. In order to achieve these objectives, we carried out an empirical study, whose results allow us to show that while some accounting systems are very close to the IPSASs model, others are completely different. Nevertheless, we think that this could be a starting point and that in the near future countries could tend towards IPSASs more and more, which may be the most probable way to reach convergence accounting systems between them.
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The objective in this study is to examine the existing literature regarding the antecedents to public sector accountability performance by including a new variable: preparer-commanders’ beliefs about the usefulness of whole-of-government consolidated financial reporting. Goldberg’s (1965) Commander Theory was used as a relevant theoretical framework. Survey results provided insights into the beliefs of preparer-commanders as to the usefulness of whole-of-government consolidated financial reports for the discharge of accountability. While there appears to be a view that such reports may be useful for decision-making purposes, there is relatively less evidence to suggest that this type of information is suitable for the purposes of government resource allocation decisions.<br /
Suggests a notion of community assets based on common property that recognizes the fundamental importance of accountability and democratic control over resources in the public sector, the sociopolitical nature of accounting, and the need to give visibility to public as well as private interests. The development of such a concept has immediate effects on the way the accounting entity and the relationship between government and society are viewed and may even have ramifications for accounting in the “private” sector.
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This article analyses the potential effect of consolidated financial reporting (CFR) on the accounting and reporting systems in Italian local government. As consequence of the increased use of decentralized entities in delivering a variety of public services, Italian local government needs to improve internal and external accountability. Although a number of obstacles (technical, legal and cultural) have been encountered in Italy, initial experience in Tuscany has demonstrated that CFR has benefits for internal and external users. CFR, in addition, is a potential stimulus for the full implementation of accrual accounting and reporting.
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A debate in this journal, spanning severa1 years, over the accounting treatment of public assets has concentrated attention on the appropriateness of the Public Sector Accounting Standards Board's decision to apply private sector accounting concepts to the development of public sector accounting standards. The Case is examined here and it is shown why private sector accounting standards must be appropriately adapted to suit a very different and varied operating environment in the public sector. These differences have been largely ignored, with resulting problems for public sector accounting standards.