Accrual accounting in the public sector information
Public finance
Policies
Agricultural
Economic
Energy
Industrial
Investment
Social
Trade
Fiscal
Monetary
Policy mix
Fiscal policy
Budget
policy
Debt
internal
Deficit / surplus
Finance ministry
Fiscal union
Revenue
Spending
deficit
Tax
Monetary policy
Bank reserves
requirements
Discount window
Gold reserves
Interest rate
Monetary authority
central bank
currency board
Monetary base
Monetary (currency) union
Money supply
Trade policy
Balance of trade
Free trade
Gains from trade
Non-tariff barrier
Protectionism
Tariff
Trade bloc
Trade creation
Trade diversion
Trade / commerce ministry
Revenue
Spending
Non-tax revenue
Tax revenue
Discretionary spending
Mandatory spending
Optimum
Balanced budget
Economic growth
Price stability
Reform
Fiscal adjustment
Monetary reform
Portal
v
t
e
Accrual accounting in the public sector is a method to present financial information on government operations.[1]: 45 [2]: 3
Under accrual accounting, income and expenditure transactions are recognized when they occur, regardless of when the associated cash payments are made.[3]: 116
The difference between public sector accrual accounting and cash accounting is most apparent in the treatment of capital assets (i.e. equipment, buildings, and public infrastructure that lasts many years).[4]: 19 Under accrual accounting, expenditure on capital is added as an asset in the government's balance sheet in the year the capital is purchased, but the cost is not included in the year's budget as an operating expense.[4]: 19
Instead, payment for capital used (i.e., the estimated depreciation or amortization) is included in that year's budget as an operating expense.[4]: 19
The usefulness of accrual accounting in the public sector remains in dispute.[3]: 124 Advocates say a government that employs accrual accounting is less likely to underinvest in public infrastructure since large up-front capital costs are not recorded as a current period expenditure — rather, the expense is recorded over the years the capital is used (depreciates).[5]: 392–393 Detractors counter that, following this reasoning, since the capital purchase does not generate a current period expense, accrual accounting may encourage excessive spending on capital and borrowing.[3]: 145 [5]: 393–394 [6]: 2 [7]: 106
A central argument in favour of public sector accrual accounting over cash-based accounting is that it can provide more comprehensive information on government finances, including balance sheet data on assets, liabilities, and depreciation.[5]: 392–394
However, accrual accounting income statements and balance sheets are based on technically complex and often arbitrary estimates of the value of public assets (market values are usually not available), so the information may not be reliable.[5]: 392–394
This may impede citizen comprehension and the transparency of government finances.[5]: 392–394 [8]
Other concerns with accrual accounting in the public sector are that it is more easily manipulated because it tends to be less transparent and is less understood by the public;[6]: 6 a deficit/surplus under accrual accounting provides a less accurate measure of the government's borrowing and fiscal stimulus to the economy compared to a cash-accounting deficit/surplus;[9]: 10 [6]: 4 and accrual accounting is more costly because of the technical demands (often requiring new IT systems and more qualified accountants).[2]: 7
While accrual accounting has been used in the private sector for over a century,[2]: 1 it has become common in the public sector only since around 2000.[10]
In 2020, 30% of 165 jurisdictions surveyed worldwide used accrual accounting.[11][12]
^Blöndal, Jón (2003). "Accrual Accounting and Budgeting: Key Issues and Recent Developments" (PDF). OECD Journal on Budgeting. 3 (1). doi:10.1787/budget-v3-art4-en.
^ abcCavanagh, Joe; Flynn, Suzanne; Moretti, Delphine (September 2016). Implementing Accrual Accounting in the Public Sector (PDF) (Report). International Monetary Fund, Fiscal Affairs Department.
^ abcMoretti, Delphine; Youngberry, Tim (2018). "Getting added value out of accruals reforms". OECD Journal on Budgeting. 2018/1: 114–166. doi:10.1787/budget-18-5j8l804hpvmt. S2CID 158811342.
^ abcCite error: The named reference CICA2003 was invoked but never defined (see the help page).
^ abcdeDorn, Florian; Gaebler, Stefanie; Roesel, Felix (2021). "Ineffective fiscal rules? The effect of public sector accounting standards on budgets, efficiency, and accountability". Public Choice. 186 (3–4): 387–412. doi:10.1007/s11127-019-00755-8. hdl:10419/213589. S2CID 254944141.
^ abcDahlby, Bev; Smart, Michael (May 2015). The Structure and Presentation of Provincial Budgets (PDF) (Report). The School of Public Policy, University of Calgary.
^Blöndal, Jón (2004). "Issues in Accrual Budgeting" (PDF). OECD Journal on Budgeting. 4 (1): 103–119. doi:10.1787/budget-v4-art5-en. ISSN 1608-7143.
^Cite error: The named reference Dees was invoked but never defined (see the help page).
^"Accounting for What?: The Value of Accrual Accounting to the Public Sector". Organisation for Economic Co-operation and Development. 1993.
^Osterkamp, Rigmar (Autumn 2007). "Accrual Accounting in the Public Sector" (PDF). CESifo DICE REPORT: Journal for Institutional Comparisons. 5 (3): 43–45.
^International Federation of Accountants (16 June 2021). "International Public Sector Financial Accountability Index: 2020".
^International Federation of Accountants (16 June 2021). "Global Public Sector Shift to Accrual Accounting Forecast to Continue".
and 25 Related for: Accrual accounting in the public sector information
accounting is the time various financial transactions are recorded. The cash basis (EU VAT vocabulary cash accounting) and theaccrual basis are the two...
and by raising awareness and adoption of accrual-based accountinginthepublicsector. IPSAS are accounting standards for application by national governments...
reporting time frames. Inthepublicsector, 30% of 165 governments surveyed used accrualaccounting, rather than cash accounting, in 2020. The notable limitations...
Certified Public Accountants' (AICPA) Accounting Principles Board (APB) on July 1, 1973. The FASB is run by the nonprofit Financial Accounting Foundation...
Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals...
Finance Act (PFA) in 1989, introducing accrual budgeting, appropriations and accounting, publishing the world's first publicsector balance sheet based...
chartered accountant in other English-speaking countries. Inthe United States, the CPA is a license to provide accounting services to thepublic. It is awarded...
Public Sector Accounting Standards Board (IPSASB) sets accrual-based international publicsectoraccounting standards. Organizations in individual countries...
companies, partnerships and sole proprietorships may elect to not use accrual basis accounting. Large multi-national corporations may use International Financial...
The electricity sectorinthe Philippines provides electricity through power generation, transmission, and distribution to many parts of the country. The...
2007 International PublicSectorAccounting Standards (IPSAS) research paper Study 14: Transition to theAccrual Basis of Accounting: Guidance for Governments...
Inaccounting, minority interest (or non-controlling interest) is the portion of a subsidiary corporation's stock that is not owned by the parent corporation...
similarities between the GFSM 2001 and business financial accounting are the recommended use of accrualaccounting as the basis of recording and the presentations...
adopted for general use inthepublic service schemes. Pension benefits should be uprated in line with average earnings during theaccrual phase for active scheme...
revenues and spending. For a government that uses accrualaccounting (rather than cash accounting) the budget balance is calculated using only spending...
Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute...
broad range of service sector activities, especially as concerns financial management and consumer finance. The finance industry in its most common sense...
entitled to the amount remaining on theaccount and accrued interest. The money will be transferred to the person who is the nominee for theaccount right away...
(Certified Accounting Technician) and IAT (International Accounting Technician). Inthe United States, licensed accountants are Certified Public Accountants...
rather than accruals basis, although the GAO notes that theaccrual deficit "provides more information on the longer-term implications of the government's...
security". The federal government controls thePublic Company Accounting Oversight Board, which would normally criticize inconsistent accounting practices...
The Federal Inland Revenue Service (FIRS) is the agency responsible for assessing, collecting and accounting for tax and other revenues accruing to the...
years worked, multiplied by the member's salary at retirement, multiplied by a factor known as theaccrual rate. The final accrued amount is available as a...