Adopting International Public Sector Accounting Standards: a challenge for modernizing and harmonizing public sector accounting
| Author | Isabel Brusca,Juan Carlos Martínez |
| Date | 01 December 2016 |
| Published date | 01 December 2016 |
| DOI | 10.1177/0020852315600232 |
| Subject Matter | Symposium on The Gordian knot of public sector accounting and the role of IPSASArticles |
Review of
Administrative
Article
Sciences
International Review of
Administrative Sciences
2016, Vol. 82(4) 724–744
Adopting International Public
! The Author(s) 2015
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DOI: 10.1177/0020852315600232
a challenge for modernizing
ras.sagepub.com
and harmonizing public
sector accounting
Isabel Brusca
University of Zaragoza, Spain
Juan Carlos Martı´nez
University of Sonora, Mexico
Abstract
The International Public Sector Accounting Standards have been seen as a path towards
the modernization of governmental accounting, and many countries have made efforts
to adopt them. The purpose of this article is to analyse the stimuli and barriers to the
adoption of International Public Sector Accounting Standards, as well as their main
benefits, using a structural equation model. The research methodology is based on a
questionnaire sent to American and European Union countries that has been used to
construct a structural model, and our results show that comparability and moderniza-
tion are direct benefits of International Public Sector Accounting Standards
implementation, and that both adopter and non-adopter countries value these positive
impacts. This justifies the process of harmonization that the European Commission
recently started.
Points for practitioners
The analysis of the impact of International Public Sector Accounting Standards in the
international context shows to what extent the adoption of International Public Sector
Accounting Standards are useful for modernizing governmental accounting and achiev-
ing accounting comparability. Describing the experience of countries that have adopted
International Public Sector Accounting Standards can help practitioners and profes-
sionals who participate in modernizing accounting systems, such as the European
Union. Many countries are now moving towards International Public Sector
Accounting Standards and the experiences of pioneer countries can serve as a learning
process. This article shows that introducing International Public Sector Accounting
Corresponding author:
Isabel Brusca, Universidad de Zaragoza – Accounting & Finance Gran Via, 2, Zaragoza 50005, Spain.
Email: ibrusca@unizar.es
Brusca and Martı´nez
725
Standards can have many advantages in practice and that countries that have imple-
mented these standards consider that they allow an increase in transparency and
accountability.
Keywords
accounting harmonization, accounting reforms, accrual accounting, International Public
Sector Accounting Standards, public sector accounting
Introduction
Over the last few decades, there have been profound cultural changes in public
sector entities. They have taken place in two fields: the theory of New Public
Management (NPM) and the principles of good governance (Hood, 1995;
Lapsley, 1999). NPM involves reducing the public sector through privatization,
downsizing and reorganizing it with customer-oriented mechanisms, and adopting
private sector management techniques to improve performance and accountability.
The principles of good governance include openness, integrity and accountability
(IFAC-PSC, 2001), which should be exercised with a focus on the organization’s
purpose and on the outcomes for citizens and service users (CIPFA, 2004).
This more open approach to good governance, together with the influence of
NPM, has led to a consensus on the necessity of extending the accountability of
public sector entities and reforming the language used. Accounting systems have
been reformed in most countries to improve accountability and transparency and,
at the same time, to restore citizens’ trust in governments.
The depth of the reforms has been very varied, and, in most cases, they have
been carried out at all levels: national, regional and local. In these processes of
reform, the International Public Sector Accounting Standards (IPSASs) issued by
the International Public Sector Accounting Standards Board (IPSASB) have
played an important role (Adhikari and Mellemvik, 2010; Alesani et al., 2012;
Bergmann, 2012; Go´mez and Montesinos, 2012; Navarro and Rodrı´guez, 2007,
2011). In fact, a variety of international governmental organizations, such as the
United Nations (UN), the Organisation for Economic Co-operation and
Development (OECD) and the European Commission (Grossi and Soverchia,
2011), have committed substantial resources to the adoption of IPSASs, and a
mimetic effect has emerged. Other international governmental organizations have
directly promoted the adoption of IPSASs, such as the World Bank, International
Monetary Fund (IMF), OECD and Asian Development Bank. Countries all
around the world have carried out initiatives for adopting IPSASs (Christiaens
et al., 2010, 2015; Jones and Caruana, 2014). However, only single-country studies
have been carried out about the factors and effects of IPSASs adoption (Go´mez
and Montesinos, 2012; IPSASB, 2014a; Sour, 2012).
The objective of this article is to analyse the drivers and stimuli for countries to
adopt IPSASs, as well as to identify the barriers that make the process difficult at
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International Review of Administrative Sciences 82(4)
the moment. Furthermore, we aim to show the reported benefits of IPSASs.
Through a questionnaire answered by 19 European Union countries and 18
American continental countries, we empirically analyse the perceived benefits of
IPSASs adoption by using a structural model based on the stimuli and barriers
identified in our theoretical part. One of the main contributions of our study is that
it includes American continental and European Union countries together and ana-
lyses both the stimuli for and barriers to the adoption of IPSASs and their import-
ance for accountability purposes.
This article is structured as follows. After the introduction, we review the pre-
vious literature and identify the stimuli and barriers that will be used as variables in
our empirical study. In the next section, the research model is outlined, describing
the aims, propositions, data and method used. After that, we show the results
obtained in the empirical analysis and discuss the main implications and
conclusions.
The path for adopting IPSASs: stimuli and barriers
IPSASs aim to improve the quality of general purpose financial reporting by public
sector entities, increasing transparency and accountability in the public sector and
enhancing the comparability of financial statements around the world (IPSASB,
2014b). In this article, the benefits of IPSASs, with respect to local or national
standards, for achieving the comparability of financial reporting is a key point as
the adoption of IPSASs will lead to international harmonization of governmental
accounting. The success of the IPSASB’s efforts is dependent upon the recognition
of and support for its work from many different interested groups acting within the
limits of their own jurisdictions.
At the moment, many countries, as well as most international public organiza-
tions, have ongoing processes for adopting IPSASs. Using Humphrey et al.’s (2009)
terminology, we can say that an international public sector accounting architecture
has emerged, which refers to the framework and process that can help to attain the
comparability of public sector accounting in the international arena. The approach
to international harmonization and convergence can become a reality through the
adoption of IPSASs at the national level. ‘Adoption’ can be defined as a process that
implies the incorporation of the criteria of international standards in local regulation
(Pacter, 2005). It assumes the coexistence of different sets of standards but with
criteria ‘converging’ towards the same principles. This process can require step-by-
step changes and an incremental approach (Bietenhader and Bergmann, 2010).
In such an approach, there are some variables and conditions that influence the
process. Considering the contingency model (Lu¨der, 2002), we focus on the follow-
ing contextual variables:
. Stimuli: events that occur at the initial stage of the process and create a positive
impact for the adoption of IPSASs by national governments.
Brusca and Martı´nez
727
. Adoption barriers: environmental conditions that create a negative impact on
the process of adoption.
Stimuli for adopting IPSASs
Based on the analysis of official material, the web pages of the International
Federation of Accountants (IFAC) and national standard-setters, and accounting
literature, eight stimuli are identified for a national government’s decision to adopt
IPSASs: (1) the issuing process for the standards; (2) the closeness of IPSASs to
business accounting standards; (3) the consideration of issues of particular signifi-
cance to public sector entities; (4) the IPSASB’s active role; (5) the international
governmental organizations’ role; (6) the sovereign debt crisis and IPSASs; (7) the
global perspective and the awareness of the importance of international accounting
harmonization; and (8) the harmonization of financial reporting with national and
statistical information.
The issuing process for the standards. The process of issuing IPSASs can itself be
considered an important factor in the legitimization process. Before standards
are approved, it is usual to hold a public consultation with the aim of gathering
opinions and views from stakeholders. The most recent consultation was about
IPSASB strategy and governance (IPSASB, 2014b, 2014c).
In its origins, the IFAC Public Sector Committee...
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