Understanding the impact of mandatory accrual accounting on management practices: interpretation of Japanese local governments’ behavior
| Author | Makoto Kuroki,Keiko Ishikawa,Kiyoshi Yamamoto |
| Published date | 01 September 2022 |
| Date | 01 September 2022 |
| DOI | http://doi.org/10.1177/0020852321988956 |
| Subject Matter | Articles |
Article
Understanding the
impact of mandatory
accrual accounting on
management practices:
interpretation of
Japanese local
governments’ behavior
Makoto Kuroki
Yokohama City University, Japan
Keiko Ishikawa
Nihon University, Japan
Kiyoshi Yamamoto
Kamakura Women’s University and University
of Tokyo, Japan
Abstract
Accompanying the spread of “new public management” since the 1980s, accrual
accounting and results-based management has become a global standard. However,
whether accrual accounting results in successful outcomes and which drivers lead to
the intended impacts of the reform have been contested. Given the mixed arguments in
the literature, we set out two research questions: (1) “Have public sector organizations
realized any positive impacts on management practices by adopting mandatory accrual
accounting?”; and (2) “What are the primary drivers of such impacts?” To answer these
questions, we examine the impact on management practices by analyzing a survey to
ascertain how financial department officers in Japanese local governments perceive
the benefits of adopting mandatory accrual accounting on management practices.
Corresponding author:
Makoto Kuroki, 22-2 Kanazawa-ku, Yokohama, Kanagawa, Japan 236-0027.
Email: kuroki@yokohama-cu.ac.jp
International Review of Administrative
Sciences
!The Author(s) 2021
Article reuse guidelines:
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DOI: 10.1177/0020852321988956
journals.sagepub.com/home/ras
2022, Vol. 88(3) 862–881
International
Review of
Administrative
Sciences
The results indicate that they have so far not recognized the intended benefits, though
they had expected higher benefits in internal control. Then, we use technical-rational,
socio-political, and institutional isomorphic perspectives in a comprehensive approach
to understand the impacts on management practices. The logistic analysis shows that
financial managers in local governments that do not have a majority party in the assem-
bly, but consist of several parties in power, as well as in those with greater financial
dependence on the central government, perceive higher benefits. Further, we find that
financial managers that imitate other local governments as a form of mimetic pressure
perceive fewer benefits. The results show that some technical-rational tools, socio-
political conditions, and institutional pressures change the perceived benefits for public
managers of adopting mandatory accrual accounting.
Points for practitioners
We find that some technical-rational, socio-political, and institutional factors explain
the intended internal benefits of the mandatory adoption of accrual accounting.
In practice, financial managers in local government feel the merits of accrual accounting
in less autonomy in not only politics, but also finance, and few mimetic conditions. It
might be understood that difficult situations would drive practitioners to use manda-
tory information.
Keywords
accrual accounting, comprehensive approach, management practice, mandatory adoption
Introduction
Accompanying the spread of “new public management” since the 1980s, the use of
accrual accounting in the public sector has increasingly become a global standard
(Barton, 2005; Ellwood and Newberry, 2007; Newberry, 2003; Pollitt and
Bouckaert, 2017; Ryan, 1998). New public management relies on market mecha-
nisms and business management tools as instruments for the reform of the public
sector (Hood, 1991, 1995). The adoption of accrual accounting is expected to
increase efficiency, transparency, and accountability for stakeholders, and provides
a more comprehensive picture, showing stocks and flows of financial assets and
liabilities. Further, it may improve internal management, such as budgeting, by
providing accrual-based cost information regarding public services (OECD, 2002).
In the public sector, many local governments have also transformed their
accounting system into an accrual basis through law or regulation (Pina et al.,
2009). However, the impact of accounting reform has been contested. Some
researchers acknowledge its benefits, including the enhancement of internal man-
agement and improved transparency and accountability for stakeholders (e.g.
Bergmann, 2012; Kober et al., 2010). In contrast, others report challenges in the
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Kuroki et al.
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