Introduction

The International Public Sector Accounting Standards are a new phenomenon aimed at reforming public sector financial reporting and have been established and governed by the International Public Sector Accounting Standards Board (IPSASB) since 1986. However, many of the technical reforms have been accelerated in the wake of the sovereign debt crisis in 2008 which created distrust and the need to demonstrate greater transparency in the public sector (Schmidthuber et al., 2022; Rossi et al., 2016; Brusca et al., 2013). IPSAS is an initiative stemming from New Public Management principles which seeks to apply accrual reporting techniques established in the private sector to the public sector. The IPSASB has formulated these standards with a long-term view to unifying governmental reporting and moving away from traditional cash-based reporting systems.

According to the International Labour Organisation over 80 bodies including the UN have adopted IPSAS either directly or indirectly (ILO, 2021). The revolution in public sector reporting is widespread with adopters in Europe (Christaens et al., 2015; Argento et al., 2018; Jorge et al., 2019), Africa (Whitefield & Savvas, 2016; Olaoye & Talabi, 2018) and Asia (Abdulkarim et al., 2023; Alshujairi, 2014). Other governments have developed their own governmental accounting standards “GAS” as seen in Indonesia. IPSAS has experienced some resistance as the benefits of implementation are not understood (Bekiaris & Paraponti, 2023). Further, there is inadequate education on the use and interpretation of accrual accounts (Fahmid et al., 2020). There is also a lack of evidence of accrual accounting being used for decision-making purposes (Polzer et al., 2019; Hepworth, 2015). A review of transnational studies is included in the review, which investigates drivers of adoption (Schmidthuber et al., 2022), corruption (Tawiah, 2023a; Hamed-Sidhom et al., 2022; Cuadrado-Ballasteros et al., 2020) and other consequences.

Much of the extant research on adoption rates has been conducted in Europe, with many of the benefits advertised by proponents applying in this context. For the purposes of this research, it was determined that a holistic review of both developing and developed countries was required to obtain a clear picture of IPSAS. This would allow us to capture the nuances associated with its implementation in various settings. This review provides evidence as to the current state of IPSAS adoption and how it can enhance governmental financial reporting. This review also provides a platform for identifying strands of the literature which have been underexplored and require further studies. The review may attract the attention of policymakers to form a better understanding of the cultural and institutional factors inhibiting adoption globally, as well as the impact IPSAS implementation has had on adopting bodies.

The remainder of the paper is structured as follows. The second section presents how the review was conducted. The third section discusses New Public Management and IPSAS adoption. The fourth section considers the consequences of adoption. The fifth section presents the challenges to IPSAS adoption and implementation. The sixth section contains the review of developing countries and cash-basis IPSAS. The paper concludes in the seventh section and suggestions for future research are presented in the eighth section.

How the Review was Done

Boundaries of the Review

IPSAS and public sector financial management reform have attracted commentary from academics and practitioners alike, particularly in the wake of the 2009 global financial crisis. Researchers have conducted various studies over the past two decades exploring IPSAS adoption rates, the reasons why countries adopt, and the practical implications and issues associated with adoption. A Google Scholar search indicated that there are over 300 academic articles available which cover the topic of IPSAS. The methodology of these studies is wide-ranging including qualitative analysis and discussions along with empirical and theoretical studies.

To ensure the most accurate and relevant information was selected for this review, the search was narrowed to include papers in the public sector and governmental studies, financial management and accountancy journals. IPSAS is a relatively new development in public sector financial management, and therefore, this review only includes articles from the past 23-year period from 2000 to 2023. The aim of this constraint is to ensure information is not outdated and reflects the current landscape in public sector reforms.

Selection of Papers

Various keywords (e.g. public sector reforms, IPSAS, government accounting standards, new public sector financial management, etc.) were used in the search to allow for the gathering of literature on various topics associated with IPSAS, including adoption, consequences, corruption, cultural factors and cash-basis. The papers were collected from reputable databases such as the Web of Science and Scopus. The quality of the journals is based on the Association of Business School, ABS-ranked journals. However, due to the nature of IPSAS and its prominence as a research topic in developing countries, not all papers met this criterion. However, if they were deemed to be of high quality, they were included.

The review approach is broken down as follows; the authors, titles, a summary of the findings and journal titles were collected to form an archive of articles examined. This database is categorized further by the topic to which each article relates. Table 1 presents articles collected in the Adoption and NPM section. Table 2 highlights the consequences of adoption which include budgeting, corruption and cultural barriers. Table 3 presents papers which examine the limitations associated with IPSAS implementation. Finally, Table 4 shows papers collected on the developing countries and cash-basis IPSAS which has become a popular alternative to the traditional accrual-basis IPSAS as less-developed countries transition to a full accrual financial reporting system.

Table 1 New public management and adoption
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Table 2 Consequences of adoption
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Table 3 Issues and Cultural Barriers of IPSAS
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Table 4 Developing world and cash-basis IPSAS
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New Public Management and IPSAS Adoption

IPSAS is underpinned by the concept of New Public Management which is a movement driven by practitioners to improve public administration and make the public sector more accountable to the stakeholders they serve. This is achieved by institutionalizing accrual accounting for budgetary and reporting to provide enhanced information about liabilities and debt (Pina & Torres, 2003; Olson et al., 2000). However, the IPSASB have also issued a cash-basis standard which is designed for transitional and developing economies with the view to full accrual adoption in the future. The OECD cites this trend as being responsible for making the public sector more responsive to citizen’s needs while promoting enhanced governance (Groot & Budding, 2008; Lapsley et al., 2009).

Professional accountants have embraced the transition to accrual and NPM techniques in public sector reporting and some have suggested that much of their enthusiasm around the reform is driven by self-interest and the desire to attain more clients and greater business (Vivian & Maroun, 2018). This has forced some to question the objectivity of professional bodies in the IPSAS diffusion process.

The accrual accounting technique is a development in the private sector and its application to the public sector is driven in part by the desire to overcome bureaucratic obstacles to allow for a more efficient allocation of resources (Pina & Torres, 2003; ACCA, 2017; Gomes et al., 2023; Obara & Nangih, 2017). However, the advantages of accrual accounting to the public sector have been refuted by many academics in the literature as the concepts of stewardship and accountability associated with public sector governance are emphasised less than information relevance which is a key characteristic of financial reporting in the private sector (Whittington, 2008; Murphy et al., 2013; Zhang & Andrew, 2014).

IPSAS is modelled on IFRS which is applied in the private sector. Many argue that using IFRS as a basis for IPSAS is unsuitable due to the complexities and nuances of government accounting. IFRS is based on transactions, risks and presenting information to capital market participants (Rincón-Soto & Gómez-Villegas, 2020), factors that are less relevant in public sector reporting. Critics argue that IPSAS adoption is merely a technical revolution, however, in practice, it is much more complex (Hepworth, 2017). In addition, it is contended that IPSAS fail to reflect public sector institutional dynamics which contribute to decoupling, the production of unsuitable information for users’ needs (Rincón-Soto & Gómez-Villegas, 2020; Baker & Rennie, 2006; Biondi, 2018; Toudas et al., 2013).

Some of the extant literature has looked at other driving forces behind the adoption of IPSAS besides the benefits of improved governance, transparency and accountability. The theory of isomorphism has attracted the most discourse among academics as an explanation for IPSAS adoption in case study settings. There are three strands to isomorphism; coercive (driven by international institutions), mimetic (a search for legitimacy), and normative (related to political groups, lobbyists and professionals) (Rincón-Soto & Gómez-Villegas, 2020). Some countries, particularly with developing economies are subject to coercive isomorphism and recognise the need to implement IPSAS to access financial aid as is the case in Jordan and other developing countries (Alghizzawi & Masruki, 2020; Mnif Sellami & Gafsi, 2019; Amiri & Hamza, 2020). These claims have been further reinforced by empirical evidence suggesting that IPSAS adoption shares a strong positive correlation with access to aid (Tawiah & Soobaroyen, 2023).

Mimetic forces driving IPSAS implementation have been highlighted in Malta, Spain and Portugal (Jones & Caruana, 2016; Gomes et al., 2023). The Maltese government’s search for trust drove IPSAS implementation. Their new EU membership and small economic power have made them more susceptible to mimetic forces sparking public sector reform. The aim to be recognised as legitimate internationally shaped their stance on IPSAS.

The final element of isomorphism discussed in the literature is the normative aspect. An Estonian case study (Argento et al., 2018) provides insight into how influential accounting professionals were a major contributory factor in adopting IPSAS in Estonia. Normative forces along with the nation’s history of a centrally planned economy formed a broader supportive context for implementing radical reforms in public sector accounting.

IPSAS adoption has been the subject of various studies in the literature, especially given that implementation is not compulsory. Adoption itself can be further broken down into full accrual adoption, partial adoption and the use of the cash-basis IPSAS. This has prompted researchers to investigate the landscape globally in public financial management reform. One of the cited benefits of the standards is increased comparability across jurisdictions (Brusca et al., 2016; Benito et al., 2007; Fahmid et al., 2020; Gkouma & Filos, 2022), however, the numerous options available have contradicted these claims.

EU countries have been at the forefront of reforms in the public sector and as such much attention has been devoted to investigating adoption rates and the reasons behind their decisions. Christiaens et al. (2010) was one of the first major studies that examined adoption at both local and central government levels in Europe. None of the respondents planned to fully adopt at both local and central government. Only 21.1% were adopted in local governments, while 36.8% had adopted or planned to adopt IPSAS at the central government level. Accrual accounting was valued by respondents to questionnaires, however, confidence in full IPSAS adoption remained low as respondents raised concerns about the role IFRS played in the development process. Conversely, this stance was contradicted by Brusca et al. (2013) who found within the Iberian context, the EU’s strategy of promoting IFRS has strengthened the credibility of IPSAS as a parallel system. Other studies of Spanish and Portuguese authorities have re-emphasised that IFRS has played a role in promoting adoption with their desire to align standards with their private sector (Jorge et al., 2019).

Christiaens et al. (2015) conducted a comparative study to their previous investigation whereby adoption rates and those considering adoption increased significantly, indicating that uncertainty around the standards is beginning to dissipate. However, questionnaires denoted that institutional factors such as legal systems and economic conditions dictated the ability to implement IPSAS. This slow trend toward harmonization is highlighted again in more recent literature. Bekiaris and Paraponti (2023) report that only 64% of OECD countries have medium to high levels of IPSAS implementation. The remainder reporting low levels of adoption lacked understanding of the benefits which has acted as a barrier to dissemination in these countries.

Many of the above studies looked at IPSAS in the context of the developed world, however many of the benefits cited such as improving governance and reducing corruption are marketed to the developing countries.

Consequences of Adoption

The benefits of IPSAS diffusion are widely reported by both practitioners and academics. Tighter fiscal control, sound financial management and government stability are advantages documented both in the literature and by professional bodies (ACCA, 2017; Gourfinkel, 2021; Casteñeda-Rodríguez, 2022). These advantages are predicted to come in tandem with societal benefits, improved data consistency and international comparability.

IPSAS has also been seen to promote transparency (Ijeoma, 2014), providing greater information on public finances and decision-making which helps to develop a more informed electorate. This is done by bridging information asymmetry between public officers and the citizens they govern (Gkouma & Filos, 2022; Fahmid et al., 2020). This has even been the case in developing countries which are characterized by inadequate regulation and low transparency (Tawiah, 2023a, b; Abdulkarim et al., 2023).

Accrual accounting techniques are intended to provide greater clarity about future liabilities, assets and debts than is available in traditional cash-based financial reporting by governments (Pina & Torres, 2003). Greater information, both in volume and quality enhances the ability of decision-makers to track performance and take corrective action if necessary (Bergmann, 2012; Gomes et al., 2023).

Having agile systems that portray an accurate picture of public finances is a means of avoiding sovereign debt crises like those experienced in the late 2000’s (Rossi et al., 2016). The Greek economy was one of the most adversely affected economies by the crash and IPSAS adoption is seen as a way of enhancing financial reporting by producing high-quality, understandable financial statements. This enables citizens to be more informed when selecting officers to represent them in parliament. Ball (2015) suggest that restoring trust to the public is the main benefit of IPSAS in the Greek context.

Finally, comparability is another significant driver of adoption. Harmonization is not as prioritized in the public sector as in the private sector due to the nature of capital markets. However, in an EU context, there are benefits of having ubiquitous standards and presentation of financial information (Lopez et al., 2002). This is especially relevant given a European standard based on IPSAS (EPSAS) is in the process of development (Caruana et al., 2019).

Transparency is one of the main aims of IPSAS, and researchers have investigated whether IPSAS can curtail corruption in the public sector. Much of the literature supports these claims with accrual IPSAS reducing corruption and cash-basis IPSAS proven to be a controller of corruption. However, the accrual basis was highlighted to be more impactful (Tawiah 2023a). The absence of a financial reporting framework in some foreign aid beneficiary countries was noted to facilitate corruption and budget waste. However, IPSAS and heightened disclosures significantly reduced perceived levels of corruption in these countries (Hamed-Sidom et al., 2022). Similarly, Cuadrado-Ballasteros et al. (2020) found that accrual systems reduce corruption, and user understanding is intrinsic to greater transparency. The reduction of information asymmetry between the government and the public forces politicians to act in the public interest.

Researchers in Nigeria have paid particular attention to the topic of corruption and IPSAS given its history of poor budget implementation and a lack of accountability. Two distinct and separate studies in the Nigerian context (Olaoye & Olaniyan, 2018; Enofe et al., 2017) have highlighted no significant association between IPSAS adoption and reduced corruption, even going as far as to say that IPSAS adoption was unsuitable and an imposition for developing countries. The researchers believe that given their economic landscape, IPSAS adoption is unsuccessful in attracting FDI, fostering development and controlling corruption, despite improved financial reporting. However, it is important to note that the vast majority of IPSAS implementation projects have yielded positive results in the area of corruption. Broader and more comprehensive institutional overhauls may be necessary to realise the benefits of IPSAS (Gkouma & Filos, 2022; Christaens et al., 2015; Abdulkarim et al., 2023) in developing economies.

Budgeting is another innate duty of public sector finance departments (Zarei et al., 2022) and the transition to accrual-basis reporting will continue to impact the budget process which has been traditionally cash-based (Benito et al., 2007; Christiaens & Rommel, 2008) and has required some amendments to budgetary law in certain jurisdictions (Alshujairi, 2014). According to López et al. (2002), information derived from financial reporting must be appropriately linked through the preparation of various reconciliations including from budgeted expenditure to actual fiscal performance. These reconciliations are vital to maintaining transparency and accountability as well as reducing budgetary waste as advertised by IPSAS (Sanderson & van Schaik, 2008; Hamed-Sidhom et al., 2022).

Much attention has been paid to the challenges associated with portraying an accurate picture of the budgetary and financial results of government bodies through reconciliation and the practicality of IPSAS 24, the standard on budgeting. Heiling (2019) and van Schaik (2021) highlighted reconciliations that would improve the presentation of budget and financial information under IPSAS, particularly when using the cash-basis of budgeting and accrual financial reporting. These included flagging cash flows under both activities and functional categories, complexities that generally arise when different charts of accounts are used. Other recommendations involve clarifying material differences between financial statements and budget figures. Differences in reconciliation should also be presented separately and not subtracted from one another. Despite the intricacies, another layer of credibility will be added to IPSAS by preparing these suggested reconciliations while also demonstrating the relationship between cash budgeting and accrual reporting.

Various case studies have been carried out in European settings on the topic of budgeting and accrual reporting. Van Der Hoerk (2005) was one of the first academics to explore this topic in the literature, identifying the contextual differences between the private and public sectors, and the dangers associated with recognising citizens as customers under a new basis of financial reporting. While the above study showed how The Netherlands transitioned to full accruals and encountered few challenges, the same cannot be said for Italy as officials there were less concerned with optimizing their plans for resource allocation, but more with the preparation of a “legally correct” budget (Grandis & Mattei, 2014).

These contrasting experiences are mirrored in a case study on the Polish and Maltese governments respectively. While Malta is committed to IPSAS adoption and less developed budgeting practices, Poland utilises sophisticated budgeting techniques and demonstrates no inclination to adopt IPSAS (Kowalczyk & Caruana, 2022).

The comparative viewpoints listed above provide a basis for standard-setters to develop a system that not only harmonises budgeting but also optimizes it, in tandem with accrual-basis reporting under IPSAS. While much of the literature presented above reflects glowingly on IPSAS, in the interest of being complete, it is important to highlight challenges associated with accrual reporting in the public sector as will be discussed in the subsequent section on issues and cultural barriers.

Challenges to IPSAS Adoption

IPSAS is undoubtedly a transformative step toward modernizing and harmonising public sector financial reporting, however, academics have identified general implementation issues and cultural barriers that may hamper a smooth transition to accrual public sector reporting.

Critical and specific government situations have not been accounted for in the development of standards as well as the suitability within European legal systems (Grossi & Soverchia, 2011; Gourfinkel, 2021). This paired with a lack of stakeholder willingness and the human resources required acts as a barrier to broader IPSAS diffusion. Equally, within the Belgian public sector, Christiaens and Rommel (2008) discussed some of the deficiencies in applying an accrual framework to the public sector. They argue that spending should not be related to the level of public services provided as in the private sector and that accruals would only be appropriate for “business-like” departments in government.

Other operational challenges have been documented in the literature such as asset measurement which gives rise to additional complexities than those experienced in the private sector (Lapsley et al., 2009; Brusca et al., 2016; Biondi & Lapsley, 2014). Typically, assets are recognised if probable future cashflows are expected. Caruana (2021) concludes that standards should draw less from private sector practices and proposes four potential alternatives to provide greater clarity for preparing IPSAS statements: historical cost, fair value, fulfilment value and replacement cost. Practical issues identified in the literature include implementation costs, lack of pressure, and alignment with public sector specialities in addition to the reliance on IFRS in standard development (Scmitdhuber et al., 2022). These concerns are valid and require careful consideration by the IPSASB to create a comprehensive framework that satisfies user and government needs.

Another point for consideration for the IPSASB is the cultural landscape in adopting countries. Baskerville and Grossi (2019) put forward the idea of “Glocalization” which is adapting universal standards to local cultural norms to facilitate the retention of identity. These slight changes make standard diffusion more palatable for those implementing IPSAS, provided these changes to standards do not compromise the quality. If adaptations do not reduce transparency or stewardship in public sector reporting, these variations should ease scepticism and make for a smoother transition around the world.

Economic factors such as the aftermath of the financial crisis (Schmidthuber et al., 2022) have played a significant role, particularly in Portugal, with the Portuguese government succumbing to pressure from the Troika after availing of aid after the financial crash (Jorge et al., 2019), reinforcing the findings of Mnif Sellami and Gafsi (2019) who found coercive factors to influence IPSAS implementation. The cultural context differed in neighbouring Spain with the Spanish public sector eager to mirror IFRS used in the private sector. Ultimately, institutions are unlikely to advance in the adoption of IPSAS without a thorough analysis of the external and macroeconomic factors including access to foreign aid, public perception, institutional dynamics and the availability of accounting professionals (Argento et al., 2018) as well as other cost-benefit analyses (Abdulkarim et al., 2020).

There is an added responsibility for higher education, particularly in the developed world, to supply an educated labour force to implement IPSAS in the civil service. Adam et al. (2020) found that universities are giving limited attention to public sector accounting, financial management and IPSAS, a trend requiring change if IPSAS is to be successful, particularly as on-the-job training is costly both financially and in terms of time.

Developing Countries and Cash-Basis IPSAS

Developing countries have attracted much attention to public financial reporting and management reforms. However, IPSAS is more than a technical accounting innovation and there are many barriers to its implementation, particularly in countries striving for economic independence and self-sufficiency. The application of IPSAS in the developing countries is more complex as developing countries are typically characterised by lower transparency, corruption and weak financial regulations (Tawiah, 2023a, b). This shows that despite the good intentions of standard setters, IPSAS may not hold all the answers to fostering development in these countries.

One of the major barriers to IPSAS success in developing countries is the lack of access to technology (Whitefield & Savvas, 2016; Alshujairi, 2014; Gkouma & Filos, 2022) and education for those operating the systems (Fahmid et al., 2020; Adam et al., 2020; Amiri & Hamza, 2020) which makes the transition to accrual accounting more seamless. In addition to these drawbacks, Polzer et al. (2019) concluded that there was little evidence of politicians using accrual-based information for decision-making in these countries. This issue is then exacerbated by the lack of education, whereby citizens display little interest in the new information produced, leading to decoupling issues and a lack of information usefulness for the public.

Hepworth (2015) also provides an interesting perspective on how IPSAS may be an enabler of corruption in developing countries. The mechanics of accrual accounting and the prudence concept may allow politicians to overinflate provisions, recognise losses and misappropriate public funds for personal gain. To realize the full benefits, the author argues that there is a need for a country’s civil service to be independent of its political system, ensuring integrity is maintained.

Studies have been conducted on the topic of IPSAS in countries where integrity, transparency and governance have been questioned previously. Iraq and Qatar are interesting cases for different reasons. Qatar has embarked on a search for legitimacy as it looks to modernise elements of its economy, legal and accounting systems to Western standards while maintaining its unique culture and values. They are moving to a less conservative culture and revolutionising their public sector is a means of achieving this legitimacy (Abdulkarim et al., 2023). A survey of professional accountants in Qatar shows that they support the disclosure of more detailed and comprehensive information associated with accrual-based public sector accounting practices. However, standard setters and governments must be conscious and understand the cultural backgrounds of the country to support the transition to ubiquitous public sector financial reporting (Abdulkarim et al., 2023). Similarly, Iraq provides a fascinating landscape given the country’s move from a macro-economic-focused and centrally planned economy to one which promotes free-market interests. Unsurprisingly, these reforms have been initiated following the American occupation of the nation in 2003 (Alshujairi, 2014).

Other obstacles to increased efficiency in financial reporting as a result of IPSAS include relationships between central and local governments as identified by Ada and Christiaens (2018) in Turkey. Collaboration between local authorities and the Supreme Audit Institution is seen as key to operationalising IPSAS in Turkey. Co-operation between central and local bodies has been a long-standing issue in developing countries and hiders the implementation of international rules locally (Christiaens et al., 2015).

Managerial reforms and system changes are critical in helping countries of the developing countries realise the benefits of IPSAS. Accrual-basis reports and systems are not always feasible for economies and governments in transition from cash-basis budgeting and financial reporting. The cash-basis standard has been issued to ease this transition, an option which many developing countries have availed of.

As discussed in prior sections the reliance on foreign aid for developing countries has prompted them to incorporate the cash-basis standard as it is deemed to be suitable for their accounting systems and stage of development (Amiri & Hamza, 2020). However, Chan (2008), contended that the mere presence of a cash-basis standard questions the validity of accrual-basis IPSAS entirely. It is counter-productive as some governments are under the impression that cash-basis and accrual-basis IPSAS are equally acceptable.

Cash-basis IPSAS has been a discussion point for many developing countries such as Bangladesh (Rajib et al., 2019). The role played by accountants in institutionalising changes in Bangladesh determines the trajectory of reforms, like the mimetic forces highlighted in Estonia (Argento et al., 2018).

A case study set in Pakistan found that cash-basis IPSAS did not cover all elements of the government’s financial position as non-cash transactions were ignored, despite the value they hold in the economy and the link they share with long-term sustainability. Overall, it was found that the true financial position was not represented on cash basis (Javed & Zhuquan, 2018). Similarly, it was found in the Nepali context that other, more effective alternatives to cash-basis IPSAS were required (Adhikari et al., 2015).

Other concerns have been raised concerning the comparability across jurisdictions. Sutcliffe (2009) argues that homogeneity is impossible due to the lack of general principles underpinning the cash-basis standard, a gap which was filled by Mustapha et al. (2017) who proposed guidelines for creating a cash-basis format which enhances the understanding of government financial statements.

Currently, the developing countries are in transition in public financial reporting, and the literature highlights that cash-basis IPSAS is not the long-term solution, with economic development and institutional amendments required. It also reinforces the credibility of accrual IPSAS as countries continue their journey to long-term growth, sustainability and self-sufficiency.

Most professionals agreed that public financial management changes are needed, listing corruption, lack of public services and transparency surrounding budget implementation as the main reasons. However, as discussed above, barriers exist in the form of inadequate IT systems and a lack of human resources to implement such changes (Amiri & Hamza, 2020; Gkouma & Filos, 2022). Financial support to aid further development has been recognised in Iraq as a driver in favour of IPSAS implementation, reinforcing extant literature (Mnif Sellami & Gafsi, 2019; Alghizzawi & Masruki, 2020; Tawiah, 2023a).

The research on IPSAS in the developing countries is inherently positive, with researchers concluding that improved information quality and heightened transparency were found in many nations including the Indian and Romanian settings (Narsaiah, 2019; Ilie & Miose, 2012). The desire for transparency and increased openness of accountancy professionals as discussed above can act as a catalyst for the long-term success of IPSAS in the developing countries.

Conclusion

The literature supports IPSAS as an innovative, more comprehensive and potentially transformative approach to public sector reporting. Accrual accounting techniques in the public sector will provide greater information about future liabilities, assets, and debts (Pina & Torres, 2003) while supporting long-term sustainability by recognising non-cash transactions. (Javed & Zhuquan, 2018). Proponents of New Public Management techniques refer to the increased efficiencies that will be realised, following the introduction of accrual accounting (ACCA, 2017; Lapsley et al., 2009; Fahmid et al., 2020).

The IPSASB’s approach to standard setting, mirroring IFRS, the private sector’s international framework has attracted mixed reactions, with some commending the increased legitimacy of using an already established accrual framework (Brusca et al., 2013; Jones & Caruana, 2016). Others, however, feel the basis for IPSAS ignores the complexities and institutional dynamics within the public sector (Rincón-Soto & Gómez-Villegas, 2020; Baskerville & Grossi, 2019).

Adoption rates have soared significantly in recent years (Christiaens et al., 2015; Bekiaris & Paraponti, 2023), increasing convergence in public sector reporting as has been desired by standard-setters. Many forces have been at play in prompting countries to implement the standards, both at local and central government levels, namely coercive, mimetic and normative forces. Access to aid (Ada & Christiaens, 2018; Alghizzawi & Masruki, 2020), the search for legitimacy (Jones & Caruana, 2016) and direction from professionals (Argento et al., 2018; Gomes et al., 2023).

This review has also focused on the developing countries, for which the standards have been advertised to reduce corruption. This is an issue which is prominent due to low fiscal transparency and weak regulations (Tawiah & Soobaroyen, 2023). IPSAS are not looked upon favourably in countries such as Nigeria (Olaoye & Talabi, 2018; Enofe et al., 2017), however, nations such as Qatar and Iraq view IPSAS as a means of creating a more accountable public sector and restoring public trust, nationally and globally (Alshujairi, 2014; Abdulkarim et al., 2023). On the contrary, IPSAS accrual programmes in Indonesia (Fahmid et al., 2020) were found to undermine other government programmes designed to facilitate growth in rural communities. This together with lack of education contributed to minimal understanding of the new information produced by the system. In addition, evidence of politicians using accrual information for decision-making in developing countries is limited (Polzer et al., 2019), conflicting with claims of professional bodies such as ACCA (2017).

Developing countries are seen by some to be limited in implementing full IPSAS and a modified cash basis of reporting has been suggested (Wynne, 2013) as being more appropriate. IPSASB has issued a cash-basis standard, to facilitate a smooth transition to accrual reporting, however, it may be detrimental to the credibility of the standards as decision-makers may view cash and accrual frameworks as equally acceptable in the long term (Chan, 2008).

Finally, IPSAS are not without their drawbacks including enabling manipulation due to accrual and prudence concepts (Christiaens & Rommel, 2008), lack of education (Adam et al., 2020), technology (Fahmid et al., 2020) and human resources (Alshujairi, 2014).

Suggestion for Future Research

It is evident from the literature review that, research in IPSAS is still in the early stages and requires more attention from scholars. Indeed, research on international public sector accounting standards (IPSAS) is essential to improve the transparency, accountability, and comparability of financial reporting in the public sector worldwide. Therefore, based on the review, future studies can explore the following areas.

First, researchers can undertake comparative studies between developed and developing countries on the adoption and consequences of IPSAS. Current studies have examined these groups of countries separately at different periods and provided mixed findings. It will be interesting to know how the adoption process in developed countries differs from developing countries. Also, will the benefits of adopting IPSAS be the same for developed and developing countries at the same time?

Second, other studies can investigate how culture and people’s perception of the government influence the relevance of IPSAS in the country. Arguably culture shaped how people see the role of government in the country. In a socialist culture, the government is seen as a key institution and manager of public funds, hence they expect the government to be more accountable and transparent. On the contrary in a capitalist culture, the government is more of a regulator and referee whose mandate is to make and enforce the laws. Some cultures may prioritize strict compliance with detailed rules, while others may be more inclined toward a principles-based approach. IPSAS, being principles-based, may face resistance or adaptation based on cultural orientations.

Third, the key theme for the adoption of IPSAS is the improvement of government reporting and accountability. If that is the case, then, can IPSAS influence the cost of borrowing and valuation of government financial instruments such as bonds? Although Tawiah and Soobaroyen (2023) show how the IPSAS adoption affects the different sources of finance, it does not cover the cost of borrowing and valuation of financial instruments.

Fourth, there is growing concern about government commitment to environmental sustainability and climate change actions. Therefore, future studies can explore the potential inclusion of environmental and social reporting within IPSAS to address sustainability and non-financial performance disclosure in the public sector.

Fifth, as highlighted in the review, developing countries are largely pressured to adopt international standards including the IPSAS, yet the evidence on the benefits is limited partly due to implementation issues. Therefore, future studies can examine the unique challenges faced by developing countries in adopting and implementing IPSAS, including institutional capacity, data availability, and political factors. Such studies can suggest strategies to support the gradual transition to IPSAS in resource-constrained environments.

Last but not least, future studies can investigate the role of emerging technologies such as blockchain, artificial intelligence, and data analytics in improving the accuracy and efficiency of IPSAS implementation and compliance. Assessing the potential for digital financial reporting and its impact on public sector transparency is also an area worth investigating.