Public Sector Accounting and the Sustainability of Public Finance Among Accounting Bases, Harmonization, and Flexibility Concerns

  • Alessandro GiosiEmail author
Part of the Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application book series (AFSGFTA)


Since the introduction of the European Semester, the endorsement of the “Six Pack” and the Directive 85/2011 (European Council Secretariat, Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States), harmonization and mutual influences among Government Accounting (GA), Government Finance Statistics (GFS), and IPSAS have been addressed continuously at the European level. The main issue seems to be “if and how” the IPSAS may integrate the GFS’ various purposes, within the entire financial reporting process. After focusing on the role played by accrual accounting in the public sector and the financial accountability needs in the European context, this chapter presents an argument centered on a systematic relationship among different accounting systems, in the light of the current European legislation. It highlights, from a qualitative standpoint, the impact of that relationship on users and their information needs. A breakdown into the revenue recognition practice, as an explanatory approach on the subject, is provided. The results raised the cue to bring out an unavoidable and structural trade-off, recognizable between the harmonization among different accounting systems and the flexibility within each of them. As such, this is discussed as a purposeful starting point, useful to figure out future improvements of the public sector accounting rules across Europe. At the end, progresses by this side could help European Union countries in effectively contributing to the achievement of some sub-targets and indicators included in the Sustainable Development Goal (SDG) 17—Partnership for the Goals—promoted by the United Nations (UN) in 2015.


EPSAS Government accounting Harmonization IPSAS National accounting SDG 17 


  1. Anessi Pessina E, Nasi G, Steccolini I (2007) Effects of budgetary accruals accounting coexistence: evidence form Italian local government. Financ Account Manag 23(2):113–131CrossRefGoogle Scholar
  2. Anessi Pessina E, Nasi G, Steccolini I (2008) Accounting reforms: determinants of local government’s choices. Financ Account Manag 24(3):321–342CrossRefGoogle Scholar
  3. Arnaboldi M, Lapsley I (2009) On the implementation of accrual accounting: a study of conflict and ambiguity. Eur Account Rev 18(4):809–836CrossRefGoogle Scholar
  4. Barton A (2007) Accrual accounting and budgeting systems issues in Australian Governments. AAR 17(41):38–50Google Scholar
  5. Barton A (2011) Why governments should use the government finance statistics accounting system. Abacus 47(4):411–445CrossRefGoogle Scholar
  6. Biondi Y (2014) Harmonising European public sector accounting standard (EPSAS): issue and perspectives for Europe’s economy and society. Account Eco Law 4(3):165–178Google Scholar
  7. Blondal JR (2003a) Accrual accounting and budgeting: key issues and recent developments. OECD J Budg 3(1):43–59CrossRefGoogle Scholar
  8. Blondal JR (2003b) Budget reform in OECD member countries: common trend. OECD J Budg 2(4):8–25Google Scholar
  9. Bromwich M, Lapsley I (1997) Decentralisation and Management in Central Government: recycling old ideas. Financ Account Manag 13(2):181–201CrossRefGoogle Scholar
  10. Brostrom B (1998) Accrual accounting, politics and politicians. Financ Account Manag 14(4):319–333CrossRefGoogle Scholar
  11. Brusca I, Martinez JC (2016) Adopting international public sector accounting standard: a challenge for modernizing and harmonizing public sector accounting. Int Rev Adm Sci 82(4):724–744CrossRefGoogle Scholar
  12. Burns RC, Lee RDJ (2004) The ups and down of state budget process reform: experience of three decades. Public Budget Finance 24(3):1–19CrossRefGoogle Scholar
  13. Carlin TM (2005) Debating the impact of accrual accounting and reporting in the public sector. Financ Account Manag 21(3):309–336CrossRefGoogle Scholar
  14. Caruana J (2016) Shades of governmental financial reporting with a national accounting twist. Account Forum 40(3):153–165CrossRefGoogle Scholar
  15. Christensen M (2003) Without ‘reinventing the wheel’: business accounting applied to the public sector. Austral Account Rev 13(30):22–27CrossRefGoogle Scholar
  16. Christensen M, Parker L (2010) Using ideas to advance professions: public sector accrual accounting. Public Money Manage 26(3):246–266Google Scholar
  17. Christiaens J, Rommel J (2008) Accrual accounting reforms: only for businesslike (part of) governments. Financ Account Manag 24(1):59–75CrossRefGoogle Scholar
  18. Cohen S, Karatzimas S (2016) Modernizing government accounting standards in Greece: a case of garbage can decision making. Public Money Manage 36(3):173–180CrossRefGoogle Scholar
  19. Connoly C, Hydman N (2006) The actual implementation of accruals accounting: caveats from a case within the UK public sector. Account Audit Accoun 19:272–290CrossRefGoogle Scholar
  20. Dabbicco G (2015) The impact of accrual-based public accounting harmonization on the EU macroeconomic surveillance and government’s policy decision-making. Int J Public Admin 38(4):253–267CrossRefGoogle Scholar
  21. Dabbicco G (2018) A comparison of debt measures in fiscal statistics and public sector financial statements. Public Money Manage 38(7):511–518CrossRefGoogle Scholar
  22. Dabbicco G, D’Amore M (2016) Debate: accounting for macroeconomic surveillance in Europe. Public Money Manage 36(3):162–164CrossRefGoogle Scholar
  23. Dasì RM, Montesinos V, Murgui S (2016) Government financial statistics and accounting in Europe: is ESA 2010 improving convergence? Public Money Manage 36(3):165–172CrossRefGoogle Scholar
  24. Dasì RM, Montesinos V, Vela Bargues JM (2018) Towards convergence of governmental financial statistics and accounting in Europe at central and local levels. Span Account Rev 21(2):140–149Google Scholar
  25. Dutta S, Reichelstein S (2005) Accrual accounting for performance evaluation. Rev Account Stud 10(4):527–552CrossRefGoogle Scholar
  26. European Central Bank (2010) Government finance statistics guide. Accessed 13 Mar 2019Google Scholar
  27. European Commission (2011) Proposal for a Regulation of the European Parliament and of the Council on the strengthening of Economic and Budgetary Surveillance of Member States Experiencing or Threatened with Serious Difficulties with Respect to their Financial Stability in the Euro Area. Accessed 16 Mar 2019
  28. European Commission (2013) Report from the Commission to the Council and the European Parliament. Towards implementing harmonized public sector accounting standards in Member States. The suitability of IPSAS for the Member States. Brussels, Belgium. Accessed 17 Mar 2019
  29. European Council Secretariat (2011) Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States. Accessed 20 Mar 2019
  30. Eurostat (1996) European system of accounts. Publications Office of the European Union, LuxembourgGoogle Scholar
  31. Eurostat (2010) European system of accounts. Publications Office of the European Union, LuxembourgGoogle Scholar
  32. Eurostat (2014) Manual on government deficit and debt. Publications Office of the European Union, LuxembourgGoogle Scholar
  33. Giosi A, Brunelli S, Caiffa M (2015) Do accrual numbers really affect financial market? An empirical analysis of ESA accounts across the EU. Int J Public Admin 38:297–310CrossRefGoogle Scholar
  34. Goldman F, Brashares E (1991) Performance and accountability: budget reform in New Zealand. Publ Budg Financ 11(4):75–85CrossRefGoogle Scholar
  35. Gray A, Jenkins W (1993) Codes of accountability in the new public sector. Account Audit Account J 6(3):52–67CrossRefGoogle Scholar
  36. Guthrie J (1998) Application of accrual accounting in the Australian public sector - rhetoric or reality. Financ Account Manag 14(1):1–19CrossRefGoogle Scholar
  37. Guthrie J, Parker L, English LM (2003) A review of new public financial management change in Australia. Austral Account Rev 13(30):3–9CrossRefGoogle Scholar
  38. Heald D (2017) Challenges for European public sector accounting. Account Eco Law 4:131–135Google Scholar
  39. Hepworth N (2003) Preconditions for successful implementation of accrual accounting in central government. Public Money Manage 23(1):37–44CrossRefGoogle Scholar
  40. Humphrey C, Miller P, Scapens RW (1993) Accounting, accountability and the ‘new’ UK public sector”, editorial for a dedicated issue on the UK public sector. Account Audit Accoun 6(3)Google Scholar
  41. International Monetary Fund (2001) Manual on government finance statistics. Washington, USAGoogle Scholar
  42. International Monetary Fund (2012) Manual on government finance statistics. Draft revision. USA, WashingtonGoogle Scholar
  43. International Public Sector Accounting Standard Board –IFAC (2014) The conceptual framework for general purpose financial reporting by public sector entities, New YorkGoogle Scholar
  44. Jones R (1998) The conceptual framework of resource accounting. Public Money Manage 18(2):11–16CrossRefGoogle Scholar
  45. Jorge S, Jesus MA, Laurano R (2014) Exploring determinant factors of differences between governmental accounting and national accounts budgetary balances in EU member state. TRAS:34–54Google Scholar
  46. Jorge S, Jesus MA, Laurano R (2016) Governmental accounting maturity toward IPSASs and the approximation to National Accounts in the European Union. Int J Public Admin 39(12):976–988CrossRefGoogle Scholar
  47. Jorge S, Jesus MA, Laurano R (2018) Budgetary balance adjustments from governmental accounting to national accounts in EU countries: can deficit be prone to management? Publ Budg Financ 38(4):97–116CrossRefGoogle Scholar
  48. Kober R, Lee J, Ng J (2010) Mind your accruals: perceived usefulness of financial information in the Australian public sector under different accounting systems. Financ Account Manag 26(3):267–298CrossRefGoogle Scholar
  49. Kober R, Lee J, Ng J (2013) GAAP, GFS and AASB 1049: perceptions of public sector stakeholders. Account Finance 53(2):471–496CrossRefGoogle Scholar
  50. Kuhn TS (1962) The structure of scientific revolution. University of Chicago Press, ChicagoGoogle Scholar
  51. Lande E, Rocher S (2011) Prerequisites for applying accrual accounting in the public sector. Public Money Finance 31(3):219–222Google Scholar
  52. Lapsley I, Wright E (2004) The diffusion of management accounting innovations in the public sector: a research agenda. Manage Account Res 15(3):355–374CrossRefGoogle Scholar
  53. Lapsley I, Mussari R, Paulsson G (2009) On the adoption of accrual accounting in the public sector: a self-evident and problematic reform. Eur Account Rev 18(4):719–723CrossRefGoogle Scholar
  54. Laughlin R (2008) A conceptual framework for accounting for public-benefit entities. Public Money Manage 28(4):247–254CrossRefGoogle Scholar
  55. Lickierman A (2000) Changes to managerial decisional taking in UK central government management. Account Res 11(2):253–261CrossRefGoogle Scholar
  56. Mader D, Vitters C, Obbagy J (2018) Restoring trust in government through transparency by using accounting and enforcing accountability. J Government Financ Manage 67(3):43–45Google Scholar
  57. Mayston D (1992) Capital accounting, user needs and the foundations of conceptual framework for public sector reporting. Financ Account Manag 8(4):227–248CrossRefGoogle Scholar
  58. Monsen N (2008) Governmental accounting in Norway: a discussion either implications for international development. Financ Account Manag 24(2):151–167CrossRefGoogle Scholar
  59. Montesinos V, Vela JM (2000) Governmental accounting in Spain and the European monetary union: a critical perspective. Financ Account Manag 16(2):129–150CrossRefGoogle Scholar
  60. Myers J (1959) The critical event and recognition of net profit. Account Rev 34(4):528–532Google Scholar
  61. Newberry S (2002) Intended or unintended consequences? Resource erosion in New Zealand’s government departments. Financ Account Manag 18(4):309–330CrossRefGoogle Scholar
  62. Partington D (2002) Essential skill for management research. Sage, LondonCrossRefGoogle Scholar
  63. Paulsson G (2006) Accrual accounting in the public sector: experiences from the central government in Sweden. Financ Account Manag 22(1):47–62CrossRefGoogle Scholar
  64. Pendlebury M, Karbhari Y (1998) Resource accounting and executive agencies. Public Money Manage 18(2):29–33CrossRefGoogle Scholar
  65. Pina V, Torres L (2003) Reshaping public sector accounting: an international comparative view. Can J Adm Sci 20(4):334–350CrossRefGoogle Scholar
  66. Pina V, Torres L, Yetano A (2009) Accrual accounting in EU local governments: one method, several approaches. Eur Account Rev 18(4):765–807CrossRefGoogle Scholar
  67. Popper K (2002) The logic of scientific discovery. Routledge, LondonGoogle Scholar
  68. Rutherford BA (1992) Developing a conceptual framework for central government financial reporting: intermediate users and indirect control. Financ Account Manag 8(4):265–280CrossRefGoogle Scholar
  69. Ryan C, Guthrie J, Day R (2007) Politics of financial reporting and the consequences for the public sector. Abacus 43(4):474–487CrossRefGoogle Scholar
  70. Scheers B, Sterck M, Bouckaert G (2005) Lessons from Australian and British reforms in results-oriented financial management. OECD J Budg 5(2):133–162CrossRefGoogle Scholar
  71. Sforza V, Cimini R (2017) Central government accounting harmonization in EU member states: will EPSAS be enough? Public Money Manage 37(4):301–308CrossRefGoogle Scholar
  72. Sprouse RT, Moonitz M (1962) A tentative set of broad accounting principles for business enterprises. AICPAGoogle Scholar
  73. United Nations (UN), World Bank, OECD (Organization for Economic Co-operation and Development), EC (European Commission) and IMF (International Monetary Fund) (1993) System of National Accounts. Brussels, Belgium: Luxembourg; USA: New York and Washington DC; France: Paris; United Nations; World Bank; Organization for Economic Co-operation and Development; Commission of the European Communities and International Monetary FundGoogle Scholar
  74. United Nations (UN), World Bank, OECD (Organization for Economic Co-operation and Development), EC (European Commission) and IMF (International Monetary Fund) (2008) System of National Accounts. Brussels, Belgium: Luxembourg; USA: New York and Washington DC; France: Paris; United Nations; World Bank; Organization for Economic Co-operation and Development; Commission of the European Communities and International Monetary FundGoogle Scholar
  75. Vinnari EM, Näsi S (2008) Creative accrual accounting in the public sector: ‘milking’ water utilities to balance municipal budget and accounts. Financ Account Manag 24(2):97–116CrossRefGoogle Scholar

Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Department of Human ScienceLUMSA University of RomeRomeItaly

Personalised recommendations