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Making Financial Sustainability Measurement More Relevant: An Analysis of Consolidated Financial Statements

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Financial Sustainability of Public Sector Entities

Part of the book series: Public Sector Financial Management ((PUSEFIMA))

Abstract

This chapter seeks a deeper understanding of local government groups’ financial sustainability by analysing consolidated financial statements. Its aim is to evaluate how measures of local government financial stability change when the analysis centres on consolidated, rather than separate, financial statements.

Financial statement results are analysed for sustainability, flexibility, and vulnerability. A benchmark analysis is implemented to determine if assessments of financial sustainability differ between separate versus consolidated financial statements.

The results reveal a clear difference between the separate and consolidated financial statement outcomes. The presence of dependent municipal entities leads to different considerations about financial sustainability than those emerging from analyses of separate financial statements. The difference arises in all three dimensions: sustainability, flexibility, and vulnerability. None of the local governments achieved the same ranking across the two financial statements.

Although the empirical analysis involves the Italian context, the results provide useful insight for the wider international debate on harmonization processes, as initiated by the European Commission. Assessing consolidated financial statements requires a clear identification of the “boundary” of the financial statement. This point presupposes that reporting entities have to be carefully identified.

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Notes

  1. 1.

    The sample includes three regional capital and 14 provincial capital governments. In geographical terms, 4 local governments are located in the northwest, 11 in the northeast, and 3 in central Italy.

  2. 2.

    Tables A.2, A.3, and A.4 are available in the Appendix to this chapter.

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Author information

Authors and Affiliations

  1. Department of Law, University of Brescia, Brescia, Italy

    Cristian Carini

  2. Department of Economics and Management, University of Brescia, Brescia, Italy

    Claudio Teodori

Authors
  1. Cristian Carini
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  2. Claudio Teodori
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Correspondence to Cristian Carini .

Editor information

Editors and Affiliations

  1. Department of Accountancy, University of Malta, Msida, Malta

    Josette Caruana

  2. Department of Accounting and Finance, University of Zaragoza, Zaragoza, Spain

    Isabel Brusca

  3. Department of Economics “Marco Biagi”, University of Modena and Reggio Emilia, Modena, Italy

    Eugenio Caperchione

  4. Department of Business Administration, Athens University of Economics and Business, Athens, Greece

    Sandra Cohen

  5. Department of Management and Innovation Systems, University of Salerno, Fisciano, Italy

    Francesca Manes Rossi

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Carini, C., Teodori, C. (2019). Making Financial Sustainability Measurement More Relevant: An Analysis of Consolidated Financial Statements. In: Caruana, J., Brusca, I., Caperchione, E., Cohen, S., Manes Rossi, F. (eds) Financial Sustainability of Public Sector Entities. Public Sector Financial Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-06037-4_6

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