Public Sector Governance and Accountability Series: Budgeting and ...

6
Accrual Accounting in the
Public Sector: Lessons for
Developing Countries
paul boothe
O
ne of the key developments in public sector governance over the
past 15 years has been the strong encouragement by internationalagenciessuchastheOrganisationforEconomicCo-operation
and Development (OECD), the International Monetary Fund
(IMF), and the World Bank for countries to move from traditional
public sector–based cash accounting to private sector–based accrual
accounting. Some international accounting bodies, such as the
International Federation of Accountants (IFAC), have also supported
this direction.
Proponents of such a change point to a number of benefits.
They believe that accrual accounting, because it recognizes
expenses when they are deemed to have occurred rather than when
they are paid, provides a more transparent picture of government
operations. In addition, accrual accounting provides a clearer treatment
of capital assets, explicitly recognizing the depreciation of
physical capital over time and variations in the value of financial
assets and liabilities, regardless of whether these events result in
cash transactions.
In 2003, it was estimated that about 5 of 28 OECD member
countries had adopted full accrual accounting, with a further 2
179