The Effect of Public Sector Accrual Accounting Reform on Fiscal Performance

Abstract

This study investigates whether the expected outcome of better performance management, accountability and transparency in government following public sector accrual accounting reform would improve fiscal performance in terms of fiscal stability and fiscal sustainability. Measured as budget deficit and public debt as percentages of gross domestic product respectively, fiscal stability and sustainability were found to have improved after the implementation of accrual accounting reform by the sample of 41 central governments of developed countries. This study provides evidence of the benefits of and justification for the huge cost of implementing accrual accounting reform.

Keywords: Fiscal Stability, Fiscal Sustainability, Intergenerational Equity Theory, Matching Concept, Public Finance and Accounting