Accrual accounting is taking over in the world’s major economies, with nearly three-quarters of their governments using it, according to a new study.
The study, Accrual Practices and Reform Experiences in OECD Countries, was conducted by the International Federation of Accountants and the Organization for Economic Co-operation and Development, and found that of the 34 countries with advanced economies that make up the membership of the latter, 25 countries, or 73 percent, base their annual financial reports on accrual accounting, and another three countries, or 9 percent, are transitioning to accrual accounting now. Only six countries currently use cash accounting.
In 2003, when the OECD first began tracking the information, only a quarter of the governments used accrual accounting.
“High-quality financial reporting is essential to ensure that governments make fiscal decisions based on up-to-date information and an accurate understanding of their financial position,” said IFAC CEO Fayez Choudhury, in a statement. “They provide a mechanism through which legislatures, auditors, and the public at large can hold governments accountable for their financial performance.”
The report also found that more than a quarter of the major economy governments studied prepare their annual budgets on an accrual basis.
“While governments still seek to improve the usefulness and comprehensibility of their financial reports, a majority of OECD countries expressed satisfaction that accounting reforms have already resulted in greater transparency and accountability of their financial operations,” said Jón Blöndal, head of the OECD Budgeting and Public Expenditures Division, in a statement.
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