A Roadmap for Implementing Accrual Accounting

Accrual in the Public Sector

Posted by Suzanne Flynn, Delphine Moretti, and Joe Cavanagh[1]

Last week the IMF published a new paper in its technical notes and manuals (TNM) series, a guide to “Implementing Accrual Accounting in the Public Sector” by Joe Cavanagh, Suzanne Flynn and Delphine Moretti (TNM 16/06). The technical note is available here.

Many countries have changed or are considering changing the basis of their financial accounts from cash to accruals. This TNM explains what accrual accounting (AA) means for the public sector and discusses current trends in moving from cash to accrual accounting.  It outlines the factors that governments should consider in preparing for and sequencing the transition. The note recognizes that governments will have different starting points and objectives, and varying practices in preparing financial statements. Countries also vary considerably in the volume of stocks and flows, and the number of public sector entities, that are recorded outside the government accounts. These factors need to be considered when planning and sequencing the implementation of AA.

Building on international experiences, the note proposes four possible phases for progressively implementing AA in the public sector. It sets out policy and operational guidance for each of these phases, which may be summarized as follows:

There are a number of general lessons than can be gleaned from the experience of those countries that have implemented AA:

[1] Suzanne Flynn is a Senior Economist in the Public Financial Management 1 Division of FAD; Delphine Moretti is Senior Policy Analyst in the OECD’s Budgeting and Public Expenditure Division; and Joe Cavanagh is an FAD expert.

[2]  In 2015, 41 governments accounted on a full accrual basis, a further 16 used modified accrual, 28 modified cash and 114 remained on a pure cash accounting basis.

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