INTHEBLACK May 2022 - Magazine - Page 26
F E AT U R E
// A C C R U A L B AS I S
ACCOUNTING
accounting model, while Vietnam has indicated it
intends to move from partial to full accrual in the
near future.
BEHIND THE PUBLIC SECTOR ACCRUAL PUSH
Greater government transparency around budgeting
and spending, and hence greater accountability, are
core elements in the global push for governments
to adopt accrual accounting.
Using accrual basis accounting will also give a
government direct oversight over its balance sheet
liabilities, such as the amounts being spent on
long-term infrastructure projects.
Then there are the large amounts of capital
governments are required to hold in order to cover
public servants’ annual leave, superannuation and
pension liabilities.
“By providing a comprehensive view of
government finances, accrual reporting helps ensure
that expenditure of public funds is transparent,
public officials are held accountable, and future
liabilities are recognised officially and planned for
properly,” IFAC and CIPFA state.
“With governments under more financial strain
than ever following the huge levels of pandemicrelated expenditure, understanding the overall
picture and making the best use of the remaining
resources is crucial to long-term recovery.
“Accrual-based accounting is essential in helping
governments mitigate corruption, improve trust
and transparency, and deliver desired outcomes that
their communities deserve and need in the postpandemic world.”
Kevin Dancey, CEO at IFAC, adds that the
continued shift from cash to accrual reporting in
the public sector “will be crucial to governments
globally in making the tough choices they face
following the pandemic”.
This will necessarily include increased usage of
international accrual-based accounting standards
developed by the International Public Sector
Accounting Standards Board (IPSASB).
Almost 60 per cent of governments that reported
on an accrual basis in 2020 used International
Public Sector Accounting Standards (IPSAS) either
directly, indirectly or as a reference point.
It is expected that, by the end of 2025, nearly
three-quarters (73 per cent) of governments that
26 ITB May 2022
report on accrual will use IPSAS in one of these
three ways.
“Professional accountants have a critical role to
play in delivering the full potential benefits for
citizens worldwide in terms of decision-making,
transparency and accountability,” Dancey says.
He notes that, in addition to the support of
regional and international organisations, effective
implementation of accrual accounting relies on the
skills of public sector accountants to interpret the
richer, more comprehensive data.
“As more governments move to accrual, the
need for public sector accountants will increase
correspondingly.”
MALAYSIA’S TRANSITION GATHERS PACE
The Malaysian Government began accounting for
transactions on an accrual basis in 2018, but so far
the country has not officially implemented accrual
accounting.
The reason for that is fairly simple. Transitioning
from cash to accrual accounting on a national public
sector level is a mammoth task.
“Malaysia has made great progress in its efforts
and actions in transitioning towards financial
reporting based on the accrual principle,” says
Datuk Dr Yacob Mustafa FCPA, accountant
general of Malaysia.
The Malaysian Government currently prepares
accounts using both cash and accrual reporting.
“The accrual-based financial reporting is
presented at the ministries level as a management
report to support the official federal government
financial statements prepared on a cash basis,”
Mustafa says.
“However, from the legal aspect, amendments
to the acts related to financial reporting have been
implemented and are in the process of being tabled
in parliament for approval.”
Mustafa says Malaysia’s journey towards
implementing accrual accounting started 10 years
ago, when it was placed as one of the agenda items
in the Public Sector Transformation Policy measures
under the New Economic Model 2011-2020.
To get to where it is now, and to ensure a smooth
implementation, Malaysia has taken four main
steps – developing standards and policies, reviewing
and drafting amendments to laws and regulations,