The value of central government accrual consolidated financial statements: A qualitative cost-benefit analysis.
Maluleke, Sipho John
Maluleke, Sipho John
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Abstract
The Public Finance Management Act (PFMA) requires both the National Treasury and Provincial Treasuries to compile consolidated financial statements (CFS) for national and provincial governments respectively in accordance with Generally Recognised Accounting Practice (GRAP). The CFS, as required by the PFMA in accordance with GRAP is currently not being compiled because of the different
accounting bases applied between national and provincial government departments (modified cash basis), and their controlled entities (accrual basis of accounting). Therefore, it will only be possible to compile full accrual CFS as required by the PFMA once the national and provincial departments have completed the transition to accrual accounting. The primary objective of this study was to establish whether preparing accrual CFS would benefit the South African public service and the South African citizenry. This objective was achieved through qualitative cost-benefit analysis (CBA). To identify
the variables utilised in the latter approach (qualitative CBA), a qualitative content analysis method was adopted. The unit of analysis included various government documents as well as relevant literature from various countries which had adopted the accrual consolidation model. On the one hand, the study revealed a number of benefits attributed to the compilation of accrual CFS. However, certain benefits were disputed by independent research studies. On the other hand, this study also identified a variety of costs associated with the adoption of accrual CFS. Unfortunately, despite extensive searches, no independent research study could be retrieved to dispute the costs. The study revealed that while accrual CFS may have certain value in terms of the benefits identified, the costs might be significant. The
study concluded that South Africa could benefit by applying GRAP 6 on Consolidated Financial Statements, provided that the stated benefits are realised. However, the benefits should be weighed against the costs and competing public needs.
Description
Submitted in fulfilment of the requirements for the degree, Magister Technologiae: Cost and Management Accounting
in the Department of Managerial Accounting and Finance, Faculty of Economics and Finance, Tshwane University of Technology
Date
2018-01-01
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Tshwane University of Technology
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Keywords
Central government, Accrual consolidated financial statement, Cost-benefit analysis