Financial accounting reforms in the Australian public sector: an episode in institutional thinking

In recent years in Australia, accounting regulations have been developed that require the adoption of commercial accounting and reporting practices by public-sector organisations, including the recognition of cultural, heritage and scientific collections as assets by non-profit cultural organisations. The regulations inappropriately apply traditional accounting concepts of accountability and performance, notwithstanding that the primary objectives of many of the organisations affected are not financial. This study examines how this was able to occur within the ideas outlined in Douglas’s (1986) How Institutions Think. The study provides evidence to demonstrate that the development; promotion, and defense of the detailed accounting regulations were each constrained by institutional thinking and, as a result, only certain questions were asked and many problems and issues associated with the regulations were not addressed. Thus, it seeks to further our understanding of the nature and limits of change in accounting and the role of institutions in promoting and defending changes to accounting practice.

Value relevance of accounting information in China pre- and post-2001 accounting reforms

Purpose – This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association between earnings and book value of equity to share returns before and after the introduction of the Accounting System for Business Enterprises (ASBE) in 2001 for A- and A&B-share firms.

Design/methodology/approach – The paper employs the return regression model. The pre-ASBE period is designated as 1997 through to 2000, and the post-ASBE period is designated as 2002 through to 2004. All firms listed on the Chinese stock market during the investigation period constitute the sample.

Findings – It is found that accounting information better explains share returns for both A-share firms and A&B-share firms in the post-ASBE period. The paper also finds that the book value of equity for A&B-share firms is incrementally value relevant to that of A-share firms in the post-ASBE period.

Research limitations/implications – Further studies will contribute to understanding how governance mechanisms and liquidity influence the association between accounting information and share returns in the Chinese A-share market.

Practical implications – The findings provide empirical evidence regarding the relevance of accounting information in emerging markets.

Originality/value – The paper contributes to the extant value relevance literature by investigating time periods surrounding the issue of ASBE in 2001 in the Chinese stock market.

Reforming Australian public sector accounting : an episode of institutional thinking

In recent years in Australia, accounting reforms have been developed which have resulted in the application of commercial systems of accounting to diverse public sector organisations. The reforms, which include the requirement to recognise infrastructure and heritage resources as assets in financial reports, endorse financial notions of accountability and performance that have been traditionally applied within private sector, profit-seeking organisations. Such notions are applied to a range of public sector organisations for the first time, even though the primary missions or objectives of many of these organisations are social, rather than financial in orientation. This critical, interpretative case study, set within the context of not-for-profit public museums, seeks to enhance an understanding of public sector accounting change based on these unique social organisations. The study examines three aspects of the reforms, namely, their development, their promotion and their defence. This examination is undertaken using the ideas contained in Mary Douglas’ (1986) How Institutions Think as the key theoretical construct. The supplementary perspectives of problematisation and epistemic communities are used to assist in applying the primary theoretical construct by explaining how, and by whom, these reforms were advocated and implemented in this specific instance. The study shows how the interpretation and application of the statements comprising the conceptual framework have shaped the development, promotion and defence of detailed standards developed for specific public sector organisations. In doing so, the study addresses two key research questions: (1) How were financial notions of accountability and performance of Australian public sector organisations constructed during the period 1976-2001 and articulated in the CF, once its development began, within this reform period? (2) How were these notions and other concepts of financial reporting outlined in the CF interpreted and applied in the (i) development; (ii) promotion; and (iii) defence of detailed accounting standards for not-for-profit public museums in Australia during the period under investigation? The study demonstrates that the concepts of financial reporting outlined in the conceptual framework were used by a relatively small group of technical experts located in influential positions in accounting regulation and in other fields to justify the application of accrual accounting within diverse public sector organisations. During the period examined, only certain questions were posed and certain issues considered and many problems associated with the implementation of the reforms were not considered. Accordingly, a key finding of the study is that each aspect of the reform period was guided and constrained by institutional thinking. In addition, the study shows how the framework's content can be used to permit equally well-argued, but conflicting, accounting policies to be adopted and defended for the same items, indicating the framework to be of only limited value as a technical tool. This leads to another key finding of the study, namely, that the framework is best understood as a political tool, serving a crucial role in enabling accrual accounting reforms to be developed, promoted and defended within the public sector. Thus, the study seeks to offer an enhanced understanding of the nature and determinants of accounting change, and accordingly, it broadens an understanding of the use of the conceptual framework, as an institution, in developing, promoting and defending changes to accounting practice.

Comparing Australian commonwealth, state and territory budget balance numbers

This article presents the findings from a case study of the 2004–05 annual budgets prepared by the Commonwealth, state and territory governments of Australia. The study examined the headline budget balance (general government sector surplus or deficit) announced in the budget papers and speeches of each of the nine governments. Findings indicate the adoption of varying measurement bases and a consequent lack of comparability in the headlined budget balance numbers. Accounting reforms have resulted in adoption of two different systems of accrual accounting by governments — the Government Finance Statistics (GFS) system and the professional Australian Accounting Standards (AAS) system — which provide significantly different measurements of the budget balance. However, there has been no prescription of the manner in which these alternative measures should be presented. This raises a number of questions from an accounting perspective.

Multiple informal imperial connections and the transfer of accountancy to Ethiopia (1905 to 2011)

The accounting history literature expounds the role of imperial connection on the transfer of Western accountancy concepts and practices to developing countries. An emerging theme within this literature is the shift in imperial power from Britain to USA over the last century and the ramifications of this shift on accountancy globally. Using a framework developed by prior research for investigating the transfer of accountancy across countries, this study examines historical developments of accounting practice, education and professional training in Ethiopia (from 1905 to 2011) in the light of the country’s interactions with Britain and the USA. These interactions facilitated Ethiopia’s continued importation of British accountancy practice and professional training contemporaneously with importation of accounting education from the USA. Over the past two decades, Ethiopia has been undertaking accounting reforms as part of economic policy reforms in pursuit of neo-liberal economic ideals. In response to shifting priorities of transnational actors, Ethiopia continued trialling policy initiatives that are yet to yield a stable equilibrium with coherent links of accounting education, practice and professional training.

Cost information in the new public sector environment : cost accounting change in a state-owned hospital

This paper reports on a case study of the utilisation and users of cost information in a state-owned teaching and research hospital in Australia. The findings indicate that the current utilisation of the cost information resides primarily at higher executive and managerial levels of the organisation. Organisational change, particularly pressure for improved productivity and competitiveness driven by public-sector reforms in Australia, is significantly filtering down throughout the subject hospital. Various productive and unproductive ways that cost information is used, and impediments to the use of costing information in the hospital setting, are identified.

Reflections on the public interest in accounting

The expression, ‘the public interest’ is so ingrained in policy development, that reforms in accounting are often championed under the notion that such developments will enhance the well-being of the community. While the public interest is well understood at policy level, at operating level the expression is ambiguous and has a multiplicity of interpretations. Current conceptions of the public interest are inadequate to define a principle which must stand as a measure of public policy. Who exactly is the public, what are the interests of the public, and what does it mean to serve the public interest? Consequently, members of the accounting profession are expected to comply with a principle that is vague and ambiguous. This paper undertakes a critical analysis of the public interest in accounting relying on a typology of public interest theories (normative, consensualist, process, and abolitionist theories) developed by Cochran [Cochran CE. Political science and “the public interest”. The Journal of Politics 1974;36(2):327–55]. The analysis indicates that existing knowledge and understanding of the public interest, is in part, consistent with some aspects of the Cochran’s [Cochran CE. Political science and “the public interest”. The Journal of Politics 1974;36(2):327–55] typology of public interest theories and inconsistent in others. The analysis also indicates that there is room for the profession to provide further guidance on the meaning of the public interest and how to apply it in practice.

Relevance of traditional management accounting in the public sector

 The major reforms that the Australian public sector went through in the early 1980s were characterised by a stress on efficiency and effectiveness. The reforms led to the import of a private sector mangement philosophy to the public sector, including private sector based management accounting techniques. It is this import that motivated the critical theoretical discussion presented in this paper concerning the applicability of traditional private sector management accounting techniques in the public sector. The paper sets out the pros and cons of such application and provides directions for future research.

An introduction to CLERP 9

An Introduction to CLERP 9, as its title suggests, is aimed at providing legal practitioners and students with an overview of Australia’s corporate governance reforms, but more than that, it also analyses the events that led to the reforms and provides practical examples of how the amendments will change corporate practices.

The book begins by defining what is generally meant by good corporate governance. It then outlines the relevant recent events that led to introduction and commencement of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9) on 1 July this year. The corporate failures of Enron and HIH – and subsequent Royal Commission – in 2001, and the failure of private auditing firms to warn of their client’s problems are well summarised.

As well as the Sarbanes Oxley Act of 2002, the US equivalent to CLERP 9, the establishment of the ASX Corporate Governance Council and the release of its Principles of Good Corporate Governance and Best Practice Recommendations are examined in detail.

The book covers all the chief changes, including the new rules for audit independence, financial disclosure, whistleblowing, remuneration for directors and executives and continuous disclosure.

Throughout, the book provides a comprehensive and easy to understand commentary on how the CLERP 9 Act alters the Corporations Act 2001 and the ASIC Act 2001, as well as highlighting important changes that affect present practice. For example, the author notes that under the auditor independence rules, when an audit firm contravenes an independence requirement, liability is placed on all members and directors of the audit firm, not just the lead auditor responsible for a particular audit. This, he says, is aimed at introducing a “culture of compliance”.

As well as providing a quick reference guide to how the CLERP 9 Act amends the Corporations and ASIC Acts at the beginning of the book, the table at the end of the book comparing the corporate governance reforms in the US, UK and Australia will be very useful for practitioners trying to make sense of how multinational clients might be liable across different jurisdictions.

Rural nursing and health care reforms : building a social model

This article explores recent shifts in health-care policy and the implications for rural nursing in Australia. Health-care reforms have resulted in the implementation of a 'market forces' ideology, creating tensions between economic imperatives and the need for equity and greater access in rural service delivery. New models of health-service delivery have been developed that have significant implications for the way rural health care is defined, practised and received. The issues surrounding the context of rural nursing practice and service delivery are discussed.

The first professors of accounting in Australia

A range of contributions in the accounting history literature deal with "the first". While such studies set out to identify key points in time in the development of accounting, they may also narrow perspectives on accounting's past. This study on the first professors of accounting in Australia seeks to clarify the historical record while, at the same time, pointing out the difficulties of the task. A call is also made to set such studies within the ambit of a theme identified by Carnegie and Napier (1996, 2000) as "comparative international accounting history".

Exploring comparative international accounting history

Accounting historians have long recognised accounting’s international scope but have typically concentrated their research endeavours on region- or country-specific studies, or on investigating the diffusion of accounting ideas, techniques and institutions from one country to others. Much potential exists to study the development of accounting from a comparative international perspective, mirroring the attention paid over the past two decades to the comparative study of international accounting practices and standards. This paper proposes a definition of comparative international accounting history (CIAH) and examines the nature and scope of studies within this genre. The CIAH approach is exemplified through an exploratory comparative study of agrarian accounting in Britain and Australia in the latter half of the nineteenth century. In the light of this study, the paper evaluates the potential of CIAH to contribute to an understanding of accounting’s past and provide insights into accounting’s present and future.

Accounting narrative evaluation: using texture as a measure of quality

This paper applies a texture-based approach to evaluating accounting narratives. We employ the texture index created by Sydserff and Weetman (1999) as it is purported to evaluate narratives more accurately than previous methods. Not enough emphasis has been placed on the utilisation of linguistic tools in the accounting context. We see that a rigorous test serves the accountability function and may contribute positively to investor protection and confidence. We support the contention that improving narrative evaluation will help increase the quality of accounting narratives as they are presented in corporate annual reports. Quality for purpose of this paper is defined as a function of readability and understandability. These characteristics are considered essential for informed investment decision-making. We focus on the usefulness of the texture index in determining an appropriate measure of both readability and understandability by applying the texture index to a sample of corporate annual reports. Our results show conditional support for the use of the texture index as a viable alternative to readability tests.