The background to the widespread adoption by Australian public trading enterprises of a deprival value variant of current cost accounting reflects successive efforts to establish demanding rate of return targets, or to legitimise price increases, or to monitor the financial performance of PTEs on a national basis. The experience of three public utilities in implementing CCA is reviewed. This experience suggests that CCA valuation of infrastructure (using deprival or optimized deprival values) is unable to deliver financial data to permit valid cross‐sectional and longitudinal comparisons of performance. Issues raised during the 1970s and 1980s debates about CCA were either ignored or overlooked.
The article proposes a more effective system for reporting on infrastructure held by public sector agencies, having regard to the information needs of users of public sector reports, and with specific reference to concerns about inter-generational equity. It initially reviews options for accounting and reporting on the condition and value of infrastructure, and on proposed routine, overdue or deferred maintenance expenditure. A distinction is drawn between major cyclical or seasonal maintenance expenditure necessary to maintain or restore infrastructure, and projected expenditure to replace or upgrade facilities to meet higher standards of functionality or service quality. The options identified here entail combinations of asset valuations, balance sheet depictions and associated disclosures. They also encompass supplementary disclosures concerning such matters as physical condition, asset management plans, and contractual commitments to perform maintenance or other works. Most embody assumptions about the future use of infrastructure.An assessment of those options suggests that the optimal mode of reporting would not involve 'recognition' of deferred maintenance as a liability, as a contra asset or as a component of equity (the treatments frequently advocated). Rather, it would involve a package of supplementary financial and non-financial disclosures-with the latter incorporating a combination of descriptive information and condition ratings for assets of differing economic lives, and statements of assumptions about future asset use. Possibly these disclosures could be augmented by disclosures of proposed or projected cash flows on future maintenance and upgrading work.
PurposeThe aim of this paper is determine the impact financial reporting obligations and, in particular, the International Financial Reporting Standards (IFRS) have on local government management decision making. In turn, this will lead to observations and conclusions regarding the research question: “Does reporting under the IFRS regime add value to the management of local government?”Design/methodology/approachFollowing analysis of a survey instrument distributed to all local governments in all states of Australia, this research reports on interviews within Australia's largest state – New South Wales (NSW).FindingsIn general, findings suggest that for smaller councils and those situated away from the major cities, the time spent on complying with IFRS and various other legislative demands results in management accounting issues often being downplayed.Research limitations/implicationsA further paper needs to be conducted in order to determine in the second year of implementation the impact of IFRS – both in Australia and, in the future, in other countries – where local government is implementing IFRS. Practical implications will be evident when all Australian states are compared as NSW is the only state where an IFRS template has been produced for all local authorities.Originality/valueThis is the first known analysis of IFRS in local government in Australia, and possibly the world. It utilises both survey and interview instruments within an institutional theory framework to capture the full richness of data available.
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