The Implementation of Accrual-Based Accounting in Malaysian Public Sector: Opportunities and Challenges
DOI:
https://doi.org/10.37134/ibej.vol11.1.5.2018Keywords:
Accrual-based accounting, Malaysian public sectorAbstract
Public sector reforms in Malaysia begun in the 1980s with the primary objective of improving the effectiveness, efficiency and transparency of governmental operational and financial management. The shift from cash-based accounting to accrual-based accounting in the public sector constitutes one of the measures outlined in the New Economic Model (NEM) under this reform initiative. The aim of this paper is to examine the opportunities and challenges faced by the Malaysian public sector in implementing accrual-based accounting. A review of previous literature in this area showed that accrual-based accounting improves decision-making processes, promotes better financial management and enhances public accountability. However, the transition process between these two accounting methods is not without challenges. Human resources competency, software and technology capability, accounting policies and standards suitability are identified as major challenges in the implementation effort. These challenges should be taken into consideration carefully by the government in order to ensure successful migration towards accrual-based accounting.
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References
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Bontas, C. A & Petre, M. C. (2009). Arguments for introducing accrual-based accounting in the Public Sector. Constantine Brancoveanu University, Romania.
Care, L. (2016). Auditor General Report, May 2011, 98–108.
Cavanagh, J., Flynn S., & Moretti, D. (2016). Accrual accounting in the public sector. CESifo DICE Report, 5(3), 43–45
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Christiaens, J., Rommel, J. Barton, A. & Everaert, P. (2012). Should all capital goods of governments be recognized as assets in financial accounting? Baltic Journal of Management, 7(4), 429 – 443.
Connolly, C. J., & Hyndman, N. S. (2005). The impact of resource accounting and budgeting in the Northern Ireland public sector. Association of Chartered Certified Accountants' Research Report (No 87). Certified Accountants Educational Trust, London.
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Cordery, C. (2010, December). Cash-based vs accrual accounting: How should NFPs account for their business?.
Chartered Accountant Journal, 58-59.
Deinert, K. (2015). Corruptions Perceptions Index 2015. Transparency International. Retrieved from
https://www.transparency.org/cpi2015
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Fauziah, M. & Noor Azman, A. (2014). Human perspective on cash to accrual-based accounting system in Malaysia. Global Review of Accounting and Finance, 5(2), 1– 15.
Gomes, M. (2013, January). Improving public sector finance. Accountants Today, 12-15.
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Mohammadi, S., Mohammadi, M., & Zare, S. (2012). Implementation of full accrual basis in governmental organizations (Case Study: Shiraz University of Technology, Iran). Interdisciplinary Journal of Contemporary Research in Business, 4(2), 287-298.
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Murni, S., Norida, H., Azimon, A.A. & Azlina, A. (2014). Enhancing Malaysian federal government accountability through annual report: a stakeholder perspective. International Journal of Business, Economics and Law, 4(2), 42-50.
Nik Zam N, W. (2005). The major impacts of change from cash to accrual accounting in the public sectors.
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Nurul Nadiah, A., Santer Nurfarahinas, M., Saiyidah Diyana, A. & Muhamad Hadi Zulfadli, P. (2015). The rationale for accrual accounting: A case of Malaysian accountant general’s department. Malaysian Journal of Research, 1(1), 20-27.
Organizations for Economic Co-operation and Development (OECD) (1993). Accounting for what? The value of accrual accounting to the public sector. Paris: OECD Publication Service.
Ouda, H. (2004). Basic requirements model for successful implementation of accrual accounting in the public sector. Public Fund Digest, 4(1), 78-99.
Raja Abdullah & Nik Mustapha (2010). New Economic Model (NEM): An analytical perspective. Presented at
Persidangan Perkhidmatan Awam ke-15, Kuala Lumpur.
Rodan, G. (February, 2000). Transparency, Asian economic crisis and the prospects of media liberalisation.
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Ropidah O., Noor Afza & Norhani, A. (2005) Adoption of accrual accounting in local authorities of Kedah Darul Aman. Universiti Utara Malaysia, Sintok.
Rowles, T. (2004). Accrual accounting in the public sector: Its usefulness in economic decision making. Journal of Finance and Management in Public Services, 3(2), 63-77.
Rozaidy, M., Raman, N., Rasid, M. & Kaziemah, S. (2014). Accrual Accounting in Malaysia: What We Should Learn from Others. Malaysian Journal of Business and Economics, 1(2), 63–76.
Ruhaya, A. & Faziyatun, M.Y. (2015). Accrual accounting change: Malaysian public sector readiness.
Journal of Management Research, 7(2), 459 – 467.
Saleh, Z., & Pendlebury, M. W. (2006). Accruals Accounting in Government–Developments in Malaysia. Asia Pacific Business Review, 12(4), 421– 435.
Saleh, Z., Isa, C. R., & Hasan, H. A. (2012). Accrual accounting: Change and managing change. IPN Journal of Research and Practice in Public Sector Accounting and Management,2(Special Issue), 41–52.
Sturesson, J., Rouvet, J.L., Schumesch, P., & Duval, J.P. (2013). Towards a new era in government
accounting and reporting. PwC Global Survey on Accounting and Reporting by Central Governments, (April), 1–44.
Tickell, G. (2010). Cash to accrual accounting: One nation’s dilemma. International Business & Economics Research Journal, 9(11), 71-78.
Tooley, S., Hooks, J. & Norida Basnan (2009). Performance reporting by Malaysian local authorities: identifying stakeholder needs. Financial Accountability and Management, 26(2),103-133.
Tiran Tudor, A. & Blidisel, R. (2007). Romanian accrual accounting experience in public higher education sector.
Journal of Business Research,8(19), 121-131.
Xavier, J.A. (2018, November 8). 2019 budget: It merits our favour. New Straits Times, p. 1. Retrieved from
https://www.nst.com.my/opinion/columnists/2018/11/429258/2019-budget-it-merits-our-favour
Wan Selamah Wan Sulaiman (2011)..Accountants today. Accountant General’s Department of Malaysia, 1-8.
Wan Selamah Wan Sulaiman (2013). Transitioning to a new public sector accounting landscape – Current status and the way forward. Presented at Inaugural Treasury Economic Forum 2013, Kuala Lumpur
Wynne, A. (2003). Do private sector financial statements provide a suitable model for public sector accounts?
Presented at European Group of Public Administration, Oeiras, Portugal. Wynne, A. (2007). Is the move to accrual-based accounting a real priority for public sector accounting?nPublic Fund Digest,6(1), 25-39.
Wynne, A. (2008). Accrual Accounting for the Public Sector – A Fad That Had Its Day? International Journal on Governmental Financial Management, 17(2), 118 - 121.
Malaysia (MPSAS). Retrieved from
http://www2.anm.gov.my/akruan/Pages/aspx
Auditor General Report (October, 2014). Financial reporting system in the public service: Malaysian experience. Presented at CAPAM’s Biennial Conference 2014, Putrajaya, Malaysia.
Azrina, H. A. & Nafsiah, M. (2014). Readiness of Malaysian public sector employees in moving towards accrual
accounting for improve accountability: The case of Ministry of Education (MOE). Procedia-Social and Behavioral Sciences, 164, 106–111.
Biraud, G. (2010). Preparedness of United Nations system organizations for the International Public Sector Accounting Standards (IPSAS). Geneva: Joint Inspection Unit.
Blondal, J. R. (2003). Accrual accounting and budgeting: Key issues and recent development. OECD Journal on Budgeting,3(1), 43-59.
Bontas, C. A & Petre, M. C. (2009). Arguments for introducing accrual-based accounting in the Public Sector. Constantine Brancoveanu University, Romania.
Care, L. (2016). Auditor General Report, May 2011, 98–108.
Cavanagh, J., Flynn S., & Moretti, D. (2016). Accrual accounting in the public sector. CESifo DICE Report, 5(3), 43–45
Champoux, M. (2006). Accrual accounting in New Zealand and Australia: Issues and solutions (Briefing Paper No. 27). Federal Budget Policy Seminar. Harvard Law School, Cambridge, Massachusetts.
Christiaens, J., Rommel, J. Barton, A. & Everaert, P. (2012). Should all capital goods of governments be recognized as assets in financial accounting? Baltic Journal of Management, 7(4), 429 – 443.
Connolly, C. J., & Hyndman, N. S. (2005). The impact of resource accounting and budgeting in the Northern Ireland public sector. Association of Chartered Certified Accountants' Research Report (No 87). Certified Accountants Educational Trust, London.
Connolly, C., & Hyndman, N. (2006). The actual implementation of accruals accounting: caveats from a case within the UK public sector. Accounting, Auditing & Accountability Journal, 19(2), 272–290.
Cordery, C. (2010, December). Cash-based vs accrual accounting: How should NFPs account for their business?.
Chartered Accountant Journal, 58-59.
Deinert, K. (2015). Corruptions Perceptions Index 2015. Transparency International. Retrieved from
https://www.transparency.org/cpi2015
Fatimah, A. R., Haslinda, Y., Normahiran, Y., Usha Rani, Saluana, C.S. & Radiah, O. (2015). Public sector accounting: Malaysian context. Kuala Lumpur: Pearson Malaysia Sdn Bhd.
Fauziah, M. & Noor Azman, A. (2014). Human perspective on cash to accrual-based accounting system in Malaysia. Global Review of Accounting and Finance, 5(2), 1– 15.
Gomes, M. (2013, January). Improving public sector finance. Accountants Today, 12-15.
Hassan, M. (2012). Debates on accrual accounting in the public sector: a discrepancy between practitioners and academicians. Graduate School of Economics, Nagoya University.
Heeks, R. (1998). Information systems and public sector accountability (Working Paper No. 1). Retrieved from
http://www.man.ac.uk/idpm/idpm_dp.htm#isps_wp
Hepworth, N. (2003). Preconditions for successful implementation of accrual accounting in central government.
Public Money & Management, 23(1), 37-43.
Ijeoman, N. B. (2014). The impact of International Public Sector Accounting Standard (IPSAS) on reliability, credibility and integrity of financial reporting in state government administration in Nigeria. International Journal of Technology Enhancements and Emerging Engineering Research, 2(3), 1-8.
International Federation of Accountants (IFAC) (2011). Handbook of international public sector accounting pronouncements. Retrieved from
https://www.ifac.org/publications-resources/2011-handbook-international-public-sector-accounting-pronouncements
International Public Sector Accounting Standards Board (2011, January). Study 14: Transition to the accrual basis of accounting: Guidance for public sector entities . New York: International Federation of Accountants.
Khan, A. & Mayes, S. (2009, September).Transition to accrual accounting. International Monetary Fund. Retrieved from
https://www.imf.org/external/pubs/ft/tnm/2009/tnm0902.pdf
Malaysian Institute of Accountant (2011). Accrual accounting the way forward. Accountants Today, 24(6), 7–16.
Mohammadi, S., Mohammadi, M., & Zare, S. (2012). Implementation of full accrual basis in governmental organizations (Case Study: Shiraz University of Technology, Iran). Interdisciplinary Journal of Contemporary Research in Business, 4(2), 287-298.
Muhammad Iqbal M. A. (2013). The preparedness of the accountant from the Malaysian accountant general’s department in moving toward accrual accounting. University Teknologi Mara. Kuala Lumpur.
Murni, S., Norida, H., Azimon, A.A. & Azlina, A. (2014). Enhancing Malaysian federal government accountability through annual report: a stakeholder perspective. International Journal of Business, Economics and Law, 4(2), 42-50.
Nik Zam N, W. (2005). The major impacts of change from cash to accrual accounting in the public sectors.
Gading Business and Management Journal, 9(2), 49-65.
Norida, B., Mohd Fairuz. M.S., Azlina, A., Azizah, M.H. & Ismail, U. (2015). Challenges in accounting for heritage assets and the way forward: Towards implementing accrual accounting in Malaysia. GEOGRAFIA Malaysian Journal of Society and Space, 11(1), 63–73.
Nurul Nadiah, A., Santer Nurfarahinas, M., Saiyidah Diyana, A. & Muhamad Hadi Zulfadli, P. (2015). The rationale for accrual accounting: A case of Malaysian accountant general’s department. Malaysian Journal of Research, 1(1), 20-27.
Organizations for Economic Co-operation and Development (OECD) (1993). Accounting for what? The value of accrual accounting to the public sector. Paris: OECD Publication Service.
Ouda, H. (2004). Basic requirements model for successful implementation of accrual accounting in the public sector. Public Fund Digest, 4(1), 78-99.
Raja Abdullah & Nik Mustapha (2010). New Economic Model (NEM): An analytical perspective. Presented at
Persidangan Perkhidmatan Awam ke-15, Kuala Lumpur.
Rodan, G. (February, 2000). Transparency, Asian economic crisis and the prospects of media liberalisation.
Transparency and the Global Political Economy. University of Warwick.
Ropidah O., Noor Afza & Norhani, A. (2005) Adoption of accrual accounting in local authorities of Kedah Darul Aman. Universiti Utara Malaysia, Sintok.
Rowles, T. (2004). Accrual accounting in the public sector: Its usefulness in economic decision making. Journal of Finance and Management in Public Services, 3(2), 63-77.
Rozaidy, M., Raman, N., Rasid, M. & Kaziemah, S. (2014). Accrual Accounting in Malaysia: What We Should Learn from Others. Malaysian Journal of Business and Economics, 1(2), 63–76.
Ruhaya, A. & Faziyatun, M.Y. (2015). Accrual accounting change: Malaysian public sector readiness.
Journal of Management Research, 7(2), 459 – 467.
Saleh, Z., & Pendlebury, M. W. (2006). Accruals Accounting in Government–Developments in Malaysia. Asia Pacific Business Review, 12(4), 421– 435.
Saleh, Z., Isa, C. R., & Hasan, H. A. (2012). Accrual accounting: Change and managing change. IPN Journal of Research and Practice in Public Sector Accounting and Management,2(Special Issue), 41–52.
Sturesson, J., Rouvet, J.L., Schumesch, P., & Duval, J.P. (2013). Towards a new era in government
accounting and reporting. PwC Global Survey on Accounting and Reporting by Central Governments, (April), 1–44.
Tickell, G. (2010). Cash to accrual accounting: One nation’s dilemma. International Business & Economics Research Journal, 9(11), 71-78.
Tooley, S., Hooks, J. & Norida Basnan (2009). Performance reporting by Malaysian local authorities: identifying stakeholder needs. Financial Accountability and Management, 26(2),103-133.
Tiran Tudor, A. & Blidisel, R. (2007). Romanian accrual accounting experience in public higher education sector.
Journal of Business Research,8(19), 121-131.
Xavier, J.A. (2018, November 8). 2019 budget: It merits our favour. New Straits Times, p. 1. Retrieved from
https://www.nst.com.my/opinion/columnists/2018/11/429258/2019-budget-it-merits-our-favour
Wan Selamah Wan Sulaiman (2011)..Accountants today. Accountant General’s Department of Malaysia, 1-8.
Wan Selamah Wan Sulaiman (2013). Transitioning to a new public sector accounting landscape – Current status and the way forward. Presented at Inaugural Treasury Economic Forum 2013, Kuala Lumpur
Wynne, A. (2003). Do private sector financial statements provide a suitable model for public sector accounts?
Presented at European Group of Public Administration, Oeiras, Portugal. Wynne, A. (2007). Is the move to accrual-based accounting a real priority for public sector accounting?nPublic Fund Digest,6(1), 25-39.
Wynne, A. (2008). Accrual Accounting for the Public Sector – A Fad That Had Its Day? International Journal on Governmental Financial Management, 17(2), 118 - 121.
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Published
2018-12-01
How to Cite
Yusof, N. S., & Jaafar, H. (2018). The Implementation of Accrual-Based Accounting in Malaysian Public Sector: Opportunities and Challenges. International Business Education Journal, 11(1), 49–62. https://doi.org/10.37134/ibej.vol11.1.5.2018
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