Management accounting innovations for rationalizing the cost of services: The reassessment of cash and accrual accounting

ABSTRACT

Management accounting can be a useful tool in austerity government because it produces information about the costs of public services and can be used for informed decision-making. Spanish local governments are required to submit data on the cost of their services to central government, which publishes this information online. The calculation of costs is based on budgetary cash accounting instead of accrual accounting; therefore cash accounting is being used for decision-making and accrual accounting has no role in this process. This paper critically analyses the innovation from three perspectives: the use assigned to the cost information in the legal framework; the opinion of academics and experts; and the perception of professionals about the usefulness of the information produced with the new system.

IMPACT

This paper offers insights into the usefulness of cost accounting in local governments, comparing cash and accrual information. The results show that information about the full cost of services is extremely valuable in the public sector. To increase the usefulness of accrual accounting, laws and regulations should start focusing on it to embed it into public sector organizations. The paper contains some other proposals that can facilitate the implementation and use of full-cost accounting.

KEYWORDS:

• Accounting innovations
• accounting usefulness
• cost accounting
• local government
• management accounting

Disclosure statement

No potential conflict of interest was reported by the authors.