Diffusion of an Accounting Innovation: Fixed Asset Accounting in the NHS in Wales

Abstract

As part of ‘New Public Management’ in the UK, changes have been made to the accounting regime. These changes typically involve the adoption of private sector accounting and budgeting approaches using accruals accounting. The process by which new ideas are spread is known as diffusion; this paper deals with the aspect of diffusion relating to the imposition of a new idea, accruals accounting, and how it is absorbed by the organisation, in this case the NHS in Wales. In particular, the paper questions whether the lack of secondary diffusion is limiting the influence of the new accounting approach. To analyse the level of diffusion we have focused on one aspect, namely, information on capital assets. The paper uses a mixture of qualitative and quantitative research methods including in-depth interviews with senior managers at two NHS Trusts and a questionnaire survey with responses from senior finance staff in all NHS Trusts in Wales. We conclude that the diffusion of accruals accounting for fixed assets has been restricted to the primary level at the top layer of management and has not penetrated below that level. There is evidence of continuing managerial indifference to the accruals accounting consequences of owning fixed assets.

Acknowledgements

This paper is drawn from a research project sponsored by the Institute of Chartered Accountants in Scotland. The authors are grateful to the Research Committee of the HfMA (Healthcare Financial Management Association) Wales and to the civil servants and the NHS staff who kindly agreed to be interviewed and completed questionnaires for this research project. Thanks are also extended for comments received from delegates at the 2007 British Accounting Association Conference and two anonymous referees.