A Sustainable Accounting Approach for Reporting on Long-Term Fiscal Sustainability

Abstract

Fiscal sustainability aims to assure that current taxpayers are paying for the services that they receive and not passing these costs on to future generations. While the notion of using accrual accounting in the government sector is to assist in measuring long-term fiscal sustainability, the accrual-based balance sheet has inherent limitations that greatly reduce its utility for this purpose. Moreover, the current literature lacks focus on the role of accounting frameworks in the endeavor to make public sector entities financially sustainable and there is no elaboration on how governmental accounting can contribute towards reporting on fiscal sustainability. Therefore, the main purpose of this chapter is to propose a sustainable accounting approach that provides practice-relevant accounting information, which can assist in measuring and reporting on long-term fiscal sustainability.