Abstract
AbstractWhile International Financial Reporting Standards (IFRS) convergence has been the face of the global accounting standardisation movement for the past few decades, accounting reforms in the public sector had started to gain momentum from the late 1990s. This paper examines the reasons for the adoption of public sector accrual accounting reforms in India. It explores the various sources of pressure influencing these reforms and the ways in which these pressures are balanced and addressed by key decisionmakers in the national and transnational contexts of an emerging economy like India. This study finds that demands for greater accountability from the public in the national context (demand pressures) as well as requests for greater transparency from international financial institutions in the transnational context (supply pressures) are two major sources of pressure that are balanced by the state in its quest for greater legitimacy. This is demonstrated through a triggering event such as political scandals evoking responses from the government to reinforce its weakened legitimacy by adopting public sector accounting reforms. Extant literature on public sector accounting reforms, mostly focuses on the phases where the standards are being actually implemented by the country. Studies exploring decision‐making processes that lead to actual implementation of accrual accounting reforms are limited. This study contributes to existing literature by examining the decision‐making process that ensues before the actual use of international standards in public sector accounting reforms and demonstrates the significant role that institutional influences play in defining such decision‐making processes. The role of these institutional influences also draw attention to the probable disparities between rationales and actual reasons for government accounting reforms undertaken by developing countries.
Highlights
Public sector accounting reforms across the globe commenced as early as the 1980s (McGregor, 1999; Groot and Budding, 2008)
This study aimed to trace, firstly, the rationales and pressures influencing public sector accounting reforms in India and secondly, the manner in which such pressures are balanced in the local context of the country
The study found that socio-political demand pressures emerging from the national context and global supply pressures arising from the transnational context led the state to initiate and undertake public sector accounting reforms in India
Summary
Public sector accounting reforms across the globe commenced as early as the 1980s (McGregor, 1999; Groot and Budding, 2008) These reforms, mainly focusing on a transit from cash to accrual accounting, formed a part of the wider movement for increasing public efficiency and accountability (Ahn, Jacobs, Lim and Moon,2014) driven by the emergence of the ideas of New Public Management (NPM) (Oulasvirta, 2014). Studies examining such reforms mostly explored decision-making that occurs post-implementation rather than an in-depth exploration of the decision-making processes that led to the adoption of such reforms Issues such as use of accounting information in political decision-making (Groot and Budding, 2008), role of institutional forces in the emergence of accrual accounting practices in a political jurisdiction (Ahn et al.,2014) and the impact of local and global institutional pressures on the outcome of public sector accrual accounting reforms (Oulasvirta,2014) were post-implementation decision-making aspects examined within national contexts. The main objective of this paper is to explore the decision-processes that led to the choices made by the Indian government to reform public sector accounting practices
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