Held up as the best government accounting ideas that the global accounting profession has to offer. IPSAS therefore has become recognized benchmark for evaluating and improving government accounting in developing countries. IPSAS are primarily intended for adoption by developing countries. The World Bank for example has endorsed the use of IPSAS in accounting for its financial assistance to developing countries. IFAC believes that in order to change the paradigm for government reporting, governments should adopt the accrual-based IPSASs, set by the International Public Sector Accounting Standards Board (IPSASB).Over 40 Countries apply Accrual IPSAS (Kara, 2012). In recent years, the IPSAS Board has addressed developing countries in two ways. First, it issued a set of comprehensive “cash basis IPSAS” in 2003 which were more closer to traditional Government Accounting practice and are less costly to implement. Secondly, the IPSAS board has issued the standard on the disclosure of external assistance under the cash basis of accounting. The cash basis standard excludes the recognition of grants receivable and loans payable, and other non-cash assets and liabilities (IFAC, 2005).


Looking at the previous years, cash basis of accounting is observed to be the commonly used basis in the public sector which has some limitations and setbacks that affects financial transactions such as poor budget implementation, mismanagement of public fund etc. This can be traced to the fact that while using the cash basis of accounting, there is no attempt to match an expense with the revenue it generates. This means that income statement and balance sheet are not good pictures of recent business conditions and an expense written against specific revenue may not have been incurred for generating the revenue. This creates the issue of poor budget implementation, making it necessary to consider the relationship between public sector budgeting and cash basis of accounting.

The preparation and presentation of financial statement at each level of government have pose series of problems worldwide. Over the years, government accounting has been anchored on cash basis of accounting while private sector accounting has been predicated on accrual basis. Whereas the accrual basis has been working perfectly well in the private sector, the continued application of the cash basis in the public sector appears to have thrown up a number of challenges relating to under-utilization of scarce resources, high degree of vulnerability to manipulation, lack of proper accountability and transparency, inadequate disclosure requirement due to the fact that the cash basis of accounting does not offer a realistic view of financial transaction. IPSAS adoption is expensive in all material respect, so expensive that some experts have contended that it’s much advertised benefits do not justify the cost of the implementation predominantly accounting or financial reporting places emphasis on accountability and transparency. Revolution is not only accorded to government functional activities, instead revolution also exists in Government Accounting.

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