GTZ Report on Accrual Accounting Status Quo - LGCDP

Cash Accounting vs. Accrual Accounting 12
2003, p.1). This applies to more developed as well as developing countries. Mostly the national level of government
benefits from the experiences made by the local governments (FEE, 2007, p.6).
OECD Countries
Within the OECD the majority of local governments use some sort of an accrual based accounting system. This is valid
for most local governments in Switzerland, the Netherlands, Sweden, Spain, Portugal, Finland, France, Great Britain,
Germany, Italy, USA, New Zealand, Australia, Canada and Iceland. Also relatively new OECD members like Poland
and Slovakia are in the process of accrual accounting implementations.
In Germany for example a comprehensive municipal reform to change to accrual accounting has started in 2003 on a
regional basis. During this reform process some of the sixteen federal regions made the change to accrual accounting
mandatory for their municipalities. Others approved the change to accrual accounting on a voluntary basis. The fastest
and broadest approach undertaken by a bigger federal region is being done by the state of North-Rhine Westphalia,
which made it mandatory for all municipalities to change to accrual accounting until the end of 2009. Besides that the
federal regions of Hamburg and Bremen already introduced accrual accounting around 2006.
All in all 11 out 16 federal regions made it mandatory for their municipalities to introduce accrual accounting until 2013
at the very latest. Five federal regions left the decision up to their municipalities whether they want to introduce accrual
accounting or go for the traditional cash accounting system or a modified accounting system (KPMG, 2008, p.1-3).
Besides these regulatory approaches there are a lot of towns and municipalities who introduced accrual accounting on
a voluntary basis.
For further information on the mentioned countries see Athukorala & Reid, 2003, p.79-81; IPSASB, 2008c; FEE, 2007,
p.23-24; Grossi, 2006, p.4-5; IFAC, 2000, p.65; CESifo, 2007.
Accrual accounting is part of a broad financial management reform in the public sector in the above mentioned
countries. However, they differ on the implementation of some sort of performance budgeting, reporting and auditing
but the change in accounting usually had implications for these other components.
Non-OECD Countries
In the case of South Asia, a couple of countries implemented some sort of accrual accounting at local level or are in
the process of doing so.
In India for instance, some federal states including Tamil Nadu, Maharashtra, UP and Karnataka are using accrual
based accounting. The urban local bodies however are more speedily towards the implementation of accrual
accounting because of a decision by the Supreme Court of India in 2001 that forces all urban governments to
implement accrual accounting, e.g. Municipal Corporation of Delhi since 2003 (SAFA, 2006, p.7-8).