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The quality and conservatism of the accounting earnings of local governments

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  • Pinnuck, Matt
  • Potter, Bradley N.

Abstract

Our aim is to provide insight into the usefulness of accounting earnings for measuring the economic performance of local governments across Australia. Specifically, we explore whether (i) accrual accounting provides useful information, and (ii) earnings of local governments are conservative. We find that accrual accounting by local governments provides useful information as measured by the ability to predict one-year-ahead operating cash-flows. We find no conservatism in the financial reports of the average local government. This, we posit, is due to a lower level of demand for high-quality accrual-based financial reports from these entities. Consistent with this argument, both the quality of accruals and the degree of conservatism increase for local governments for which we predict a demand for higher-quality financial reporting.

Suggested Citation

  • Pinnuck, Matt & Potter, Bradley N., 2009. "The quality and conservatism of the accounting earnings of local governments," Journal of Accounting and Public Policy, Elsevier, vol. 28(6), pages 525-540, November.
    • Handle: RePEc:eee:jappol:v:28:y::i:6:p:525-540
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    Citations

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    Cited by:

    1. Enrico Guarini, 2016. "The day after: newly-elected politicians and the use of accounting information," Public Money & Management, Taylor & Francis Journals, vol. 36(7), pages 499-506, November.
    2. Joseph Drew & Brian Dollery, 2015. "Inconsistent Depreciation Practice and Public Policymaking: Local Government Reform in New South Wales," Australian Accounting Review, CPA Australia, vol. 25(1), pages 28-37, March.
    3. Fitzgerald, Brian C. & Giroux, Gary A., 2014. "Voluntary formation of audit committees by large municipal governments," Research in Accounting Regulation, Elsevier, vol. 26(1), pages 67-74.
    4. Muhammad Umar Bello & David Martin @ Daud Juanil & Rozilah Kasim & Muhammad Najib Razali & Yunos Ngadiman & Talib Bon, 2018. "Evidence of Municipal Awareness as a Construct for Enhancing Citizen Satisfaction in Municipal Council of Malaysia," Traektoriâ Nauki = Path of Science, Altezoro, s.r.o. & Dialog, vol. 4(2), pages 1001-1012, February.
    5. repec:cuf:journl:y:2017:v:18:i:1:moreno-enguix is not listed on IDEAS
    6. Maria del Rocio Moreno-Enguix & Ester Gras-Gil & Joaquin Hernandez-Fernandez, 2017. "An Explanation of Management of Local Governments in Spain Based on the Structure of the Internal Control System," Annals of Economics and Finance, Society for AEF, vol. 18(2), pages 393-410, November.
    7. Madah Marzuki, Marziana & Abdul Wahab, Effiezal Aswadi, 2016. "Institutional factors and conditional conservatism in Malaysia: Does international financial reporting standards convergence matter?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(3), pages 191-209.

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