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The quality and conservatism of the accounting earnings of local governments


  • Pinnuck, Matt
  • Potter, Bradley N.


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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    Cited by:

    1. 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.
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    6. repec:eee:jocaae:v:12:y:2016:i:3:p:191-209 is not listed on IDEAS


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