Determinants of public sector accounting reforms. A case study of Sri Lanka in rapidly developing Asia

• Pages: 191-205
• Published date: 13 January 2020
• Date: 13 January 2020
• DOI: https://doi.org/10.1108/IJPSM-03-2019-0085
• Author: Chitra Sriyani De Silva Lokuwaduge,Keshara De Silva
• Subject Matter: Public policy & environmental management,Politics,Public adminstration & management

Determinants of public sector

accounting reforms

A case study of Sri Lanka in

rapidly developing Asia

Chitra Sriyani De Silva Lokuwaduge

Victoria University Business School, Victoria University,

Melbourne, Australia, and

Keshara De Silva

RMIT University, Melbourne, Australia

Abstract

Purpose –The purpose of this paper is to extend the New Public Financial Management concept and the

contingency model approach to an analysis of the determinants of the accrual-based International Public

Sector Accounting Standards (IPSAS) adoption process as a financial management reform in Sri Lanka, a

developing country in Asia.

Design/methodology/approach –Based on the prior literature, this paper develops a framework to

highlight the importance of accrual-based reforms in public sector accounting policies to enable better

transparency and accountability. It shows the extent to which Sri Lankan public sector institutions have

adopted IPSAS-based accounting standards and the limitations of adopting these standards in a developing

country, using documentary analysis.

Findings –In developing countries, the public sector faces practical problems when adopting reforms due to

limited institutional capacity, high political involvement and bureaucracy in decision making. This paper

concludes that significant policy changes towards the adoption of international accounting standards have

gained momentum over the last decade in Sri Lanka while the much larger economies in Asia are still

studying this process. However, the prevailing political uncertainty in Sri Lanka has negatively impacted the

implementation process.

Originality/value –Relatively little is known about the diffusion of, and the difficulties in, implementing

accrual-based IPSAS in the Asian region. This paper is an attempt to fill this gapby exploring the Sri Lankan

experience. This could be applied by other developing countries in Asia, including the high-growth nations,

for policy adoption and accounting harmonisation.

Keywords Public sector, Public administration, Public sector management, Accountability,

Public sector reform, Public sector accounting

Paper type Research paper

1. Introduction

The international trend towards modernising financial information systems in order to

adopt sound financial management and accountability systems is likely to continue

throughout the world, irrespective of socioeconomic differences. This reform has been

strongly influenced by the involvement of international organisations such as the OECD,

NATO, United Nations, World Bank, International Monetary Fund (IMF) and the European

Commission (Adhikari et al., 2009; Grossi and Soverchia, 2011; Lokuwaduge, 2016; Senarath

Yapa and Ukwatte, 2015). This process was initiated by recommendations by professional

accounting organisations such as the International Public Sector Accounting Standards

Board (IPASB) and the International Organization of Supreme Audit Institutions

(INSTOSAI). Adoption of International Public Sector Accounting Standards (IPSAS) for

better accountability and transparency has been identified as an application of New Public

Financial Management (NPFM) as a post-NPFM reform initiative in accounting practices,

especially among the developed countries over the last two decades (Van Helden, 2005;

Lapsley, 2009).

Received 26 March 2019

Revised 13 June 2019

25 August 2019

1 December 2019

23 December 2019

Accepted 23 December 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0951-3558.htm

Public sector

accounting

reforms

InternationalJournalof Public

SectorManagement

Vol.33 No. 2/3,2020

pp.191-205

©EmeraldPublishingLimited

0951-3558

DOI10.1108/IJPSM-03-2019-0085

191