http://www.thejakartapost.com/news/2010/11/03/public-sector-accounting-system-be-adopted-2011.html
Summary
Andreas Bergmann, Chairman of the International Public Sector Accounting Standards (IPSAS) said to The Jakarta Post of after the four-day IPSAS board meeting, “Countries around the world should adopt a conceptual framework on public sector accounting by 2011 to allow more transparent and reliable public sector accounting on a global scale.” A meeting was held on November 2, 2010, its goal was to create the outlines for public sector accounting standards. The objective of The Public Sector of Accounting Standards is to meet the needs of users of financial statements by providing the information needed for accountability and decision making. Indonesia has made the exclusive decision of adapting to accrual accounting by 2015 on November 1, 2010. According to Andreas Bergmann, in the past, accrual accounting was uncommon for the public sector, but now many countries are planning to switch to it because of its extensive advantages. He also said that reliable information provided by accrual accounting would assist “crisis management”. For now, only five countries actualized the full accrual accounting standard: Australia, Iceland, New Zealand, Switzerland and the United Kingdom.
Connection
In our financial accounting textbook, it talks about the accrual accounting method briefly on page 80. As stated in the textbook, transactions are recorded when it happens. The article talks about the near development of accrual accounting. Although it may take a while for the country to fully adapt to it, the government is going to have a five-year transition period to phase out “cash-in and cash-out bookkeeping” according to Andreas Bergmann. It would also be easier for people to analyze the financial statements if it is kept up to date at all times.This article also connects to the importance of timeliness and reliability.
Reflection
Accrual basis accounting is a great example of an accounting method that keeps financial accounting up to date. It is most commonly used with keeping up with income and expenses. Unlike most standard accounting, accrual basis accounting requires accountants to post as income and expenses occur, rather than postponing until a later date. Accrual basis accounting can also make it possible to take a snapshot of the financial health of a company at any given time. You can pull it out anytime you want. With this information, it is extremely helpful when it comes to making short term goals for the company, applying for a business loan, or making plans for a long term project.
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ReplyDeleteThe accrual basis accounting is indeed a great accounting method because it reports income when earned and expenses when occurred, as opposed to the cash basis accounting. Although in the cash basis accounting, where income and expenses are recorded when paid, it isn't being postponed until a later date. It is only being recorded when everything has been paid. I also strongly agree with you that the information from the financial statements under the accrual basis accounting will be extremely helpful when it comes to making future plans. It provides a more precise picture of how a company is doing over the long-term. Not only is that method more accurate to measure profit, it also provides shareholders with assurance. The amounts stated as revenues and the expenses are reasonable so there is a high probability that the revenues and expenses recorded will ultimately result in similar cash flows, hence the information will be fairly accurate to make future investments.
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