INTRODUCTION
1.1 Background of the Study
Over the last few decades, the public demand for radical improvement of public sector management has resulted in a wave of organizational, managerial, financial and accounting reforms in the public sector worldwide (Christians and Rommel, 2018). The result of these reforms brought about the concept of New Public Management (NPM) which implies managing based on use of economic regularities and market efficiency principles (Azuma, 2012). The NPM reform underpin six core elements in public sector governance namely privatization, marketization, decentralization, output orientation, quality systems and intensity of implementation (Connolly and Hyndman, 2016). According to Hood (2015), the NPM focuses on reducing the difference between public and private sectors by moving public sector practice closer to private sector practice, shifting the emphasis from process accountability towards accountability in terms of outcomes and results. This has led governments to introduce cost improvement programs, performance indicators, financial management information systems, financial targets, delegated budgets and resource allocation rules (Aarlinton and Watkins, 2017). Thus, accounting reorientation as part of the New Public Financial Management led to adoption of accrual accounting by the public sector. In this regard, International Federation of Accountants Committee Public Sector Committee (IFAC PSC) and OECD Public Management Committee (PUMA) directly or indirectly supported the adoption of International Accountings Standards (IASs) as a basis of development of International Public Sector Accounting Standards (IPSASs) (IFAC PSC, 2015). The IPSASs set out guidance for the structure, minimum requirements, recognition, measurement and disclosure requirements in the general purpose financial reporting intended to meet the needs of users who are unable to require the preparation of financial reports tailored for their specific needs. The major objective of IPSASs is to prescribe a manner in which general purpose financial statements should be prepared to ensure comparability both with the entity‟s financial statements of previous periods and with the financial statements of other entities. IPSASs are set through a due process commencing with research and deliberations held before tentative positions are adopted. Exposure drafts of proposed standards are disseminated to solicit the views of interested parties which are considered in revising and finalizing a standard (IFAC, 2014). Traditionally, public sector organizations used cash-based accounting systems which posed challenges due to lack of standardized international reporting practices. The cash based system lacked internationally accepted rules and guidelines on recognition, measurement, reporting and management of debt and state assets (Luder and Jones, 2013). Taking into account that relevant and reliable accounting information is an important resource in management decision making, a comprehensive accounting information system is crucial for management performance (Vasicek, 2014). This increased focus on public sector financial management has created increasing demand for high-quality standards and guidance on how to adopt and implement such standards. The adoption of IPSASs by public sector entities is driven by the need to strengthen efficiency, accountability and professionalism in management of public resources (Aggestam, 2015). Accrual accounting improves decision making through comprehensive reporting of assets and liabilities and increased financial control as it provides a representation of the entity‟s overall financial position by providing a snapshot comparison between financial periods while enhancing strategic planning (Aggestam, 2015). IPSASs also improve comparability, harmonization, transparency and accountability in financial reporting by public entities as they provide more relevant, reliable and timely financial information for decision making (IFAC Public Services Committee, 2012). Other benefits attributed to accrual accounting include: identification of total cost of government programs and activities through better measurement of costs and revenues; greater focus on outputs; more efficient and effective use of resources and greater accountability, better presentation of financial position of the public sector organizations and greater attention to assets and more complete information on liabilities through better assets and liabilities management (Mellet, 2017; Olsen, 2016).1.1.1 International Public Sector Accounting Standards
International Public Sector Accounting Standards (IPSASs) are financial measurements reporting rules recommended for adoption by governments around the world in the preparation of financial statements by public entities applicable at all levels of governments to harmonize their national standards in response to greater government financial accountability and transparency (Chan, 2008). The adoption of IPSASs is part of strategies for modernization by public sector to improve the level of confidence in the quality and reliability of financial reporting and encourage in the provision of information for accountability and transparency (Benito et al, 2017). The IPSASs are developed by the International Public Sector Accountants Standards Board (IPSASB). The IPSASB traces its origins to 1986 when IFAC established the Public Sector Committee (PSC) as one of its standing committees. The PSC had a mandate to develop programs for the improvement of public sector financial management and accountability. In 2004 IFAC re-launched the PSC as IPSASB with revised terms of reference and mandate to futuristic focus on developing and issuing IPSASs. The IPSASB has 18 members, of whom no less than three shall be public members. Membership from Switzerland, South Africa, United Kingdom, New Zealand, Morocco, France, Japan, Italy, Canada, China, United States, Panama, Pakistan, Malaysia, Australia, Brazil and Romania (www.ipsasb.org). The International Public Sector Accounting Standards Board (IPSASB) develops International Public Sector Accounting Standards (IPSASs) both cash based and accrual based standards used for the preparation of general purpose financial statements by governments and other public sector entities around the world. Through these standards, the IPSASB aims to enhance the quality, consistency, and transparency of public sector financial reporting worldwide. The IPSASB also issues guidance and facilitates the exchange of information among accountants and others who work in the public sector and promotes the acceptance of and international convergence to IPSASs (www.ipsasb.org). Since IPSASB inception, the board has so far issued a total of 32 accrual-based IPSASs which are based on IASs/IFRSs in as far as they are applicable to the public sector. Accrual basis of accounting implies that transactions and other events are recognized when they occur and not only when cash or cash equivalents is received or paid. The Board has also issued four IPSASs which are specific to public sector namely IPSAS 22 on Disclosure of Information about General Government Sector, IPSAS 23 on Revenues from Non-Exchange Transactions, IPSAS 24 on Presentation of Budget Information in Financial Statements and IPSASs 32 on Service Concession Arrangements (Grantor). The IPSASB has also issued two cash-based IPSASs which are applied as transitory to adoption of accrual based IPSASs. The most important IPSAS being IPSAS 1 and IPSAS 2 on the Presentation of Financial statements and Cash flow statements respectively (IPSASB Consultation Paper, 2014). The major objective of IPSASs is to prescribe a manner in which general purpose financial statements should be prepared to ensure comparability both with the entity‟s financial statements of previous periods and with the financial statements of other entities. The IPSASs set out guidance for the structure, minimum requirements, recognition, measurement and disclosure requirements in the financial statements. General purpose statements are those intended for users who are not specified including taxpayers, rate payers, Members of legislature, creditors, suppliers, media and employees. IPSASs are focused towards harmonization of accounting and statistical reporting systems which are transparent, standardized and internationally comparable accounting information that decreases diversification of accounting systems and improves quality of government reporting (IPSAB, 2015).1.1.2 Financial Reporting in Public Sector in Nigeria
Financial reporting plays the main medium of communicating the information discrete to outside user. FASB (2018) states that the objective of financial reporting is to provide financial information about reporting entity that is useful to all stakeholders. The usefulness of financial information is enhanced if it is comparable, verifiable and understandable. Relevance and reliability are other major characteristics of useful financial information. The fundamental objective of the financial statements for any public/private sector organization is to provide high quality information concerning the economic activities of entities useful for economic decision making. The government should fulfill the stewardship function by providing an audited comparison of the actual use of resources with the agreed budget. A government’s financial accountability arises from the budget setting process during which it gains agreement to the levels of taxation which will be levied and to the funding which will be allocated to the various services which it intends to provide (Wyne, 2017). The legislation provides for keeping of financial records and auditing of all governments and other public entities as well as securing efficient and transparent fiscal management (Constitution, 2015).