2024 Global Report on the Use of Accrual Accounting for Fiscal Management

The report presents an analysis of the adoption and implementation of accrual accounting in the public sector to explore its role in providing information on fiscal sustainability, informing economic analysis, and supporting policy decision-making. The analysis examines the benefits and disadvantages of accrual accounting using various methods, including profiling the socioeconomic characteristics of countries and the results of Public Expenditure and Financial Accountability assessments by their accounting basis in 2020; analyzing completeness and comparability issues with partial accrual accounting; reviewing research on accrual-based financial information as an indicator of fiscal risks; and assessing the use of accrual-based financial information for debt management and transparency. The analysis also reviewed the role of technology in facilitating access to accrual data and the costs versus benefits of accrual adoption. It also included three case studies of developing countries preparing to transition to full accrual accounting. Drawing on the lessons learned by countries that have successfully adopted accrual accounting, this report outlines a 'theory of change' that identifies two distinct phases of accrual accounting reforms. The first phase involves the initial adoption of accrual accounting and the preparation of an opening balance sheet, as well as the production of accrual-based financial statements for individual public sector entities and consolidated financial statements for the whole of government. This phase primarily focuses on improving transparency. However, it does not necessarily lead to better decision-making as it only provides information about past financial position and performance. The second phase, which is crucial for achieving high-level outcomes, involves implementing accrual-based planning and budgeting and a performance measurement system. This phase establishes a clear link between accrual-based financial information and financial and nonfinancial performance information, enabling a fully integrated strategic planning, budgeting, financial reporting, and fiscal management approach