Evaluating the Accounting Information Quality and Decision-Usefulness of Governmental Financial Reporting When Becoming More Accrual Like: Evidence of a Change from Cash to Modified Cash

Abstract

In this study we analyze the quality and perceived usefulness of financial reporting at the central government level by applying a methodology based on both private and public sector literature. We assess the quality and decision usefulness of Greek central government financial statements under the former system of cash accounting and the recently adopted system of modified cash accounting. The perceptions of ninety five respondents grouped under four main user categories and collected through an advanced web-based questionnaire are used for this purpose. The evaluation is conducted within the wider debate on the benefits associated with the move to full accruals. While the move to modified cash improved - albeit below optimum level - the qualitative characteristics of reported financial information, expertise in public sector accounting affects the views on quality and perceived usefulness expressed by respondents.

Keywords: accounting information quality, accrual accounting, cash-basis of accounting, governmental financial reporting, Greece, modified cash-basis of accounting, perceived usefulness

JEL Classification: M40, M41