The Tiebout Hypothesis: Implications for Municipal Financial Reporting
Journal of Accounting Auditing and Finance, Fall 1979, 3(1): 31-41
Posted: 12 Jul 2014
Date Written: 1979
The current measurement focus in municipal financial reporting is "revenue minus expenditure" or the inflow and outflow of liquid financial resources on a modified accrual basis. One of the issues raised, in the FASB Discussion Memorandum on a conceptual framework for reporting by nonbusiness organizations, is whether users need an "operating statement." An "operating statement" implies a shift in measurement focus to "revenue minus expense" on a full accrual basis complete with a "bottom line." This article utilizes economic theory (the Tiebout hypothesis) to build a case as to how and why an operating statement could provide potentially useful information to one user group. local taxpayer-voters (constituents).
Keywords: Municipal financial reporting, Tiebout hypothesis
JEL Classification: A12, M41
Suggested Citation: Suggested Citation