The harmonisation of GAAP and GFS financial reporting in the Australian public sector: why and how did it happen?: an agenda setting perspective

Abstract

In April 2003, the Financial Reporting Council (FRC) issued a strategic direction to the AASB to develop an accounting standard that would harmonise Generally Accepted Accounting Principles (GAAP) and Government Finance Statistics (GFS) accounting for Australian public sector entities. Australia is the only jurisdiction that has developed and implemented such an accounting standard. This thesis examines how and why the FRC made the decision to issue this strategic direction in a qualitative historic case study. The main data sources are oral histories and archival and other written documents. The thesis adopts the perspective that public sector accounting standards are essentially a type of public policy and adopts an agenda setting theoretical framework to investigate the events. Addressing previous calls for the use of a more sophisticated construct to investigate accounting agenda setting processes, the thesis develops a holistic, epistemologically and theoretically grounded framework combining existing theoretical lenses. The theoretical framework introduces discourse to the investigation of accounting agenda setting, enabling new insights into the political nature this process. The theoretical aspect of this thesis highlights the importance of considerations of institutional political and discursive elements and individual and collective actors in investigations of accounting agenda setting. The thesis argues that policy entrepreneurs (PEs) faced problems during the preparation of the federal government budget papers for the financial year 1999/2000. They identified the idea of GAAP/GFS harmonisation as a potential solution to their problems. At that point in time, however, other issues dominated the agendas of governments and standard setters. This created a need for the PEs to engage in a strategic process to convince the standard setters to consider and act upon GAAP/GFS harmonisation. The PEs initially focused their lobbying activity on the accounting standard setting bodies. At some point in time, it became evident, however, that the Australian Accounting Standards Board (AASB) might not decide to develop a desired accounting standard. As a result, the PEs refocused their lobbying on the AASB’s oversight body, the FRC, which essentially provided the strategic direction to the AASB. As part of the agenda setting process, the PEs had to search for a set of problems that served as a justification for their policy solution. They also created a new epistemic community that was bound by the belief that GAAP and GFS accounting principles could be harmonised and serve microeconomic GAAP and macroeconomic GFS objectives. The thesis found that the PEs were able to exploit a window of opportunity to convince the FRC of their favoured solution. FRC members from non-public sector backgrounds relied on the expertise of public-sector members and the support of the epistemic community for the project. In essence, the thesis argues that the FRC and the AASB lost control over their agendas in the GAAP/GFS harmonisation agenda setting case. Policy implications from this research project are that the institutional independence of the FRC and the AASB should be reconsidered. In addition, the institutional arrangements for public sector accounting standards should be reflected on in the light of the lack of contribution of FRC members without-public sector experience. Last, a more formalised agenda setting project should be implemented.