Factors determining the Implementation of Accrual Basis of Accounting (ABA) in the Public Sector

Accrual Basis of Accounting is the process whereby revenue is recorded when it is earned, and expenditure is recorded when the consequence in liabilities is known or when benefits are obtained. This study adds to the current debate by looking at the elements that influence Accrual Basis of Accounting (ABA). This study analysed the factors determining implementation of ABA and the Quality of Financial Reporting in the Public Sector. The study adopted ex-post facto and exploratory research designs. Primary data through structured questionnaires were administered to the respondents from Accountant General’s Office, Auditor Generals’ Office, Ministry of Finance and Osun State Internal Revenue Service as well as the Public Accounts Committee of the State legislature were all used for the investigation. Principal Component Analysis (PCA) was used to analyse the determinants of implementation of Accrual Basis of Accounting. Results from Principal Component Analysis (PCA) showed that the nine (9) components of Accrual Basis of Accounting (ABA) can be combined efficiently into two (2) factors i.e International Accounting Standards and System/Administrative factor explaining 81.3% of the total variance among the inter-correlations of the nine (9) components of accrual accounting with eigenvalues of 3.057 and 1.067 respectively while other factors were below 1.0 base rate. The result of mean ranking with a value of 3.82 and 3.66 revealed that the existence of the cost-expense-based budget and prevalence of the traditional bureaucratic model of management are the major barriers to implementation of ABA in the study area. The study concluded that from the result of principal component analysis, the result indicated that out of the nine (9) itemized components (International Accounting Standards, System/administrative factor, High cost of personnel training, Costly implementation, Time consuming, High opportunity cost, Personal factors, Political factors and Low level of education and weak expertise) only the first two factors are prominent to this study. The sensitivity of the factors explained further that the components are categorized into International Accounting Standards and System/Administrative factor. It is therefore recommended that governments should provide the ministries, departments and agencies with necessary funding facilities and training towards implementing Accrual Based Accounting in their states.