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Accounting for Public Hospitals: A Case Study of Modified GAAP

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  • Sheila Ellwood

Abstract

Public hospitals in the U.K. apply GAAP as modified by the Treasury, the Financial Reporting Advisory Board (FRAB) and the Department of Health. Individual National Health Service (NHS) Trusts apply their interpretation of the accounting manuals with further guidance and scrutiny from oversight bodies such as the Audit Commission. This article uses a case study approach to investigate how GAAP is modified and to outline the consequences of the constructed reality. The modifications are layered and often opaque. The accounts are constructed according to accounting requirements stipulated by Government and the account preparers adapt the requirements at Trust level. The accounting statements play a part in constructing a reality (Hines, 1988) that has consequences through the NHS control regime and in how the financial position is portrayed to the public. It appears that GAAP is used to legitimate the NHS as a modern organization applying commercial accounting practice, but the accounting statements provide a distorted view of GAAP compliant statements. The accounting, while not itself real, is real in its consequences and can lead to biased decision‐making, service closures and job losses. The planned compliance of NHS Trusts with international GAAP may provide further scope for modification and manipulation in constructing NHS accounting reality.

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  • Sheila Ellwood, 2008. "Accounting for Public Hospitals: A Case Study of Modified GAAP," Abacus, Accounting Foundation, University of Sydney, vol. 44(4), pages 399-422, December.
    • Handle: RePEc:bla:abacus:v:44:y:2008:i:4:p:399-422
    DOI: 10.1111/j.1467-6281.2008.00269.x
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    References listed on IDEAS

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    1. Allan Barton, 2005. "Professional Accounting Standards and the Public Sector—a Mismatch," Abacus, Accounting Foundation, University of Sydney, vol. 41(2), pages 138-158, June.
    2. Sheila Ellwood & Susan Newberry, 2007. "Public sector accrual accounting: institutionalising neo‐liberal principles?," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 20(4), pages 549-573, July.
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    4. Susan Newberry, 2001. "Public-Sector Accounting: A Common Reporting Framework?," Australian Accounting Review, CPA Australia, vol. 11(23), pages 2-7, March.
    5. Hines, Ruth D., 1988. "Financial accounting: In communicating reality, we construct reality," Accounting, Organizations and Society, Elsevier, vol. 13(3), pages 251-261, April.
    6. Burchell, Stuart & Clubb, Colin & Hopwood, Anthony & Hughes, John & Nahapiet, Janine, 1980. "The roles of accounting in organizations and society," Accounting, Organizations and Society, Elsevier, vol. 5(1), pages 5-27, January.
    7. Geoffrey Whittington, 2008. "Fair Value and the IASB/FASB Conceptual Framework Project: An Alternative View," Abacus, Accounting Foundation, University of Sydney, vol. 44(2), pages 139-168, June.
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    Cited by:

    1. Dennis M. Lopez & Pamela C. Smith, 2010. "Auditor Type and Audit Quality Differences in Nonprofit Healthcare Organizations – U.S. Evidence," Working Papers 0107, College of Business, University of Texas at San Antonio.
    2. Anita Golovkova, 2020. "IFRS implementation in healthcare facilities in the United Kingdom: (un)intended effects [Implementace IFRS ve zdravotnických zařízeních ve Velké Británii – (ne)zamyšlené dopady]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2020(3-4).
    3. Dennis M. Lopez & Pamela C. Smith, 2010. "Auditor Type and Audit Quality Differences in Nonprofit Healthcare Organizations – U.S. Evidence," Working Papers 0107, College of Business, University of Texas at San Antonio.
    4. Hodges, Ron & Mellett, Howard, 2012. "The U.K. private finance initiative: An accounting retrospective," The British Accounting Review, Elsevier, vol. 44(4), pages 235-247.
    5. Inger Johanne Pettersen, 2013. "Diverse management practices— a study of clinical managers," Public Money & Management, Taylor & Francis Journals, vol. 33(1), pages 39-46, January.
    6. Anita Golovkova, 2020. "IFRS implementation in healthcare facilities in the United Kingdom: (un)intended effects [Implementace IFRS ve zdravotnických zařízeních ve Velké Británii - (ne)zamyšlené dopady]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2020(3-4), pages 53-70.

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