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Impact of Depreciation Information on Capital Budgeting among Local Governments: A Survey Experiment

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  • Makoto Kuroki

Abstract

This study investigates the impact of depreciation practices on the internal decision making of local government (LG) budget officers. Prior studies focus on depreciation practices that influence decision making and policy formulation through financial performance indicators. However, such practices are also expected to affect capital asset management. Specifically, the presence of depreciation information makes it possible for budget officers to account for the burden of current and future generations such as depreciation costs and debt interests when budgeting. Thus, this study tests the impact of depreciation information on capital budgeting by conducting a survey experiment with all 1788 LGs in Japan. A questionnaire was sent to LG budget officers with two patterns of experimental groups: decision making for capital budgeting (a) without depreciation information and (b) with depreciation information. The experimental results show that budget officers’ capital budget decisions are influenced by the presence of depreciation information. This study contributes to accounting and public sector research and practice by showing the impact of depreciation information on the decision making of LG budget officers for capital budgeting.

Suggested Citation

  • Makoto Kuroki, 2022. "Impact of Depreciation Information on Capital Budgeting among Local Governments: A Survey Experiment," Australian Accounting Review, CPA Australia, vol. 32(2), pages 201-213, June.
    • Handle: RePEc:bla:ausact:v:32:y:2022:i:2:p:201-213
    DOI: 10.1111/auar.12355
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    References listed on IDEAS

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    1. Mari Kobayashi & Kiyoshi Yamamoto & Keiko Ishikawa, 2016. "The Usefulness of Accrual Information in Non‐mandatory Environments: The Case of Japanese Local Government," Australian Accounting Review, CPA Australia, vol. 26(2), pages 153-161, June.
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