Public Sector Accounting - An Interdisciplinary Field Involving Accounting, Economics, and Jurisprudence

Public sector accounting has recently been improved. Currently, there are requirements to disclose stock information in addition to the flow information presented in budget statements or accounts statements. Public sectors have prepared and disclosed their financial statements (including balance sheets and income statements) based on business accounting approaches. Moreover, as a matter of policy, the government tends to prepare and disclose cost information along with the financial statements for the individual ministries and governmental agencies. The objectives of clarifying the fiscal conditions in a state through the preparation and disclosure of financial statements are to fulfill the state fs accountability to its citizenry and market participants and to optimize and enhance the efficiency of its fiscal activities. Most importantly, the improved information should contribute to democratic decisions on public finance. A perspective different from the business accounting is that public sector accounting places more emphasis on inter-generational fairness. With respect to the inter-generational benefits and burdens, however, various factors must be considered, and the differences between assets and liabilities in the balance sheet may not be the indicators for that purpose. Public sector accounting is considered to have been developed based on the business accounting approach. As such, the objective of the accounting is to retrospectively review how assets and liabilities have changed as a result of past public finance operations. Yet, in considering compelling public finance conditions, there is a need to discuss and consider expected perspectives, in order to clarify what resources will remain in the future by incorporating the aspect of future cash flows (this paper views this as a mixture of accounting thought and economic thought). It is important to recognize that both perspectives are commingled. If the forecast perspective is highlighted, the assets in the balance sheet should include taxation rights that give rise to future tax revenue. Another useful practice, from the perspective of information disclosure, is to prepare an individual balance sheet, in addition to a comprehensive financial statement, for each significant political agenda (e.g., public pension obligations). Public sector accounting has been developed without implementing a necessary legal basis. The effects of this reform may be a matter of not much interest without infringing any democratic control of public finance under cash basis accounting. The focus for public finance, however, has certainly been transferring from flow to stock and from the aspect of political decision to the aspect of administration. The role of public sector accounting should be clarified in conjunction with the various systems.