Accrual financial reporting in the Public Sector: Is it a reality?

Although modernization of governmental accounting has led to the implementation of accrual financial reporting, budgets in most continental European countries, including Spain, continue to be based on cash or modified cash methods. Consequently, cash-based and accrualbased financial information coexist. This may create problems for the full implementation of accrual financial statements. This paper analyzes the differences in practice between the results disclosed in financial and budgetary statements under both bases of accounting in order to identify to what extent accrual accounting has been implemented and to verify whether budgetary and accrualbased financial figures are significantly different. The research findings show that there is a high correlation between the current budgetary result and the economic result and, therefore, that in practice the accrual principle has not been implemented effectively