Current Practices and Issues in the Accounting for Government Infrastructure Assets

  • Che Ruhana Isa Universiti Malaya
  • Haslida Abu Hasan Universiti Malaya
  • Zakiah Saleh Universiti Malaya

Abstract

Purpose: This paper aims to explore the current accounting practices and issues in accounting for infrastructure assets in Malaysian public sector organisations. Comparatively, this paper also provides an overview of current practices in other countries.


Design/ Methodology/ Approach: Data collection was through reviews of extant literature, accounting standards and guidelines by the Accountant General’s Department of Malaysia (AGD), including guidelines and government publications in other countries.


Findings: Accounting practice for infrastructure assets varies across countries. There is no specific accounting standard for infrastructure assets. Instead, most countries including Australia, Austria, Canada, France, New Zealand and Malaysia follow the accounting standards for property, plant and equipment to account for infrastructure assets. However, given the unique nature of infrastructure assets, there are issues in identifying what constitute infrastructure assets and determining which government organisations have control over their assets. In addition, challenges in recognition and valuation of infrastructure assets, which include initial and subsequent measurement, depreciation and disclosure also exist.


Practical Implications: The government’s spending for infrastructure assets represents a significant proportion of its budget. Therefore, accurate accounting treatments and reporting of the assets is pivotal. This paper aims to present an update to policy makers and practitioners on current pertinent accounting standards, issues and accounting practices at the international level as well as at the Malaysian federal government.


Originality/ Value: Research on accounting for infrastructure assets is still limited. Findings from this research will add to the body of knowledge by highlighting the main issues and providing basis for further investigation.

References

Abdullah, F. A., & Muhammad, K. (2020). Factors influencing valuation accuracy of PPE in public sector FS: Accountants’ perspective. Journal of Critical Reviews, 7(19), 459- 471.

AGD. (2022). Surat Pekeliling Akauntan Negara Malaysia (SPANM) Bil. 3 Tahun 2022 -Tatacara perakaunan aset bukan kewangan kerajaan. https://www.anm.gov.my/ arkib-pengumuman/pengumuman/2022/arkib-berita-pengumuman-2022/11151- surat-pekeliling-akauntan-negara-malaysia-spanm-bil-3-tahun-2022-tatacara- perakaunan-aset-bukan-kewangan-kerajaan

Abu Hasan, H., Saleh, Z., & Isa, C. R. (2022). Malaysian Public Sector Accounting Standards (MPSAS) implementation in state governments of Malaysia: Status and challenges. IPN Journal of Research and Practice in Public Sector Accounting and Management, 12(1), 33-55. https://doi.org/10.58458/ipnj.v12.01.02.0075

Basnan, N., Md. Salleh, M. F., Ahmad, A., Harun, A., & Harun, A. M. (2013). Ke arah pelaksanaan perakaunan asas akruan di Malaysia: Cadangan perakaunan dan perundangan bagi aset warisan. IPN Journal of Research and Practice in Public Sector Accounting and Management, 3(1), 17-66. https://doi.org/10.58458/ipnj. v03.01.02.0027

Caruana, J. (2021). The proposed IPSAS on the measurement for public sector financial reporting - recycling or reiteration?. Public Money and Management, 41(3), 184-191.

CICA. (2002). Accounting for infrastructure in the public sector. CPA Canada.

Dollery, B. E., Kortt, M., & Grant, B. (2013). Funding the future: Financial sustainability and infrastructure finance in Australian local government. Federation Press, Sydney.

European Commission. (2013). Towards implementing harmonised public sector accounting standards in member states. The suitability of IPSAS for the member states. Report from the Commission to the Council and the European Parliament [COM (2013) 114 final], Brussels, Belgium.

Farias, V. R. (2020). New development: Accounting recognition of public infrastructure -applying a practical control criterion approach. Financial Accountability & Management. 40(7), 535-539.

Félio, G. (2006). Infrastructure asset management: How does Canada compare to Australia and New Zealand?. ReNew Canada, 2(5), 31-33.

Fourie, J. (2006). Economic infrastructure: A review of definitions, theory and empirics. South African Journal of Economics, 74(3), 530-556. https://doi.org/10.1111/j.1813-6982.2006.00086.x

IFAC. (2023). Greater transparency and accountability in the public sector, IFAC’s point of view. https://www.ifac.org/what-we-do/speak-out-global-voice/points-view/greater-transparency-and-accountability-public-sector, last accessed 18 Sept 2023.

IPSASB. (2015). Project brief on infrastructure assets. IFAC.

IPSASB. (2019a). Revised project brief on infrastructure assets. IFAC. IPSASB.

IPSASB. (2019b). Infrastructure assets - Agenda item 6. IFAC.

IPSASB. (2020a). IPSAS 17 - Property, plant, and equipment. IFAC.

IPSASB. (2020b). IPSAS 32 - Service concession arrangements: Grantor. In Handbook of international public sector accounting pronouncements. IFAC.

IPSASB. (2022). Property, plant and equipment - Agenda Item 7. IFAC.

Ismail, S., Abdullah, T., & Zainuddin, S. A. (2013). Issues, challenges and recommendations in complying to the International Accounting Standards (IPSAS) 17 on property, plant and equipment. IPN Journal of Research and Practice in Public Sector Accounting and Management, 3(1), 1-14. https://doi.org/10.58458/ipnj.v03.01.01.0026

Ivannikov, I., & Dollery, B. (2020). Accounting problems in infrastructure asset valuation and depreciation in New South Wales local government. Australian Accounting Review, 30(2), 105-115.

Lombardi, R, Schimperna, F., Smarra, M., & Sorrentino, M. (2021). Accounting for infrastructure assets in the public sector: The state of the art in academic research and international standard setting. Public Money & Management, 41(3), 203-212. DOI: 10.1080/09540962.2020.1840761

Mahadi, A., & Hussin, H. (2007). Pengurusan aset kerajaan berkomputer: Satu anjakan paradigma. Jabatan Audit Negara, 1-28. www.audit.gov.my/docs/BM/6Penerbitan/2Buletin Audit/4.BuletinBil4DIS07.pdf

Malaysian Public Sector Accounting Standards (MPSAS). (2013). MPSAS 17 - Property,plant and equipment.

Micallef, F., Sutcliffe, P., & Doughty, P. (1994). Financial reporting by governments. Discussion Paper No. 21, Australian Accounting Research Foundation.

OECD. (2021). Building resilience: New strategies for strengthening infrastructure resilience and maintenance. OECD Public Governance Policy Papers, No. 05, OECD Publishing, Paris, https://doi.org/10.1787/354aa2aa-en

Ouda, H. (2016). Governmental capital assets: How far should the accounting recognition of these assets go?. International Journal on Governmental Financial Management, 16(1), 24-41.

Pallot, J. (1994). Where from? Where to? (Infrastructural Assets Forum, Continuing Education Course, Paper No. 439). New Zealand Society of Accountants & Victoria University of Wellington.

Pallot, J. (1997). Infrastructure accounting for local authorities: Technical management and political context. Financial Accountability & Management,13(3), 225-242. https://doi. org/10.1111/1468-0408.00035

Pilcher, R. (2005). Local government financial key performance indicators: Not so relevant, reliable and accountable. International Journal of Productivity and Performance Management, 54(5-6),451-467. https://doi.org/10.1108/17410400510604584

Rosli, M. H., Hasbolah, F., & Yahya, N. F. (2019). Accounting for heritage assets: Issues and challenges in Malaysia. International Journal of Innovation, Creativity and Change. 6(9), 231-244.

Rosli, M. H., Kasim, N., & Kamaluddin, A. (2020). Heritage assets in Malaysia: Perspectives of Malaysian government agencies. Humanities & Social Sciences Reviews, 8(2), 969-973.

Rowles, T. R. (1992). Financial reporting of infrastructure and heritage assets by public sector entities. Australian Accounting Research Foundation.

Simpkins, K., & Jensen, G. (1995). Accounting for infrastructure assets: Loss of service potential. Office of the Controller and Auditor-General.

Syed Ali, S. S., Sheung, C. C., & Mohd Razali, M. W. (2019). Case study in a Malaysian public agency on an asset management - Moving towards the accrual basis of accounting. Accounting and Finance Research, 8(3), 149-156.

Tasmania Treasury & Finance. (1995). Guidelines for the recording, valuation and reporting of non-current physical assets in Tasmanian government departments.

Vermeer, T., Patton, T., & Styles, A. (2011). Reporting of general infrastructure assets under GASB Statement No. 34. Accounting Horizons, 25(2), 381-407.
Published
2023-12-15
How to Cite
ISA, Che Ruhana; ABU HASAN, Haslida; SALEH, Zakiah. Current Practices and Issues in the Accounting for Government Infrastructure Assets. IPN JOURNAL OF RESEARCH AND PRACTICE IN PUBLIC SECTOR ACCOUNTING AND MANAGEMENT, [S.l.], v. 13, n. 2, p. 109-127, dec. 2023. ISSN 2682-9347. Available at: <https://myjms.mohe.gov.my/index.php/jrpam/article/view/25089>. Date accessed: 30 may 2024.

Most read articles by the same author(s)

Obs.: This plugin requires at least one statistics/report plugin to be enabled. If your statistics plugins provide more than one metric then please also select a main metric on the admin's site settings page and/or on the journal manager's settings pages.