Arnaboldi & Lapsley (2009)

European Accounting Review
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On the Implementation of Accrual Accounting: A

Study of Conflict and Ambiguity
Michela Arnaboldi & Irvine Lapsley
To cite this article: Michela Arnaboldi & Irvine Lapsley (2009) On the Implementation of Accrual
Accounting: A Study of Conflict and Ambiguity, European Accounting Review, 18:4, 809-836, DOI:
10.1080/09638180903136225
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European Accounting Review
Vol. 18, No. 4, 809– 836, 2009
On the Implementation of Accrual

Accounting: A Study of Conflict
and Ambiguity
MICHELA ARNABOLDI and IRVINE LAPSLEY

Dipartimento di Ingegneria Gestionale, Politecnico di Milano, Milan, Italy
(Received December 2007)
ABSTRACT There has been a major debate on the merits of accrual accounting in the
public sector in general. This paper is an implementation study of accrual accounting in
local government. It examines this issue from an implementation perspective. The
implementation perspective adopted draws on Matland’s ambiguity–conflict model
(1995). This research is informed by a combined methods approach: the analysis of
public documents and debates; a survey of local authority capital accountants and case
study information on management’s perceptions of this accounting information. This
research reveals a complex outcome of reformers’ initiatives which has resulted in these
accounting changes being retained within the accounting domain and having limited
impact on wider potential users of this information.
1. Introduction
This paper is an implementation study of accrual accounting. Specifically, this
paper examines the introduction of full accrual accounting in local government.
The UK has implemented full accrual accounting in local authorities by the
reform of its capital accounting. This paper reveals the importance of the research
context in understanding the outcome of a policy initiative such as this. In
particular, this paper explores the potential for policy conflict. It also examines
ambiguity of implementation, particularly from the discretion of implementers
in their interpretation of the reform (Matland, 1995).
Correspondence Address: Michela Arnaboldi, Dipartimento di Ingegneria Gestionale, Politecnico di

Milano, Piazza Leonardo Da Vinci 32, 20133 Milan, Italy. Fax: þ39 02 23994083; Tel.: þ39 02
23994069; E-mail: michela.arnaboldi@polimi.it
0963-8180 Print/1468-4497 Online/09/040809–28 # 2009 European Accounting Association

DOI: 10.1080/09638180903136225
Published by Routledge Journals, Taylor & Francis Ltd on behalf of the EAA.
810 M. Arnaboldi and I. Lapsley
The wider debate on accrual accounting in the public sector highlights prospec-
tive difficulties with the adoption of accrual accounting generally. The specific
context of local authorities offers distinctive challenges, given the nature of
assets held, historical accounting practices and the complexity of local authority
activities. This paper analyses the policy conflict – a prolonged debate within
local government on this policy reform. The outcome of the local authority
debate on accrual accounting was proposals for radical changes to long-standing
practices. The ultimate adoption of proposals for accrual accounting in local
government was also the subject of conflict, with considerable challenges. The
implementation perspective reveals that the outcome of these deliberations was
the design of a complex system of capital accounting, which, in itself, has
created the preconditions for greater ambiguity of implementation. The actual
practices of local authorities after the reform are also studied in this paper both
by surveying finance officers and by interviews with managers at case study
sites. This survey confirms the implementation perspective that issues of ambigu-
ity and the discretion of key individuals may impact negatively on intended
practices.
This paper is organised into the following sections: ‘2. Conceptual Framework –
Implementation, Conflict and Ambiguity’; ‘3. Research Context: Accrual
Accounting in the Public Sector’; ‘4. Research Design’; ‘5. Evidence: From
Conflict to Ambiguity’; ‘6. Conclusion’.
2. Conceptual Framework – Implementation, Conflict and Ambiguity

This paper is an implementation study. The distinct model of policy implemen-
tation used here, which synthesises many of the findings of the prior literature on
implementation studies, and which retains a relevance to current studies
(Bossong, 2008) is the Matland ‘ambiguity – conflict’ model (1995). The
‘ambiguity – conflict’ model is particularly useful for this particular research, as
it captures both key dimensions and trajectories of implementation. The
Matland model depicts the degree of conflict surrounding the policy, the level
of ambiguity in policy formulation and implementation as key factors which
shape the policy implementation process. This model of policy implementation
is examined in closer detail below. But, first, the concepts of policy conflict
and ambiguity of implementation are considered.
Policy conflict is depicted by Matland (1995, p. 156) as existing when ‘more
than one organization sees a policy as directly relevant to its interests and
when the organisations have incongruous views’. The exacerbation of conflict
is regarded as a function of different approaches to policy formulation and
implementation. Thus rational models may be defined in such a way that
policy conflict is deemed not to exist. The rational approach presumes individuals
are self-interested with goal congruence and where there is no conflict. The
classic depiction of implementation is often attributed to Pressman and
Wildavsky (1973), see, for example, Schofield and Sausman (2004) and Pulzl
On the Implementation of Accrual Accounting 811
and Treib (2006). However, the Pressman – Wildavsky concept of implemen-

tation has experienced sustained criticism from researchers who see adherence
to rationality in implementation as inappropriate. The major reservation over
the Pressman – Wildavsky exposition of implementation is its overreliance on a
top-down, hierarchical view of how policies can be implemented in organisations
(Hjern and Porter, 1981; Hjern, 1982). These top-down models, by their very
assumption of agreement, may lead to conflict when differences are exposed.
However, more bureaucratic methods of implementation may expect conflict,
which is handled by extensive bargaining, side deals and even achieving compli-
ance by coercion (Matland, 1995).
Ambiguity in policy implementation arises where policies may have double or
even multiple meanings. Matland (1995, p. 158) elaborates upon this concept:
. . . ambiguity appears in many ways, perhaps most obviously in cases

where the technology needed to reach a policy’s goals does not exist . . .
also . . . when there are uncertainties about what roles various organizations
are to play in the implementation process, or when a complex environment
makes it difficult to know which tools to use, how to use them, and what the
effects of their use will be.
The classic model of implementation rests heavily on ideas of rationality, with

clear policy goals and implementation difficulties attributed to weak linkages
in operational systems (Schofield and Sausman, 2004). However, these ‘weak lin-
kages’ may be attributable to ambiguous means of policy delivery. Moreover,
researchers have identified the potential for implementers at the local level to
have considerable discretion or agency in the exact manner in which policies
are implemented (Lipsky, 1969, 1980; McLaughlin, 1987; Lipsky and Smith,
1993; Sutter, 1999; Barrett, 2004). Lipsky, in particular, has made a seminal
contribution to this literature with his concept of ‘street level bureaucrats’, as
the following quote illustrates:
. . . public policy is not best understood as made in legislatures or top-floor

suites of high ranking administrators, because in important ways it is actu-
ally made in the crowded offices and daily encounters in street level
workers . . . the street-level bureaucrats, the routines they establish, and
the devices they invent to cope with uncertainties and work pressures,
effectively become the public policies they carry out.
(Lipsky and Smith, 1993, p. 13)
While implementation studies, and particularly, the difference between

recommended policies and actual practices are well established, the significance
of ambiguity to the processes by which policies are translated into practice is also
recognised as a major difficulty (Seidman, 1983; Baier et al., 1986; Nutt, 1986;
Wallace and Hoyle, 2008). In particular, Nutt (1986) demonstrated that key
actors involved in change may mobilise to exploit policy ambiguities by the

obstruction, delay or blocking of changes with which they do not agree.
Matland (1995, p. 159) observes the importance of ambiguity of policy means
as an obstacle to effective implementation:
The degree of ambiguity inherent in a policy directly affects the implemen-

tation process in significant ways. It influences the ability of superiors to
monitor activities, the likelihood that the policy is uniformly understood
across the many implementation sites, the probability that local contextual
factors play a significant role, and the degree to which relevant actors vary
sharply across implementation sites.
Table 1 shows a summary of Matland’s ambiguity – conflict model of implemen-

tation (1995) and this model is now examined more closely.
The first of these models – administrative implementation – captures situations
where, with both low conflict and ambiguity, the process of implementation is
primarily managerial. The experimental model is where there is little opposition
to a new policy but ambiguous goals and means and key actors can experiment
with implementation. The third model, symbolic, is identified by Matland as
typical of examples of non-implementation of policy. In this case, Matland
(1995, p. 168) depicts the situation as one in which a policy has substantial
exposure in its development and adoption stage, but ultimately with little
effect. In this context, Matland saw professions as playing an especially impor-
tant role in symbolic implementation, where vague or ambiguous courses of
action can quickly be replaced by courses of action shaped by their professional
training. With symbolic implementation there is conflict and disagreements tend
to be resolved by coercion (Matland, 1995, p. 169). Also within the symbolic
model of implementation, the strength of local agents (cf. Lipsky’s ‘street level
bureaucrats’) is evident. These circumstances differ from the political model of
implementation, in which the strength resides at the macro level and where
policy options are clear. These dimensions of policy implementation inform
the analysis of the data in this study, but first, a closer examination of the
debate on accrual accounting in the public sector is undertaken next.
Table 1. The ambiguity–conflict model of implementation
Model variant/concept Conflict Ambiguity

Administrative Low Low
Experimental Low High
Symbolic High High
Political High Low
Source: Adapted from Matland (1995).
3. Research Context: Accrual Accounting in the Public Sector

The widespread reform movement known as New Public Management (NPM)
(Aucoin, 1990; Hood, 1991, 1995) has led many public organisations to review
their procedures and structures, often by adopting managerial innovations from
the business sector. Accrual accounting is one of these innovations, which has
been seen as instrumental to pursue NPM principles: efficiency, effectiveness,
transparency and accountability (Parker and Guthrie, 1990; Pallot, 1992; 1994;
Mellett, 1997; Lapsley, 1998; Likierman, 2000; Lapsley and Oldfield, 2001;
Lye et al., 2005). Full accrual accounting is based on the businesslike principle
that revenues and cost should be charged to the period in which they are
earned and used. This system is proposed by NPM proponents as a substitute
for the traditional cash accounting system of public administrations.
The initial pressure to shift from cash accounting to accrual accounting was
proposed in Australia and New Zealand during the 1980s (Funnell and Cooper,
1998; Pallot, 2002), but it subsequently became a major innovation within the
array of NPM technologies (OECD, 2002). This official, enthusiastic endorse-
ment is based on the prospect of enhanced information: valuations of assets
held by organisations; pictures of claims on these resources, explicitly showing
debt exposure; an evaluation of the revenues and costs incurred in a specific
period including the use of assets (depreciation and amortisation). Supporters
of accrual accounting see the benefits from this information on two levels. A
first benefit is enhanced transparency and accountability towards external stake-
holders (Micallef, 1994; Wong, 1998); by providing a complete picture of
resources, debt and revenues, public accounts may achieve better communication
with stakeholders, who include service users, citizens, oversight bodies and other
interested bodies. Second, accrual accounting will provide full cost information,
which proponents of accrual accounting suggest may be useful for improving
internal management. Among the suggested management uses of accrual
accounting are: budgeting and allocation of financial resources, outsourcing
decisions, service costs evaluation and internal accountability (Ball, 1994;
Likierman, 2000).
These benefits have often been questioned, highlighting several issues. A first
area is conceptual and it questions the appropriateness of accrual accounting to
public institutions. In particular, Guthrie (1998) raises concerns over the applica-
bility of accrual accounting to public sector organisations because of its ‘narrow
view of costs and efficiency, that is a dollar amount and the underlying philos-
ophy is one of neoclassical economics with a narrow view of performance’
(p. 6). Furthermore, there are doubts over the effectiveness of accrual accounting
in guaranteeing sound financial performance, as failures and scandals in the
private sector testify (Guthrie and Johnson, 1994; Guthrie, 1998; Guthrie et al.,
1999).
However, these fundamental challenges to accrual accounting have slowly
faded into the background with the wide penetration of accrual accounting in
the public sector (Carlin, 2005) and the focus of the debate has shifted to
implementation difficulties (Jones, 1992; Christiaens and De Wielemaker,
2003; Christiaens and Van Peteghem, 2007). A major difficulty has been the rec-
ognition and valuation of assets (Pallot, 1994). Most recently the debate has
focused around the non-neutrality of accrual accounting and the possible arbi-
trariness in its implementation (see, for example, Connolly and Hyndman,
2006; Christiaens and Van Peteghem, 2007). Accrual accounting has been
revealed as a ‘fluid’ technique which may be shaped by its implementers in
several ways. This facet of accrual accounting implementation resonates with
Lipsky’s concept of the street level bureaucrat (1969, 1980). Furthermore,
claims over the benefits of enhanced information from accruals in public sector
organisations are undermined by the limited interest in annual reports in the
private sector (Griffin, 1982) and from citizens, with governments and auditors
remaining the main readers of annual reports (Jones, 1992; Mayston, 1992;
Ryan, 1998; Jones and Pendlebury, 2004; Barton, 2005). The non-neutrality of
accrual accounting is even more evident when focusing on internal needs. Here
there are reported examples of ambiguity which are exacerbated by agency
effects. Implementers make sense of the reform meaning and its actual use
within their specific organisation, which may include outsourcing decision and
tendering procedures, budget allocation, cost control and benchmarking. In this
process, implementers design and develop accrual accounting around their
perceptions of the perceived needs of managers (Ball, 1994; Likierman, 2000),
which may not lead to consistency in accounting practices.
4. Research Design
In this paper a combined methods approach (Bryman, 2004) has been adopted.
This can take different forms – interviews, observation, surveys, documentary
or archival research. In this paper we analyse documentary evidence, survey
key informants and undertake case studies (see Table 2). The key benefit of
the combined methods approach is the enhanced validity of results by drawing
inferences from multiple sources of evidence. This approach has been further
strengthened by a longitudinal perspective, which is essential to understand the
research context – the development and evolution of local authority accounting
in the UK. The sources of data in this study are (1) the documents produced as
part of the debate over how local authority accounting should be reformed, (2)
the document which was the outcome of the debate, (3) a survey of finance
officers on how they implemented these changes to local authority accounting
practice, and (4) case study evidence of managers’ perceptions of the value of
accrual accounting information.
The documents referred to at (1) and (2) are documents from the professional
body which has the most significant membership and influence on local govern-
ment in the UK – the Chartered Institute of Public Finance and Accountancy
(CIPFA). On (3), the survey of capital accounting practices included all of the
Table 2. The research approach
Concept Evidence
Conflict: (1) A study of the accrual accounting debate in local
government
Proposal development (2) A study of the outcome of the debate
Ambiguity: (1) A survey of capital accounting accountants’ discretion in
the implementation of accrual accounting
Implementation of (2) Evidence from local government managers of discretion
proposal in the use of accrual accounting information
32 local authorities in Scotland, which have to comply with UK local authority

practice. A questionnaire was sent to local authority accountants with responsi-
bility for capital accounting implementation. There were 32 responses out of
32 – a response rate of 100%. This is an ‘excellent’ response according to
Mangione (1995, p. 60), which confirms both the validity of the questions
asked and the target respondents. On (4), the case study sites were local auth-
orities with significant capital expenditure. At each of the three case study
sites, interviews were held with three managers, one at the corporate level and
two with those with responsibility for services with significant capital assets
(housing, roads and transport).
The analysis of official documents reveals the trajectory of the reform process:
the policy conflict. It also highlights the potential for ambiguity and agency in the
interpretation of accounting policy recommendations. The survey yields valuable
information on ambiguity: how finance officers use their discretion (agency) in
the interpretation of these policies to facilitate or deny managers the opportunity
to act on this information. The case study evidence from managers reveals that
capital asset accounting information is of limited value in their decision-making.
5. Evidence: From Conflict to Ambiguity

In this section we examine the policy conflict around the development of a
successful reform of local authority capital asset accounting and the continuing
conflict around the final reform proposal. We then examine the potential for
ambiguity in the implementation of the reformed local authority accounting
system. This is achieved by focusing on the documentation in the debate
within the local authority accountants, and the outcome of the debate. We then
examine both practising accountants and management perspectives on the
implementation of this reform.
5.1. The Debate: A Story of Conflict

Local authorities in the UK have a system of full accrual accounting. However, it
took 20 years from the initial debate on accrual accounting (CIPFA, 1975) before
it was formally implemented by UK local authorities (see Table 2). The proposal
to adopt accrual accounting was fiercely contested. This facet of the move to full
accrual accounting resonates with Matland’s symbolic implementation (1995), in
which a prolonged period of debate and exposure is found. In part, the strength of
this opposition can be understood by examining the long-standing practices of
UK local authorities, which may be seen as somewhat idiosyncratic, at least by
proponents of reform. This is also a characteristic of Matland’s model of symbolic
implementation as he noted professionals were ever ready to draw on existing
practices and expertise to inform their actions of resistance.
The traditional practices of UK local authorities in accounting for capital assets
reflected the manner in which they were financed (see, for example, Lapsley and
Pallot, 2000; Jones and Pendlebury, 2004). If assets were acquired from revenue
income they could be charged to revenue expenditure; if assets were financed by
loans, they should appear in the balance sheet for the duration of the loan, with per-
iodic write downs to reflect repayments of loans. This system of accounting was
sometimes referred to as debt capital, as only assets acquired by loan finance
were likely to appear in local authority balance sheets. This practice had legal
backing. The 1972 Local Government Act (para. 7, Schedule 13) required that:
where expenditure incurred by a local authority for any purpose is defrayed

by borrowing the local authority shall . . . in each year debit the account
from which that expenditure would otherwise fall to be defrayed with a
sum equivalent to an instalment of principal and interest combined such
that, if paid annually, it would secure the payment of interest at the due
rate on the outstanding principal together with the repayment of the princi-
pal not later than the end of the fixed period.
The 1975 CIPFA exposure draft advocated the repeal of the above legislation to
facilitate the adoption of depreciation accounting. The rationale of the 1975 docu-
ment for depreciation was to improve the consistency and comparability of local
authority accounting practices over capital accounting, in which some assets were
recorded in the balance sheet and some were not, and identical assets in different
local authorities may or may not appear in balance sheets or be written down over
the same period. These proposals for reform were advanced at a time when
CIPFA had just become a founder member of the International Accounting Stan-
dards Committee with a remit for greater standardisation of accounting practice.
However, an internal review panel at CIPFA did not endorse the 1975 exposure
draft and the 1972 legislation was not repealed. It is notable that, by the time the
internal CIPFA panel reported (1977), the accounting profession had become pre-
occupied with the debate on inflation accounting and the 1975 proposals for his-
toric cost accounting were dated. However, the weaknesses of local authority
accounting identified in CIPFA’s 1975 exposure draft were repeated in every sub-
sequent proposal for capital accounting reform up to the 1989 reform which was
ultimately accepted by CIPFA and implemented in 1994 –95.
A major motivation of reformers within CIPFA was the desired aim to improve
information for local authority managers. To this end, a subsequent discussion
paper (CIPFA, 1983) advocated an asset rental system, in which managers of
local authority services would be charged for the use of assets in the provision
of services. The intention of this proposal was to make managers more responsive
to the efficient use of assets and not to regard them as a free good. This proposal
was rejected by a formal review two years later (CIPFA, 1985), which considered
that the asset rental system was most appropriate for property assets (land and
buildings) and therefore not applicable across all assets. The frequency of
reform initiatives and of their rejection is indicative of the kind of conflict
which Matland (1995) depicts in his symbolic model of implementation.
Indeed, at the time of the debate over the asset rental system, Woodham (the chair-
man of the committee which drafted the 1995 exposure draft on depreciation
accounting) re-entered the debate. In this latest contribution, Woodham advocated
current cost accounting in the non-trading activities in local authorities (1984).
However, this contribution to the debate was an academic article which had
little or no noticeable impact on practice.
In 1987, the first UK Statement of Recommended Practice (SORP) on local
authority accounting, which standardised local authority regulations across the
UK for the first time by the production of an Accounting Code of Practice
(ACOP), was approved by the ASB. This document – the ACOP – was the
accounting profession’s mechanism to ward off the prospect of detailed prescrip-
tion of accounting practices by central government. The 1987 UK SORP noted
capital accounting in local authorities had not been reformed, but made no rec-
ommendations for reform. The then Secretary of State, Nicholas Ridley,
invited local government professional bodies to devise a suitable system
(Parkes, 1990). This push for change from central government can be seen in
the light of radical changes to capital accounting in the NHS (DoH, 1989),
which was acknowledged by CIPFA (1990). At the time of the 1987 UK
SORP, the professional body, CIPFA, was regarded as accepting the long-
standing weaknesses of finance capital and the need for change (Parkes, 1989).
However, while the Capital Steering Group was established as a result of the
promptings of the 1987 UK SORP and the Secretary of State for the Environment,
it was 1990 before it produced a ‘final’ report and it was 1994 –95 before the final
report was implemented, and this was still contested beyond 1995. All of this con-
tinuing debate and conflict is typical of Matland’s symbolic model of implemen-
tation (Table 3). Next we examine the outcome of the debate, which is not a
resolution, but a contested ‘solution’.
5.2. Resolution of the Debate: Conflict Continues

As noted above, the successful reform of capital accounting started with a report
on capital accounting in local authorities by CIPFA in 1989. The document
included two main ideas on capital charges, the most radical of which affected
818
M. Arnaboldi and I. Lapsley
Table 3. The debate on capital accounting in UK local authorities
Number Year Source Status Topic Outcome

(1) 1975 CIPFA Exposure Draft Depreciation accounting Rejected –review
(2) 1977 CIPFA Working Party Review of (1) above Rejected (1)
(3) 1983 CIPFA Discussion Paper Asset rental system Review undertaken
(4) 1984 CIPFA Working Party Review of (3) Rejected
(5) 1984 Woodham Academic article Depreciation accounting No obvious impact
for non-trading activities
(6) 1987 CIPFA/LASAAC Accounting Code Need to revisit Review initiated
of Practice (ACOP)
(7) 1989 CIPFA Discussion Paper Recommends depreciation accounting Consultation
(8) 1990 CIPFA Policy Paper Recommends depreciation accounting Accepted
(9) 1994 CIPFA/LASAAC ACOP/SORP Requires depreciation accounting Implemented 1994–95
(10) 2002, 2003 CIPFA Review Minor changes Noted
(11) 2006 CIPFA/LASAAC ACOP/SORP Deletion of notional interest Accepted from 2007–2008
the revenue account. This report envisaged that the depreciation of assets – with
the exception of land – would be charged in all service accounts, basing the
valuation on the current replacement cost. In addition there was to be a cost of
capital charged for holding assets in that service. These costs were to be adjusted
‘below the line’ to maintain fiscal neutrality for local taxpayers and to avoid dis-
tortions on information provided to local taxpayers. This specific proposal
reflects the statutory obligation of local authorities to have a charge against the
revenue account which equates to the debt charges of capital assets held.
There was much opposition to the above proposals, which were revisited and in
1990 the final report of the Capital Accounting Steering Group was published,
relaxing the 1989 proposed scheme in two ways: (1) it categorised assets and
their treatment differently; (2) it gave flexibility in the determination of asset
charges in the revenue account. The main changes involved in the new frame-
work are summarised in Table 4.
However, the opposition of practising accountants to the proposals meant yet
more consultations. In this regard, it is interesting to note comments contained
in a draft version of the 1992 ‘final’ report of the Capital Accounting Steering
Group. In this draft, there is a sense of frustration on the part of the Capital
Accounting Steering Group with the continued opposition to its proposals. The
draft report (CIPFA, 1992, p. 10) dismisses concerns as being over ‘practical
issues of implementation’ rather than with technical content, citing concerns over,
the costs of the initial valuation exercise and of subsequent revaluations,

the timing of the proposed change given the pace of recent and prospective
changes affecting local government finance and services, and the apparent
complexity of the accounting entries required.
However, a closer examination of the concerns of practising accountants also

contains two fundamental points. First, to avoid the new capital accounting
charges impacting on the total net expenditure of the local authority (and
thereby the level of local taxation), the Capital Accounting Steering Group pro-
posed that depreciation charged to the revenue account should be netted off
Table 4. Summary of changes in the capital accounting framework
Main changes in the capital accounting framework

Revaluation of fixed assets – both operational and non-operational – at current value
Valuation and inclusion at fair value of assets financed by unconventional means – such as
deferred purchase
Assets and liabilities related to finance leases were required to be included in the balance
sheet in accordance with generally accepted accounting practice
Charging services with a capital charge based on both a specified notional rate of interest
and a depreciation charge
Table 5. Responses on costs and benefits
Do the costs of preparing and presenting capital charging information exceed its benefits?
No 9
Yes 17
Probably not 1
Not identifiable/not known 5
Table 6. Use of capital charging in trading activities
How useful is capital charging and asset valuation for your trading activities?
Not useful 8
Marginal or doubtful 9
Useful for comparing or calculating cost 5
Useful for budget, objectives, break even 7
Useful for use of asset 2
Widespread use 1
against the statutory minimum provision and the cost of capital would be credited
to a central property holding account and, thereby, cancelled out within the
revenue account. The concern of practising accountants was that the net effect
was nil on the revenue account and they considered this difficult to explain to
elected members and service officers (CIPFA, 1992). Furthermore, the housing
revenue account was excluded from these proposals at a time when 60% of
metropolitan local authority assets and 80% of district councils’ assets were
houses (CIPFA, 1992).
These are substantive reasons for concern over the implementation of this
system of capital accounting (see Table 5 and Table 6). They resonate with Mat-
land’s observation (1995) of symbolic implementation of policy changes which
ultimately have little substantive effect. Also, the resolution of the debate was
by a top-down edict – a formal statement from the governing body of the pro-
fessional body caught up in this protracted debate (CIPFA, 1993a, 1993b).
This latter act – the ‘resolution’ of the debate by a top-down cajoling or
command – is also indicative of symbolic implementation. Furthermore, the
detailed implementation of these proposals gave scope for the discretionary
power of local agents (Lipsky, 1969, 1980; Lipsky and Smith, 1993; Matland,
1995) in the interpretation of the new capital accounting framework, particularly
over the reliability of information systems (Deakin, 1998), the estimation of
depreciation (Bond and Dent, 1998) and the use of the new capital charging infor-
mation (CIPFA, 2003). Indeed, continued opposition to the capital accounting
regime led to a review (CIPFA, 2003) and to deletion of notional interest
charges from 2007 – 2008 (CIPFA/LASAAC), see Table 2.
5.3. Ambiguity of Implementation

The lengthy discussion on the framework for capital accounting and its final
approval might have been expected to result in a definite and explicit framework
for each local authority to adopt. However, as noted above, the complexity of this
change has left ‘ambiguous’ areas in implementation with the potential for differ-
ent interpretations and use by local authorities. This ambiguity is shown in this
paper using the perspective of different actors; Section 5.3.1 presents the ambi-
guity in the light of capital accounting practices, showing that the framework
defined after the extensive debate is ‘flexible’ which leaves the capital accoun-
tants the space to adapt it. In Section 5.3.2 we provide the perspective of man-
agers capturing different perceptions and the relevance given to the new full
accrual accounting information.
5.3.1. Ambiguity in implementation: accountants’ views

The long and lively debate on full accrual accounting resulted in a reference fra-
mework which is a compromise, as discussed above. Therefore, there is an issue
of coherence within the authorities themselves, where their actions and interpret-
ations on use, utility and operation of capital accounting information could
provide contradictory behaviour on implementation and a picture of ‘fuzziness’.
These elements of research results are discussed below in two stages: (1) the
utility of capital accounting; and (2) the use of capital accounting.
Utility of capital accounting. A major issue in the implementation of capital

accounting is the declared aim of accounting reformers (Parkes, 1989, 1990) to
enhance information for users. In local authorities there are two groups of
users which may be affected by the financial statement change: external (e.g. citi-
zens and other authorities) and internal (managers, politicians). Analysing the
survey respondents’ perceptions of potential external users, reported interest in
financial statements was not particularly widespread: only 11 local authorities
received routine questions on their annual accounts. Further analysis of these
11 positive answers revealed that questions were generally raised by councillors
and central government, with only two authorities receiving requests from the
public during the period in which annual accounts of local authorities are made
available for public inspection. The interest in local authority accounts was there-
fore generally low. These findings confirm existing literature on the use of local
authority accounts (Sidebotham, 1966; Butterworth et al., 1989; Collins et al.,
1991). However, the reported level of interest decreased even further when
looking specifically at capital charging information. The survey respondents
reported that any queries on capital accounting mainly arose from auditors
(internal and external) about the asset valuation method.
However, capital accounting was also intended to enhance internal information
for management use. The survey addressed this topic with four questions cover-
ing general and specific elements. The value of capital accounting to local
authorities in general was explored with two questions investigating the cost and
benefits perception and the desire to revert to the old system. Analysing respon-
dents’ perceptions of the cost of calculating capital charges compared to their
benefits, 53% of the respondents affirmed that the costs exceed the benefits
(see Table 2). The main reason given was that the exercise was carried out just
to comply with ‘best practice’ as specified in the Scotland Act of 2003, which
regulates local authority accounts. This finding fits Matland’s observations
(1995) on the symbolic implementation of policy reforms. This has two conse-
quences: first, the attention given to asset valuations and the methodology used
by local authorities were not carefully defined and the cost estimates obtained
were not robust; second, the impact on management was limited or non-existent
as the following comment shows:
Yes, a minimal cost approach is taken to obtaining and presenting the

necessary information to comply with the Accounting Code of Practice.
This creates a situation where the valuation and assessment of depreciation
are not robust for anything other than this technical accounting requirement.
(A14)
The first of the above findings is a clear demonstration of ambiguity of implemen-

tation (Wallace et al., 2006), arising from agency or discretion in the hands of
implementers (Lipsky, 1969, 1980; Giddens, 1984). However, there were nine
authorities (28%) which considered the benefits of capital accounting exceeded
its cost. Some of these respondents stressed the low cost of the production of
this information by finance people. Others emphasised the benefits of having a
‘qualification free’ set of accounts for comparison with private sector organis-
ations. A more direct question was then asked on their preference of the most
appropriate accounting basis; 16 authorities expressed the desire to revert to
accounts based on the traditional ‘finance capital’ approach.
These comments showed that most of these organisations saw capital account-
ing as a formal or ‘symbolic’ task to comply with, particularly over the need to be
consistent with other parts of the public sector. This is another facet of the ambi-
guity of implementation: the need to be seen to be legitimate rather than actually
using accrual accounting information. The following comment from A14 was a
clear example of this perception:
Yes it would save time and money and no one outside the profession would
notice. However it is difficult to see how this would be acceptable by the
Accounting Standards Board, and how it would fit with the whole of gov-
ernment accounts developments. It may be that the more likely approach
would be to make capital charges a real cost in terms of council tax,
however the cost and additional work required to obtain robust data on
which to make any change should not be forgotten.
(A14)
Further, it is interesting that ‘supporters’ of capital accounting state that their pre-
ference is linked to the need to comply with international accounting standards.
Finally, there are two authorities which suggest the adoption of standard
depreciation.
Two further questions explored the utility for, and of, specific elements, high-
lighted as particularly relevant by supporters of reform. The specific area tackled
here was trading activity, where the respondents signalled a marginal or non-
existent influence of capital charging. However, respondents at A16 suggested
that the managers’ attitude can influence its deployment as capital charging
was ‘useful to the extent that it forces managers to consider options on the use
of assets’. A similar response came from A20, which underlined the perception
of line managers of trading operations that capital accounting was not aligned
with its stated objectives, as the following comment shows:
Managers of trading operations tend to view capital charges as a ‘charge

from finance that is out of their control’ but do appreciate that is necessary
to contain the costs in achieving their break-even status.
The above comments are consistent with an accounting application which lacks
clear, explicit criteria of implementation, and opens up the possibility of ambigu-
ity in interpretation (Modell, 2002). Indeed, 12 organisations gave examples of
capital accounting use in trading activities for the calculation of costs or budget-
ing. Only one authority was, however, very positive (A27) affirming that these
elements are ‘essential for pricing, budgeting and final accounts’.
The investigation on utility was further supported by analysing a controversial
element in the accounting framework: notional charges. The majority of respon-
dents (69%) considered them to be useless and only eight authorities answered
positively. The examples provided by positive respondents are related to the fol-
lowing two areas: first, information on the costs tied up in assets, second, the
possibility to benchmark externally with other authorities. The respondents
were more critical on the comparison with the private sector where the benefit
of capital charges was considered to be doubtful, as shown by this comment:
As stated above, for comparison and benchmarking purposes they enable

services provided by the public sector to be more readily compared with
those of the private sector. However, the removal of the notional interest
charge would make the private sector comparison more meaningful.
(A11)
While the above comments do not convey a sense of formal and overt resistance
(Burns and Scapens, 2000), they do highlight a passive resistance in implemen-
tation, an adherence to the need for, in Matland’s terms, a symbolic adoption.
The picture emerging on utility revealed a reported widespread lack of interest
by external users in financial statements and capital accounting. The actions of
external users are essentially outside the sphere of influence of the accountants
providing local authority accounts. However, with regard to the internal users,
the results presented a different picture. There were five authorities which were
very positive on capital accounting, both in general and also in response to the
specific questions, but this was a minority position. There were 12 authorities
which answered negatively to all four questions. The remaining 15 authorities
had an ambiguous position, revealing the scope to have local interpretations of
the national guidance on capital accounting (Wallace et al., 2006). In particular,
eight authorities affirmed that they did not want to revert to the old system but
they reported marginal usefulness in answers to the other three questions; while
seven authorities declared a desire to revert to the old system, though signalling
some benefits of capital accounting.
Use of capital accounting. The differentiated picture above on the utility of

the capital accounting information provides a basis for analysing respondents’
views on the use of capital accounting. This issue was explored with three ques-
tions studying the use in management areas emphasised as crucial by accrual
accounting proponents: in cost control; in benchmarking; and in budgeting and
tendering procedures.
The survey respondents indicated that their managers made little use of capital
charging in cost control or in benchmarking with other local authorities. The
majority of respondents do not use these numbers; only 28% of the local govern-
ments answered positively and provided examples of its use. Four authorities out-
lined that they use capital charging for budgets and reports prepared on a full cost
basis; in these cases the services treated in this way are those services designated
as significant trading operations (a requirement of CIPFA’s Best Value Code of
Best Practice (BVCOP)). Five authorities made general use of capital charges in
benchmarking. However, the following comment from one of these authorities
indicated the limited impact of capital accounting information on the manage-
ment of local government:
Capital charges are included in the ‘Total Cost’ of Services and therefore
part of the costs used when completing returns. However, although
included in benchmarking exercises, due to inconsistencies in reporting
between authorities, these costs would inevitably be excluded when carry-
ing out detailed benchmarking.
This is an example of agency or discretion (Lipsky, 1969, 1980; Giddens, 1984)

in the implementation of capital accounting. This finding is supported by some
authorities which responded negatively on the use of capital costs in benchmark-
ing, specifying the ‘non-controllability’ of these calculations and hence using
their discretion to use capital charges or not when undertaking these exercises.
A second element of the new capital accounting system explored was the use of
capital charges in the budgeting process. Of the 32 respondents, only 10
Table 7. Implementation of capital charging (A)

Are capital charges (notional charges þ depreciation) included in delegated budgets
throughout the year or adjusted in the final accounts at the year end?
Included in delegated budgets throughout the year 10
Adjusted in the final accounts at the year end 13
Both 3
Depends on service 5
None 1
authorities confirmed that they included them in the budget (Table 7). But, even
within these 10 authorities some responses entailed a purely formal approach, as
the following comment revealed:
Capital charges are included in delegated budgets, but are classed as ‘non
controllable’ i.e. Departments are not responsible for these budgets (except
for Trading Services where Capital Charges impact on surpluses/deficits).
(A4)
The five authorities which have a difference in treatment, depending on the

service, reported on their situation as shown in Table 8.
These findings demonstrate the limited impact of capital accounting infor-
mation on management within local authorities and the scope for alternative
implementation strategies, given the expertise of accountants in manipulating
complex accounting systems (Carruthers, 1995).
5.3.2. Ambiguity in implementation: managements’ views

This section presents the perspective of managers within local authorities at our
three case study sites on what the adoption of full accrual accounting means to
them. While the generalisation of results based on three case studies must be
interpreted with some caution, there is nevertheless, important evidence on
Table 8. Implementation of capital charging (B)

Local Included in delegated budgets Adjusted in the final accounts at the
authority throughout the year? year end?
A2; A31 Trading service Other services
A3 Significant Trading Operation Other services
(STO)
A20 Housing revenue account and Other services
trading account
A24 Other services General services þ HRA treated as
year end entries
how ambiguity in implementation arises for local government managers. The

three local authorities are named Fraser, Cooper and Marshall to preserve
their anonymity. In each authority we explored the use and utility of accrual
accounting in two operational areas in which capital accounting is considered
essential – Roads and Housing – and at the Corporate level, where actors are
dealing with the overall development of the local authorities. Table 9 summarises
the results of the three cases.
The first perspective comes from the corporate level. In all the three authorities
there is an area of responsibility for corporate capital and asset planning (follow-
ing Corporate Planning), which works closely with accountants. Despite the
similar responses of the accountants to the survey from these three authorities,
the perception of the three Corporate Planning Directors is different. The most
positive is the Corporate Planner at Fraser, who considered accrual accounting
as ‘universal language useful to put order in a complex environment’. Assigning
a value to assets, defining criteria for their evaluation is a way to put order into a
varied portfolio of assets, and set the basis for ‘rational decision making’ (infor-
mants’ own words). With this perspective all the assets are recognised and eval-
uated, although with different criteria. Further, she considered the proposal which
emerged from the long debate on local government accounting to be ‘adequate’.
The other two Corporate Planners at Marshall and Cooper are less enthusiastic
about accrual accounting. At Cooper, the Director concedes the utility of capital
accounting, but he highlighted that, at present, the assets valuation and the mech-
anism to reflect this value in the financial statements are driven by ‘accounting
requirements’, and the need to ‘satisfy’ external auditors:
The external auditor has challenged us, in recent times, over whether there
are expenditures which should be classified as capital expenditure but do
not add to asset values in the balance sheet. However, our valuers approach
capital expenditure (using Red Book guidance – RICS) that expenditure
which does not add to floor area has not added to value. Although there
are some exceptions, the external auditor accepted this, in the end.
(Corporate Planner at Cooper)
Despite this partial discontent, capital accounting is applied to all assets; they
stated they were content with the proposed framework and asset categories,
although their operationalisation needs to be refined.
The more critical is the Corporate Planner at Marshall which emerged as a very
positive authority in the survey of capital accountants. Her reluctance is specifi-
cally related to the difficulties of using accrual accounting information for plan-
ning and decision-making:
Accounting information are not very useful for asset planning, at the
moment we do not have a proper planning process but I’m trying to
build it in collaboration with service managers. We are trying to be holistic,
Table 9. Managers’ views on capital accounting at case study sites
Fraser Cooper Marshall

Corporate † Perception of valuation: useful † Perception of valuation: financial issues are † Perception of valuation: useful
Planning for a sense of order overestimated and driven by external auditor for accounting purpose
† Asset value: done for all but dealt † Asset valuation: done for all assets † Asset valuation: varied picture
by accountants † Asset categories: satisfied † Asset categories useful for
† Asset categories: adequate and † No need for further information, but accounting purpose
useful to put order refinement in asset value † Need for further information:
On the Implementation of Accrual Accounting

community needs and choice
Housing † Asset value is a combination of † Asset value on market value † Asset value on current use
stock, rental and investment † No use for asset values † No use for asset values
† No use for asset values † Use of multiple non-financial indicators † Use of multiple non-financial
† Use of multiple non-financial † Quite satisfied with asset categories: natural indicators
indicators fit † Quite satisfied with asset
† Quite satisfied with asset † Capital charges in HRA not visible to them categories
categories † Need more information, but not
† Capital charges in HRA not asset values
visible to them † Capital charges in HRA not
visible to them
Roads † Asset value: rough figure to feed † Asset value: capitalisations of actual rentals † Asset value: not present
the database † No use for asset value † No use for asset value
† No use for asset value † Use of multiple non-financial indicators † Use of multiple non-financial
† Use of multiple non-financial † Benchmarking on roads conditions indicators
indicators † Quite satisfied of asset categories † Benchmarking on roads
† Benchmarking on roads † Notional charges: not visible conditions
conditions † Unsatisfied by asset categories
† Notional charges: not visible but † Notional charges: not visible
done by accountants
827
defining a model in which you have objectives and under that we will have
not a huge document but 2 – 3 pages done every year of the service asset
management plan: what is your services objectives, what property underpin
those objectives, we refresh that we work with to understand which the
critical elements to deliver their services objectives.
(Corporate Planner at Marshall)
However, asset valuations are made in Marshall, although only for accounting
purposes. Some assets – roads and cultural heritage – are excluded, as their
valuation is considered ‘questionable’ (informants’ word). Finally, it is interest-
ing to highlight that this third Director is the only one who signalled the impor-
tance of having more information on the services, increasing the relation not only
with internal service managers but also with outside agencies:
Maybe is about empowering and working with the community and to make
more the choices of your community as part your settlement plan, I know it
is quite an ambitious thing, there is quite a lot of joint up working across the
council and also there is a lot of joint up working with community planning
partners.
(Corporate Planner at Marshall)
Next, we turn to the service managers’ perspectives. The first operational area
addressed in this study is Housing. This service has a specific treatment in the
accounting framework whereby the traditional finance capital approach is used
for their assets, but they have the option of charging the notional cost of
capital against their revenue accounts, as with other services. Only Marshall
decided to reflect this in its housing revenue account. But none of the three
Housing Directors interviewed has any awareness of this, as the following
comment shows:
Actually I think what we are required to show is notional interest and depre-
ciation, although there’s moves to change that. But I’m not so sure this is
dealt by accountants.
(Housing Director at Fraser)
Entering the accounting criteria, all three directors consider the categories pro-
vided by CIPFA meaningful and houses are classified as operational assets.
Moving to the assessment modes instead the ambiguity of the proposal ends in
a variety of practice: three authorities using three different parameters. Marshall
values the houses on the current use value, Cooper opted for the market value and
finally, Fraser decided on a ‘combination’ of stock, rental and investment:
The stock value is a combination of the value of the stock, the rental value of
the stock minus the investment requirements of the stock. It’s not
a commercial value. It’s not how much the asset is worth on the open market,
it’s not that kind of valuation. It’s a completely different type of valuation.
(Housing Director at Fraser)
This variation of practice underlines the ambiguity inherent in these accounting

values. However, there is complete unanimity when the Directors discuss the
utility of capital accounting: they all agreed that it is useless. For managerial pur-
poses they all use multiple non-financial indicators, in particular house conditions,
maintenance costs and user needs. Financial accounting information is totally neg-
lected in management and they did not signal any desire to improve information in
this direction, but preferred improved data on users or housing conditions:
The accounting valuation does not matter to us. The critical part is service
users. We do no know enough about them. For example we do not know
age profile, important for elderly because we spent c. £400 k per year in
adaptation of houses for elderly.
(Housing Director at Marshall)
I’d like to improve our database having information on the whole stock of
houses and not only on a sample of them; now we have covered nearly the
30%.
(Housing Director at Cooper)
The perspective of managers becomes even more critical with the second service
area: Roads. The three Directors are critical of all the aspects of capital account-
ing. Even the categorisation of assets was criticised by one of the Directors
(Marshall) as being useless in capturing the complexity of roads:
The roads are infrastructural and operational as well, the team here are
combined so the operational manager is also the asset manager, so he
can influence the type of working made. We do what we call roads main-
tenance management. The roads maintenance manager is responsible for
street lighting and the bridges, everything has to do with the infrastructure
and management of the road.
(Roads Director at Marshall)
Marshall decided not to value the roads because of the difficulty of assigning
them a robust figure. The other two authorities exploited the ambiguity of the
accounting framework with different approaches: Cooper valuated roads on a
market value, while Fraser inserted what they consider a ‘rough number’:
We’ve kind of come up with figures like ‘what do you think the road net-
works worth’, that tends to be a pretty rough and ready figure, it’s not really
based on a real assessment of every road.
(Roads Director at Fraser)
This uncertainty and this variety across authorities is well known to the three
Directors. This situation undermines the benchmarking data provided by
CIPFA on capital values, because they are not useful for actual comparisons.
However, they do benchmark against each other through a national network
(Traffic Scotland) based within the Scottish Government’s Transport Agency.
But this comparison is based on non-financial indicators, specifically on a
survey of the condition of roads. These are the data considered meaningful to
decide and plan:
As a policy we have a road maintenance plan, which set up frequency of

maintenance we should be doing. We use roads conditions and other phys-
ical parameters as the basis of the plan although we need to refine the
process. Asset valuation is just an academic exercise.
(Roads Director at Marshall)
Overall these findings demonstrate the ambiguity inherent in this scheme of

accrual accounting. The managers have choices of valuation which they exercise.
But, most importantly, there is scepticism over the merits of a scheme which is
regarded as accountants talking to accountants and which does not provide
useful information to these managers. These findings are supportive of Matland’s
symbolic implementation (1995).
6. Conclusion
In this paper we have examined the implementation of capital asset accounting in
a major public service – local government. The widespread adoption of full
accrual accounting across the public sector has resulted in an intense debate,
with many critics (Guthrie, 1998; Barton, 2005) of this trend for a closer conver-
gence of the accounting practices of the public and private sectors. The
implementation perspective highlights the likely failure of top-down, rationalistic
approaches to policy change (Barrett, 2004), in general, but especially where
there is significant agency or discretion at the local level of implementation
(Lipsky, 1969, 1980; McLaughlin, 1987; Sutter, 1999). This potential for policies
to be enacted other than intended is exacerbated where there is a lack of a clear,
explicit blueprint for policy implementation and the resultant ambiguity is
exploited by local implementers (Wallace et al., 2006). This outcome is also
affected by the existence of strong professions (Matland, 1995) which may
work against the policy directives from a centralist, hierarchical approach, a situ-
ation which is typical in many public sector settings (Skelley, 2002), and is
certainly applicable to the current study setting. Matland (1995) identified four
models of implementation in a synthesis of major contributions to the implemen-
tation literature which builds on the concepts of conflict, agency and ambiguity of
implementation. The work of Matland, in particular, is drawn upon in this paper’s
analysis of the implementation of full accrual accounting in local government.
The research context of this paper is important in understanding the outcome of

policy decisions. The specific study setting in this paper is local government – a
sector of the economy which has an entrenched tradition of a very distinctive
approach to accounting. The capital accounting practices of local government
in the UK before full accrual accounting were often classified as ‘finance
capital’ to depict the importance of the source of finance as the key determinant
of how assets were ‘valued’ and recorded in local authority financial statements.
The move from ‘finance capital’ to full accrual was the outcome of a debate over
19 years: from 1975 when CIPFA, the professional body for local authority
accountants, first promulgated its ideas for depreciation accounting to a proposal
which was accepted in 1994. These circumstances resonate with Matland’s sym-
bolic model of implementation (1995). In symbolic implementation, there is a
protracted period of exposure and development of the policy in a conflict situ-
ation before implementation. This study examined the implementation of
capital asset accounting, over 10 years after its first introduction in local govern-
ment and after the preceding 19 years of debate. This debate between reformers
and traditionalists was protracted and intense. The series of initiatives over the 19
years reveal this. As do the comments of critics of the policy proposal for capital
accounting when it was finally decided. In Matland’s model of symbolic
implementation (1995), ‘resolution’ of protracted debate is achieved by a top-
down directive, as evidenced by the professional body CIPFA issuing its final
policy, which was still subject to criticism.
This research also shows that the intended aim of enhancing accountability
by improving the accounting information available to users of local authority
services and taxpayers has not materialised. The local authorities in this
survey did not report much interest in their annual reports and accounts from
anyone other than their auditors. This confirms the long-standing view in the
general accounting literature (Griffin, 1982) and in local government literature
(Sidebotham, 1966; Butterworth et al., 1989; Collins et al., 1991) that there is
little or no appetite for scrutiny of the annual reports and accounts of local auth-
orities. The present evidence is gathered from accountants as providers of finan-
cial accounting on local authorities and may therefore be considered to be
biased. But local authority financial accountants keep circulation lists of who
actually requests or receives their annual reports and accountants and are well
placed to offer an informed view of the demand or otherwise for this infor-
mation. Sidebotham’s observation (1966) that local authority accounts are
simply too complex for scrutiny other than by those with expertise in public
finance is pertinent here. This adds to the existing knowledge of the ‘user
needs’ perspective, but we add to this by offering specific results on capital
accounting. Proponents of the reform of local authority capital accounting
advanced the case that the implementation of capital asset accounting would
enhance users’ needs (Parkes, 1989, 1990). However, finance officers in this
study reported that there was little or no interest in the capital accounting
information from ‘users’. These findings are supportive of Matland’s model of
symbolic implementation (1995), in which the actual policy outcome may have
little substantive effect.
Also, the distinct nature of the reform of capital accounting has continued the
debate. The specific template for capital accounting in local authorities had gener-
ated new forms of accounting for which the finance officers did not report the deliv-
ery of any tangible benefit and for which the costs of implementation were high. The
traditionalists who were critical of the capital accounting reforms had some success
when the UK Accounting Code of Practice of 2006 abandoned the need to calculate
and incorporate the notional interest charge as part of its capital charges, following a
review of the capital accounting system by CIPFA in 2003. It is interesting to note
that a significant number of finance officers in this study favoured a return to the
former finance capital approach – an indication of continued resistance and a
factor which could promote the symbolic interpretation of this accounting practice.
It is also important to note that, while capital assets are recorded in local authority
balance sheets and depreciation is charged to the revenue account, the effects of
depreciation in the revenue account are moderated to ensure that they do not
exceed the amount for debt charges which would have been made under the
former ‘finance capital’ regime. It is not possible for local authorities to charge
more because of legal constraints on the raising of local taxes and revenues from
rented properties. In this sense, the traditional form of capital accounting has not,
cannot be, fully abolished without changes in legislation.
Third, this new system of accounting has not connected with the management
of local authorities. Advocates of the new system of capital accounting (e.g.
Parkes, 1989) had seen a key benefit of this reform as the provision of enhanced
information for managers on capital assets. However, managers within local auth-
orities were seldom given the opportunity to act on this information, as it was not
offered to them by their accountants. The significant agency effects (Lipsky,
1969, 1980) residing within the accountants’ area of expertise made them gate-
keepers for this kind of information. The unwillingness of the accountants to
make use of this information to inform management decisions undermined,
indeed, all but eliminated the possibility of a substantive use of this information.
This accords with Matland’s symbolic implementation model. Most of the local
authorities in this study did not include capital accounting information in their
delegated budgets. Instead, they treated it as a year end adjustment to their
annual accounts. In this way, there is little possibility of managers within local
government services routinely acting on, and responding to, capital accounting
information. Furthermore, at the top level of management, capital accounting
information was disregarded in exercises such as benchmarking studies of ser-
vices across local authorities. The case study evidence presented revealed a scep-
ticism over the use of capital accounting information for decision-making, but it
did recognise that it had a role to play in compiling statutory accounts. This was
seen as ‘accountants talking to accountants’.
Therefore, despite the intense debate over 19 years and the protracted period
(over 10 years) to achieve an effective implementation, this paper suggests that
the capital accounting reform in local government has had a limited impact. On
the basis of this study, these capital accounting reforms are more of a symbolic
compliance (Matland, 1995) with wider changes in accounting practice than an
impetus for management action and a key factor in a wider accountability for
local authorities. However, while the above study offers support for Matland’s
conflict – ambiguity model of implementation, specifically his symbolic model,
there remains a case for further research. This study has shown the benefits of
a longitudinal perspective on policy initiatives and the value of obtaining an
authoritative overview of implementation issues by obtaining cross-sectional
data by survey. But further research is merited, especially by the comparative
case study approach. An investigation, in depth, of those specific local authorities
which are supportive of the reformed system of capital accounting and those
which are most negative to this reform would enhance our understanding and
development of Matland’s model of implementation. This further research
would extend the existing study and make an interesting contribution to the
future effectiveness of capital accounting in local government.
Acknowledgements
The authors acknowledge the financial support of the British Accounting Associ-
ation – Special Interest Group on Public Services Accounting Research, funded
by CIPFA and the helpful comments of the anonymous reviewers.
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European Accounting Review

ISSN: 0963-8180 (Print) 1468-4497 (Online) Journal homepage: https://www.tandfonline.com/loi/rear20

On the Implementation of Accrual Accounting: A

Michela Arnaboldi & Irvine Lapsley

To link to this article: https://doi.org/10.1080/09638180903136225

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On the Implementation of Accrual

MICHELA ARNABOLDI and IRVINE LAPSLEY

(Received December 2007)

Correspondence Address: Michela Arnaboldi, Dipartimento di Ingegneria Gestionale, Politecnico di

0963-8180 Print/1468-4497 Online/09/040809–28 # 2009 European Accounting Association

2. Conceptual Framework – Implementation, Conflict and Ambiguity

and Treib (2006). However, the Pressman – Wildavsky concept of implemen-

. . . ambiguity appears in many ways, perhaps most obviously in cases

The classic model of implementation rests heavily on ideas of rationality, with

. . . public policy is not best understood as made in legislatures or top-floor

While implementation studies, and particularly, the difference between

actors involved in change may mobilise to exploit policy ambiguities by the

The degree of ambiguity inherent in a policy directly affects the implemen-

Table 1 shows a summary of Matland’s ambiguity – conflict model of implemen-

Table 1. The ambiguity–conflict model of implementation

Model variant/concept Conflict Ambiguity

3. Research Context: Accrual Accounting in the Public Sector

Table 2. The research approach

32 local authorities in Scotland, which have to comply with UK local authority

5. Evidence: From Conflict to Ambiguity

5.1. The Debate: A Story of Conflict

where expenditure incurred by a local authority for any purpose is defrayed

5.2. Resolution of the Debate: Conflict Continues

Number Year Source Status Topic Outcome

the costs of the initial valuation exercise and of subsequent revaluations,

However, a closer examination of the concerns of practising accountants also

Table 4. Summary of changes in the capital accounting framework

Main changes in the capital accounting framework

Table 5. Responses on costs and benefits

Table 6. Use of capital charging in trading activities

5.3. Ambiguity of Implementation

5.3.1. Ambiguity in implementation: accountants’ views

Utility of capital accounting. A major issue in the implementation of capital

Yes, a minimal cost approach is taken to obtaining and presenting the

The first of the above findings is a clear demonstration of ambiguity of implemen-

Managers of trading operations tend to view capital charges as a ‘charge

As stated above, for comparison and benchmarking purposes they enable

Use of capital accounting. The differentiated picture above on the utility of

This is an example of agency or discretion (Lipsky, 1969, 1980; Giddens, 1984)

Table 7. Implementation of capital charging (A)

The five authorities which have a difference in treatment, depending on the

5.3.2. Ambiguity in implementation: managements’ views

Table 8. Implementation of capital charging (B)

how ambiguity in implementation arises for local government managers. The

Fraser Cooper Marshall

On the Implementation of Accrual Accounting

This variation of practice underlines the ambiguity inherent in these accounting

As a policy we have a road maintenance plan, which set up frequency of

Overall these findings demonstrate the ambiguity inherent in this scheme of

The research context of this paper is important in understanding the outcome of

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