Download Accounting Hierarchy

Attachment 4.8.2
Public Sector Accounting
Green Paper # 2
Accounting Hierarchy
There is a hierarchy to the development, adoption, and implementation of accounting systems and accounting standards. The
most basic but general level is the framework of accounting. The next level, standards, addresses specific categories of
accounting and reporting needs, for all types of participating organizations. Then, the accounting policies for specific entities
apply the concepts of the framework and standards to that entity. Finally, detailed instructions tell bookkeepers and
accountants how to record transactions and other events in a way that results in compliance with policies and standards, and
within the adopted framework of accounting.
Accountancy Practice Hierarchy
ACCOUNTING
CONCEPTS
ACCOUNTING
PERSONNEL
ACCOUNTING
PROCESS
CONTROL
FRAMEWORK (one)
METHODOLOGISTS
(few)
STANDARDS
(several)
FOCUS
Accounting
Policies
(many)
FOCUS
instructions
(very many)
FOCUS
SENIOR
ACCOUNTANTS
(many)
junior accountants
(very many)
For the entire public sector in any country, there should be only one framework and one set of standards. These should apply to
all financial accounting and general purpose financial statements. The accounting systems should also allow for additional
information to be accumulated for managerial and for fiscal statistical reporting, as well as for other purposes. For example,
capital assets should recognized under the accrual basis at depreciated historical cost, at valuations according to standards for
capital assets, and also current cost or current value should be recorded for the same assets as required by both accounting
standards and statistical reporting standards. Asset valuations at current value or current cost can be disclosed in the general
purpose financial statements, either on the face or in the notes to the financial statements if depreciated historical cost is used
on the face, and the current cost data can be provided for ESA 95 reporting.
Accounting policies for each public sector organization will have a common methodological base which will be around 90-95%
common. However, because of the considerable differences between state and local governments, and other special purpose
public sector bodies, some accounting policies will be specific to the different types of public sector entities, and some might be
applicable for only certain individual entities. Accounting instructions will be very similar for all public sector entities. However,
since each entity operates within its own managerial and organizational procedures, processes, and time frames, accounting
instructions will be developed at the entity level with specific application to that entity, perhaps based on recommended
templates developed for each type of entity.