Governance, transparency and accountability: An international comparison

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ScienceDirect Journal of Policy Modeling 37 (2015) 136–174

Governance, transparency and accountability: An international comparison Manuel Pedro Rodríguez Bolívar ∗ , Andrés Navarro Galera, Laura Alcaide Mu˜noz Department of Accounting and Finance, University of Granada, Faculty of Business Studies, Campus Universitario de Cartuja s/n, 18071 Granada, Spain Received 27 October 2014; received in revised form 13 November 2014; accepted 22 January 2015 Available online 11 February 2015

Abstract Governmental financial transparency is an essential element in the implementation of policies to overcome the present crisis of public finances. The international financial reporting standards aim to improve governmental transparency and accountability through the use of new accounting models. Based on an international empirical study involving the Supreme Audit Institutions of 29 countries, this paper examines the political decisions associated with the introduction of the fair value accounting (FVA) to improve governmental financial transparency. Our findings show that the application of FVA would require action in three areas of government public policy: regulatory reform, skills training for public-sector staff and internationalisation. © 2015 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved. Keywords: Governmental transparency; Accountability; Public policy; International Public Sector Accounting Standards; Fair value accounting

1. Introduction In the context of the present international crisis of government finances, according to both the Fiscal Sustainability Report (European Union, 2012) and Directive 2011/85/EU (Council of Europe, 2011), improvements in public accounting practices are crucial for obtaining high-quality information on budgetary stability and governmental financial sustainability. In agreement with ∗

Corresponding author. Tel.: +34 958 24 28 81. E-mail addresses: [email protected] (M.P. Rodríguez Bolívar), [email protected] (A. Navarro Galera), [email protected] (L. Alcaide Mu˜noz). http://dx.doi.org/10.1016/j.jpolmod.2015.01.010 0161-8938/© 2015 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.

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this, several previous studies (Cooper, 2006; Hubbard, 2006; Klein & Salvatore, 2013; Paredes, Pedregal, & Pérez, 2014; Salvatore, 2006) have agreed that governmental accounting systems play an essential role in implementing appropriate public policies to overcome the financial crisis affecting the public sector worldwide. In this context, the proposed International Public Sector Accounting Standards (IPSAS) (IFAC, 2011) seek to enhance the accountability of public sector entities by increasing transparency in governmental financial statements. The application of the fair value (FV) model (IFAC, 2011), represents the current international benchmark for the preparation of governmental financial statements, with a view to improving their relevance, comparability and transparency (Haque, 2006). The adoption of fair value accounting (FVA) may have important policy implications because it could influence the choice of the best model to manage public sector services (Rodríguez & Navarro, 2007). Accordingly, prior research has shown that the selection of an appropriate policy for accounting measurement could enable a better response to information demands, by focusing on the reforms being undertaken by public administrations, known as New Public Management (Rodríguez & Navarro, 2007), especially those associated with transparency. These reforms are expected to produce information that is more reliable, secure and complete (Khurana & Kim, 2003). Nonetheless, the possible replacement of historical cost accounting (HCA) by FVA is arousing much academic debate concerning the relationship between FVA and certain financial information characteristics. With respect to this relationship, national governments wishing to implement FVA may need to take policy decisions and adapt public accounting rules accordingly (Whittington, 2008). Directive 2011/85/EU states that audits by government agencies such as Supreme Audit Institutions (SAI) should encourage the adoption of international accounting practices. In this respect, policy implications may arise due to the problems of reliability that have been imputed to FVA. The information obtained from applying FVA is believed to be more relevant for users than that derived from HCA, but at the same time, less reliable (Betts & Wines, 2004). In accordance with international auditing standards (IFAC, 2008; INTOSAI, 2006), financial audit reports must make specific reference to the understandability and comparability of the information content of governmental financial statements. Accordingly, the replacement of HCA by FVA could have repercussions on the SAI decision making process, as the main users of governmental financial statements, by impacting on the performance of its functions. Taking into account the above considerations, the aim of the present study is to identify the policy implications of implementing the IPSAS to improve governmental accountability. To achieve this aim, based on international empirical research conducted in 29 countries, we seek to determine the policy actions required to implement FVA for the purpose of improving governmental financial transparency. The rest of this paper is organised as follows. In Section 2, we study the importance of FV with respect to public administrations’ transparency and accountability, and we identify the reasons why changes in accounting criteria may influence the development of the functions performed by SAI. Section 3 presents an empirical study based on a questionnaire, detailing the research questions and the main results obtained. In Section 4, we discuss the implications of these results and highlight the main conclusions drawn. 2. Accounting measurement basis and SAIs’ functions In recent years, the reforms of accounting policies have sought to improve governmental accountability, and thus, transparency and efficiency (Haque, 2006; OECD, 2001), having as

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result financial information understandable, comparable, timely, reliable, complete and accessible (Haque, 2006). In this sense, prior studies have shown that change the basis for accounts evaluation could significantly affect the usefulness of government financial information with respect to accountability (Navarro & Rodríguez, 2007). The International Federation of Accountants (IFAC) is the most representative organisation of the accounting profession, its public sector committee – International Public Sector Accounting Standards Board (IPSASB), to promote the international harmonization of public accounting standards, and this body regularly issues International Public Sector Accounting Standards (IPSAS). Their application may contribute to the success of public sector reforms, by raising the quality of governmental financial information, and thus improving governmental transparency and accountability. In recent years, in IPSAS 15, 16 and 17, the IFAC has advocated the incorporation of FV as a criterion for evaluating assets (IFAC, 2011). According to previous studies, the information obtained when FV is applied is more relevant to users than that prepared in accordance with the HC method, but at the same time it is less reliable (Betts & Wines, 2004). This lower reliability of FV is usually associated with the difficulties encountered in obtaining market prices (AAA FASC, 2000). In this regards, the change in accounting measurement proposed by the IPSAS could enhance the quality of financial information (IFAC, 2011) because it impacts on the qualitative characteristics of financial information, and especially on its comparability, understandability and timeliness, all of which could affect the financial transparency of governments and hence their accountability (Navarro & Rodríguez, 2004). In this sense, greater comparability of the financial statements issued by public entities could contribute to improving transparency. In order to obtain financial information facilitating comparability, it is necessary a measurement basis that is appropriate for the preparation of financial statements. In this regards, the application of FV (IFAC, 2011), based on estimates made in accordance with the current market circumstances for each year, would provide values that are more homogeneous and therefore more useful for improving governmental financial transparency (Barth, 2006). On the other hand, information transparency could also be affected by the understandability of financial information (Navarro & Rodríguez, 2007). Because the HC method accumulates the values of assets acquired over a period of time, it could be difficult to determine and understand the market circumstances prevailing at the moment of each successive acquisition (Eccles, Herz, Keegan, & Phillips, 2001). While the application of FV incorporates current market circumstances, and therefore would be expected to favour the understandability of financial statements and hence their transparency. In the case of timeliness of governmental financial statements, the application of FVA requires those responsible for preparing financial statements to quantify items on the basis of current market transactions (IFAC, 2011). These estimations must be obtained at the moment when financial statements are being drafted, and this could lead to delays in their preparation. Nevertheless, FV estimates are very timely, to the extent that they reflect changes in current market circumstances, and thus provide more transparent financial information (Barth, 2006). On the other hand, the incorporation of the FV approach into governmental financial statements could have important consequences on the activities of SAI, by directly affecting their competences and functions. According to the principles of stakeholder theory (Goodpaster, 2009), each of these entities takes note of the quality of information content in financial statements; in the case of SAI, they are receivers of accountability.

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Directive 2011/85/EU, of 8 November 2011, obliges SAI to promote international best practices in public accounting through the exercise of financial audits, and improve governmental financial transparency and accountability. Hence, leading international bodies (AARF, 1990; IFAC, 2011; CICA, 1990; GASB, 1987) consider SAI to be one of the main groups of users of governmental financial statements. The implementation of FVA in governmental financial statements may affect the relevance and reliability of their information content (Whittington, 2008), and could also have an impact on the activities carried out by SAI in performing the functions, especially those regarding accountability. In the performance of financial control, the SAI are responsible for determining whether governmental financial statements meet the qualitative characteristics required of financial information, especially as regards its transparency, accountability, comparability, understandability and timeliness (Haque, 2006). Similarly, the replacement of HCA by FVA could affect the transparency of financial statements and this change, in turn, could have an impact on the audit function of the SAI, especially in the performance of financial audits, as these institutions must endorse the understandability, comparability and timeliness of governmental financial statements, and, to do so, they must perform tests to verify the valuation of public sector assets (Navarro & Rodríguez, 2004). Therefore, it would be interesting to examine whether SAI consider that the replacement of HCA by FVA could contribute to improving the usefulness of governmental financial statements as regards transparency and accountability, and whether they believe the problems of reliability associated with FV estimates might complicate the performance of their work. In this regard, it is both interesting and timely to consider what public policies could be undertaken to overcome such problems and to best implement FVA in governmental accounting systems.

3. Empirical research 3.1. Research questions As shown in Section 2 of this paper, HCA and FVA do not seem to have the same capacity to increase the usefulness of financial statements and hence government accountability. Among the aspects highlighted by IFAC (2011) regarding governmental financial information, three characteristics may have a direct effect on transparency: comparability, understandability and timeliness. Therefore, in analysing whether FVA could improve financial transparency, we must study its capacity to advance the accomplishment of these three characteristics. In addition, to determine the real capacity of FVA to improve financial transparency, we must analyse the variables that influence its reliability, such as the verifiability and objectivity of its estimates, together with their cost and means of quantification. Likewise, as in the business sector, the inclusion of more complete information in the Notes to governmental financial statements could improve the reliability of FV estimations. Therefore, this matter must be studied. All these characteristics of financial information may affect the capacity of governmental financial statements to satisfy users’ demands (Ball, 2006; Barth, 2006). Accordingly, the impact of any given basis for accounting measurement – that is, FVA vs. HCA – on the relevance and reliability of financial statements will depend on the specific information needs of each particular type of user. In view of the considerations described in Section 2, an analysis of users’ perceptions regarding financial information based on FVA could provide new knowledge about the capabilities of this

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valuation method, and enhance the quality of governmental financial statements, a goal that is specified in the international public accounting rules published by the IFAC (2011). The incorporation of the FV approach in preparing governmental financial statements and its influence on the relevance and reliability of the information content of these documents (Ball, 2006; Whittington, 2008) is a question of great interest to one of the most influential entities in this context, the SAI. These bodies seek to ensure that users have access to high-quality financial statements, reflecting transparency in the use of public resources and, in short, favouring accountability. Our first research question examines whether SAI believe that the implementation of FVA would improve the usefulness of financial statements. If, as held by the IFAC (2011) and some doctrinal papers (Navarro & Rodríguez, 2007), the introduction of FVA improves the relevance of governmental financial statements, its utility could be greater than that of HCA for the SAI, as entities responsible for monitoring public accounts. In consequence, the following research question is proposed, based on perceptions among the SAI: RQ1: Do SAI believe that the use of FVA in the preparation of governmental financial statements could improve its utility for enhancing accountability, compared with those prepared under HCA? A lively debate about FVA is currently taking place, because adoption of this approach could generate problems of reliability, as is increasingly recognised (Ball, 2006). This is so because on some occasions it is difficult to obtain objective and verifiable estimations of the FV of assets and, in others, because certain factors (such as economic incentives) could lead managers to employ unverifiable FV estimates. In this respect, previous studies have concluded that the information obtained by the application of the FV approach is more relevant to users, but less reliable, than that derived from the HC method (Ball, 2006; Betts & Wines, 2004). Therefore, the reliability of the FV estimates included in governmental financial statements could be a factor inhibiting the implementation of FVA. Accordingly, the following research question is proposed: RQ2: Do SAI believe that the incorporation of FVA into governmental financial statements could generate relevant problems regarding the reliability of these statements for the purposes of accountability? Furthermore, the incorporation of FVA would require value estimations to be of practical use. Given that FVA is a new accounting criterion in many countries, and that many users may lack experience in its application, another question of interest in order to assess its repercussions on accountability is that of the viability of the estimations produced. SAI tend to have opinions based on the exercise of monitoring and auditing. In consequence, we propose the following research question: RQ3: Do SAI believe that the implementation of FVA could generate problems regarding the viability of their value estimations for accountability purposes? The final research question examines the role attributed to the notes to financial statements in contributing to the reliability and viability of FVA. Both the IFAC (2011) and certain doctrinal papers (Navarro & Rodríguez, 2007) consider that the information included in the Notes to governmental financial statements could increase the reliability of FV estimates, to the extent that the methods and hypotheses utilised are identified; this also favours their viability. For this reason, the fourth research question in our study is intended to obtain the opinions of SAI on the role of the notes to financial statements and their influence on the reliability of FV estimates:

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RQ4: Taking into account the reliability problems that prior research has identified regarding the implementation of FVA, do SAI believe that the introduction of FVA estimations in the notes to governmental financial statements could improve the reliability of these statements for the purposes of accountability? 3.2. Sample selection and research methodology The debate on the political implications of the international accounting standardisation movement could be enriched by studying the usefulness of financial information based on the IPSAS for the users of governmental financial statements in different countries. As noted in Section 2 of this paper, SAI are called upon to act as guarantors of governments’ published financial statements, of transparency in the use of public resources and, ultimately, of accountability. To achieve this aim, this paper examines the perceptions of SAI about the usefulness of governmental financial statements based on the IPSAS, with respect to improving transparency and accountability, and the public policies that should be undertaken by politicians in order to facilitate the implementation of FVA. Initially, we contacted the director/president of each institution and, after carefully explaining the research goals and methods, requested their cooperation in completing the questionnaire. Those who agreed to participate then designated a liaison officer who was sent instructions on how to complete the questionnaire, in coordination with the other departments within the SAI. To collect the opinions of SAI, our research team put into contact with the persons assigned as interlocutors of SAI. The research methodology was based on a questionnaire inquiring into the relevance, reliability and viability of FVA. As many developed Western countries are currently addressing the issue of governmental reform and modernisation, a process in which financial transparency is a key factor (Christensen & Lægreid, 2007), the questionnaire was sent to official SAI in the most representative countries of the main public administration and accounting traditions in Western democracies (Anglo-American, Nordic, Central and Eastern European, Southern European and Germanic models). Nonetheless, due to differences in their legislative reforms it would be useful to analyse the comparative responses of the SAI according to which of the above groups they belong to. A total of 29 countries were finally included in our sample and 22 SAI belonging to these countries answered the questionnaire (Appendix), a total response rate of 75.86%. The questionnaire items were expressly constructed for the purposes of this study, and were arrived at via a two-phase process. Firstly, the research team drafted a preliminary version based on the conclusions of previous work in the field and on the recommendations of internationally respected standards-setting organisations that have addressed the question of FVA. In the second of the phases involved in deciding upon the items to be included, and as an experimental approach, the text of the initial version of the questionnaire was sent to five SAI, and the objectives of the study explained. The purpose of this communication was not to obtain answers to the questionnaire, but rather to ascertain the opinions of these five SAI on the following: (a) the understandability of the questionnaire text; (b) the clarity of the questions posed and possible ambiguities; (c) the possible inclusion of other questions relevant to the study aims. The suggestions received were analysed and, when considered appropriate, incorporated into the text of the questionnaire. Following the suggestions of these five SAI, some changes were made in order to improve the understandability and clarity of the questionnaire. This second version of the questionnaire was sent to all the SAI in our sample. The introductory letter to the liaison person in each organisation stressed the need for him/her, before answering

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the questions, to be quite certain of having understood the meaning of each questionnaire item and the ultimate goals of this study. Moreover, these interlocutors were offered the possibility of clarifying possible doubts before completing the questionnaire. In this respect, some e-mails were received concerning the exact meaning of some items; these questions were answered, and thus we may be reasonably sure that the questions measured the intended constructs. Based on prior studies on attitude analysis (Emerson, Conroy, & Stanley, 2007) and on the usefulness of accounting information (Dumontier & Raffournier, 2002), respondents to the questionnaire were asked to describe their degree of agreement with each statement on a five-point Likert scale (ranging from strongly disagree, “1” to strongly agree, “5”). The categories included in the questionnaire represent an inherent order (weaker to stronger), but the numbers assigned to the categories do not indicate the magnitude of difference between the categories in the way that an interval or ratio scale would. After the questionnaire was completed, each item was analysed separately; this is reported in Section 3.3. Wilcoxon’s method and the Student’s t test for comparison of the means were used to determine the existence or otherwise of statistically significant differences between the attitudes of the sample SAI. The t test is generally used to test the hypothesis of the equality of the means, and is the most powerful statistical tool available when the hypothesis of normality is fulfilled (Lehmann & Romano, 2005). However, when this assumption does not hold, the t test may not be valid, in which case non-parametric methods such as the Wilcoxon signed rank test, or the sign permutation method (Good, 2005) may be used instead. Among these non-parametric methods, the Wilcoxon test is most commonly recommended, and so it was applied in the present study, to confirm the results obtained by the t test. The research questions were tested at the 0.01 and 0.05 significance levels. 3.3. Analysis of the results 3.3.1. Descriptive statistics As shown in Tables A1 and A2 in Appendix, the SAI in the Anglo-American countries believe that governmental financial statements based on FVA (henceforth FVA-FS), in relation to those made under HCA, would: (a) more accurately represent government assets; (b) improve the comparability of financial information; (c) better describe the cost of providing public services. However, Anglo-American SAI also perceive issues of reliability; FVA-FS are not considered more verifiable than those generated on the basis of HCA and many SAI are of the opinion that FV estimates may be no more objective than those of HCA. In addition, according to Anglo-American SAI, changing from FVA to HCA would increase the cost of obtaining these estimates. They also believe the notes to financial statements could enhance their objectivity. In any case, the existence of markets for assets is considered more influential than their nature. In contrast to the above, SAI in Nordic countries present no clear pattern in their views of whether FVA-FS might or might not improve the accuracy, understandability, comparability and timeliness of the information published (i.e. the determinant features of governmental financial transparency). Neither is there a clear view that FVA-FS would promote the objectivity and verifiability of the information provided, and these SAI question the usefulness of the notes to financial statements, contrary to the opinions of the Anglo-American SAI. However, the Nordic SAI do recognise the existence of generally accepted methods for estimating value. Furthermore, in these countries, the existence of markets and the nature of public assets are associated with the SAI’s views on reliability.

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In southern European countries, most SAI consider that FVA-FS would improve the representation of government assets and the cost estimates of public services, increasing the comparability and understandability of the financial information published. With respect to reliability, these SAI believe FVA-FS would only improve verifiability if FV were applied to financial assets traded in a market about which information was available in the notes to financial statements. Furthermore, these SAI acknowledge the higher cost of financial auditing based on FVA-FS. In addition, their views on the reliability of the financial information published place greater emphasis on the existence of markets than on the nature of the assets involved. According to the SAI from Germanic countries, basing governmental financial statements on FVA would make the representation of public assets more accurate, understandable and comparable, although this might not be the case when the FV method is applied to nonfinancial assets with no active market. Moreover, FV is generally considered to be capable of generating useful financial information for the purposes of cost calculation. As regards reliability, provided there are markets and that FVA is applied to financial assets, FVA-FS would provide more verifiable and objective financial information, although the methods and assumptions used in the estimates should be disclosed in the notes to financial statements. On the other hand, the advantages of FV are more debatable when it is used in the valuation of non-financial assets for which no market exists. However, there is broad agreement regarding both the existence of generally accepted methods for obtaining FV estimates and the fact that such methods would make financial auditing more costly. Finally, in the countries of Central and Eastern Europe, SAI recognise FV as a valuation approach that would improve the representation of governmental assets, generating financial information that is more understandable and comparable, although with respect to its timeliness, opinions are divided. As regards reliability, provided that the notes to the financial statement include information on the methods and assumptions on which the estimates are based and that there exist markets for the assets in question, these SAI believe FVA-FS would be more objective and verifiable, although this is not the case for non-financial assets for which there is no market. Furthermore, in general these SAI acknowledge the existence of generally accepted methods for estimating FV and the greater cost of obtaining financial audits by this method. 3.3.2. Statistical results The data discussed in this section are illustrated in Tables A3 and A4 (see Appendix). Concerning both relevance and reliability, the results of the t test show that, in general, there are significant differences between the perceptions of the SAI from countries with experience in implementing FVA (the Anglo-American group) and those lacking such experience (the rest of the sample), since the significance values are below 0.05. Similar results were obtained by the Wilcoxon test, with the same level of significance. For viability in particular, the t test revealed differences of opinion between the two SAI groups (i.e., those with and without experience in applying FV), although these were less marked in the absence of markets for assets. In fact, with the Wilcoxon test such differences were not statistically significant; the same was true regarding the existence or otherwise of markets for the assets. In general, for the three blocks (relevance, reliability and viability), the results of both the t test and the Wilcoxon test are independent both of the existence of markets for the assets and of the nature and purpose of the assets. The values obtained from these tests do not differ markedly, although there was some difference regarding the values for the items related to viability, whose significance levels were higher than those for the relevance and reliability-related items, at close to 0.04 (in the t test) and 0.18 (in the Wilcoxon test) when there is no market for the assets.

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At the level of detail enabled by these descriptive statistics, the greatest differences of opinion are to be found in the items concerning the comparability between entities, which is much more widely recognised in the Anglo-American countries, and regarding the timeliness of the financial statements, more accepted among the non-Anglo-American countries. Regarding reliability, in general, the problems of the verifiability and objectivity of FV, with the consequent disadvantages for financial auditing, are more clearly recognised in the countries with experience in applying this approach.

4. Conclusions According to various agencies and transnational norms, in the present context of international crisis in government finance, greater financial transparency is essential for the implementation of the public policies needed to overcome this crisis. In order to enhance this crucial element of accountability, governments must compile and disclose financial information that is more understandable, comparable, timely and reliable, for the benefit of citizens, supervisory bodies and other stakeholders. To this end, improvements must be made in public accounting practices; accordingly, the IFAC has published a set of IPSAS recommending the FVA model as a means of improving the financial transparency of governments. Previous research has shown that governments may need to take action to adapt national public accounting standards to meet the requirements for changing to FVA. In this respect, the experience and perceptions of SAI in different countries are of fundamental importance, as these bodies are obliged to promote international accounting practices in order to enhance the transparency of governmental financial statements. The views transmitted by these 22 SAI show that, in the Anglo-American, Southern European, Germanic and Central and Eastern European countries, it is believed that the application of the FV criterion would enhance governmental financial statements, by better representing assets and by providing information that is more comparable, especially between different government agencies. Furthermore, while the contribution of FVA to improving cost calculation is recognised only in the Anglo-American and Southern European countries, the Germanic and Central and Eastern countries do agree that this approach would enhance the understandability of governmental financial statements. Therefore, FVA could facilitate greater transparency and accountability in governmental financial statements in the Anglo-American countries. On the other hand, this benefit to be derived from FVA is not recognised by the SAI of the Nordic countries, while for those from the Germanic, Southern Europe and Central and Eastern countries it is unclear how useful FVA would be in situations in which there is no market for non-financial assets. Nevertheless, these SAI are more favourable to FVA than are those from the Nordic countries. In all the areas of our sample, the SAI agree that adopting FVA would imply higher costs for financial audits. Moreover, except in the Anglo-American countries, all respondents acknowledged the existence of generally accepted methods for estimating the FV of assets. Regarding the associated disadvantages, in terms of verifiability and objectivity, two groups of opinions can be observed. The SAI from the Anglo-American and Nordic countries are clearly of the view that the adoption of FV would undermine the accomplishment of these ideals, while those from the other countries consider that FVA-FS may be more verifiable and objective. However, all respondents believe that FVA would only improve verifiability and objectivity if the notes to the financial statement always included information on the methods and assumptions used in deriving the value estimates.

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The above conclusions, together with the differences of opinion between the SAI with experience in FVA (the Anglo-American countries) and those lacking this experience (the remaining countries), could usefully underpin the definition of government policies aimed at promoting transparency as an essential element of accountability in the public sector. Our empirical results show that the application of FVA in national public accounting systems requires the adoption of public policy decisions aimed at fulfilling the stipulated conditions for this accounting model to be applied, with special attention to the requirements concerning the reliability of financial information. Accordingly, the policy implications arising from the introduction of FVA in order to enhance governmental financial transparency could be grouped into three types of government policy decisions: (a) legislative reforms; (b) skills training for public sector staff; (c) internationalisation. With respect to the first of these areas, governments interested in implementing FVA would need to undertake reforms in their national accounting standards to formalise a standard model for the notes to financial statements so that the information provided is sufficient to ensure the verifiability and objectivity of the values derived from the new accounting method. It would also be necessary to reform the laws governing the auditing of governmental financial statements, in order to: (a) incorporate new procedures to obtain evidence in situations of uncertainty in the application of new valuation models; (b) define the risks of subjectivity affecting the valuations made in audit reports; (c) specify the disclosures to be made regarding valuation methods in the notes to governmental financial statements to ensure their content is sufficiently reliable. It would also be desirable for accounting rules to be amended to include a general listing of the types of initial hypothesis that can be used in the valuation of public assets, as well as the valuation procedures and techniques that are generally accepted, specifying the financial risks involved in their use, and their consequences as regards financial transparency, the assessment of solvency and analyses of the sustainability of public policies, among other purposes. These political reforms would be necessary in all the geographic areas analysed. Although the Anglo-American SAI are the only ones to reject the existence of generally accepted valuation methods – contrary to the opinion of the other SAI – they are also the only ones with experience in FVA-FS auditing, and so their perceptions are more solidly grounded, from the technical standpoint. Turning to the second area of policy implications (skills training for public sector staff), the application of FVA would require the technical personnel employed by SAI to become more highly skilled in the implementation of international valuation standards; therefore, further training would be needed on the relationship between these standards and the IPSAS accounting valuation models of the IFAC. To this end, it might be useful to organise training courses for SAI technical staff and also to modify the procedures for SAI recruitment, incorporating specific requirements on the relationship between transparency, accountability and international accounting valuation models. The application of FVA could be further enhanced by the establishment of formal mechanisms for collaboration and by the harmonization of criteria among public sector accounting personnel, auditors and valuers of movable and immovable property, to agree upon and to publish valuation protocols and methodologies for cases in which there are no organised, liquid markets. These initiatives could be especially necessary in Anglo-American and Nordic countries, because the SAI in these areas clearly recognise the possible negative effect of FVA on the verifiability and reliability of governmental financial statements, unless certain conditions are

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met such as the provision of additional information report in the notes to financial statements, regarding the methods and assumptions used in the valuation procedures. Finally, to contribute to policy decisions on legislative reforms and public sector staff, it would be advisable for international partnerships to be reached between governments. This could be an interesting initiative, enabling exchanges of practical experience regarding the application of new methods of asset valuation and their impact on government accountability. It would also make it possible to compare and improve national regulatory standards and governmental financial statements and thus the financial transparency achieved in different countries. Accordingly, it could be useful to develop, maintain and publish international databases that include reference values for different types of public assets, depending on their nature, level of use, lifespan and alternative uses, with the aim of facilitating accessibility to all stakeholders in government accountability, including stakeholders who are not specialists in public finance. Acknowledgments This research was carried out with financial support from the Regional Government of Andalusia (Spain), Department of Innovation, Science and Enterprise (Research project P11-SEJ-7700) and from the Spanish National R&D Plan through research projects numbers ECO2010-17463ECON and ECO2010-20522-ECON (Ministry of Science and Innovation). Appendix. See Tables A1–A4.

Table A1 Descriptive statistics for financial assets by nationality of the SAI. Financial assets Anglo-American countries

Nordic countries

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 3 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 2 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 22 88 4 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 18 72 3 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the 32 1 8 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework

CV

Mean SD 3.4

Frequency Percentage Min Max Mean SD

CV

1.19023807

Mean SD 3.1

5

4.0

0.71 0.18

16

64

2

4

3.2

1.10 0.34

5

3.4

1.14 0.34

15

60

2

4

3.0

1.00 0.33

5

4.4

0.55 0.12

15

60

2

4

3.0

1.00 0.33

4

3.6

0.55 0.15

16

64

2

4

3.2

1.10 0.34

2

1.6

0.55 0.34

15

60

2

4

3.0

1.00 0.33

0.9539392

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Frequency Percentage Min Max Mean SD

147

0

0

0

0.0

0.00

0.00

10

40

2

2

2.0

0.00

13

52

2

4

2.6

13

52

2

4

15

60

2

15

60

20

0

0

0

0

0.0

0.00

0.00

0.00

12

48

2

4

3.0

1.15

0.38

0.89

0.34

12

48

2

4

3.0

1.15

0.38

2.6

0.89

0.34

12

48

2

4

3.0

1.15

0.38

4

3.0

0.71

0.24

10

40

2

3

2.5

0.58

0.23

1

4

3.0

1.22

0.41

12

48

2

4

3.0

1.15

0.38

80

4

4

4.0

0.00

0.00

12

48

2

4

3.0

1.15

0.38

20

80

4

4

4.0

0.00

0.00

18

72

3

4

3.6

0.55

0.15

20

80

4

4

4.0

0.00

0.00

15

60

2

4

3.0

0.71

0.24

2.9

4.0

0.93710241

0.00

2.9

0.97430763

3.3

0.67494856

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

0

148

6. FVA is more relevant than HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency Reliability 7. The financial information under Fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting. 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A1 (Continued ) Financial assets Anglo-American countries

Nordic countries

Frequency Percentage Min Max Mean SD

Mean SD 3.3

Frequency Percentage Min Max Mean SD

CV

1.14

Mean SD 2.8

4.0

1.00 0.25

15

60

2

4

3.0

1.00 0.33

3.4

1.14 0.34

13

52

2

3

2.6

0.55 0.21

4.0

0.00 0.00

13

52

2

3

2.6

0.55 0.21

3.6

0.55 0.15

15

60

2

4

3.0

1.00 0.33

1.6

0.55 0.34

13

52

2

3

2.6

0.55 0.21

3.6

0.55 0.15

16

64

2

4

3.2

1.10 0.34

0.72341781

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 149

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 3 5 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 2 5 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 20 80 4 4 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 18 72 3 4 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the 32 1 2 8 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 18 72 3 4 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

CV

150

2.7

1.21

8

32

1

2

1.6

0.55

0.34

13

52

2

3

2.6

0.55

0.21

10

40

1

4

2.0

1.22

0.61

15

60

2

4

3.0

1.00

0.33

12

48

1

4

2.4

1.14

0.48

15

60

2

4

3.0

1.00

0.33

15

60

2

4

3.0

1.00

0.33

10

40

2

2

2.0

0.00

0.00

15

60

1

4

3.0

1.41

0.47

15

60

2

4

3.0

1.00

0.33

20

80

4

4

4.0

0.00

0.00

15

60

2

4

3.0

1.00

0.33

15

60

0

4

3.0

1.00

0.33

20

80

4

4

4.0

0.00

0.00

20

80

0

4

4.0

0.00

0.00

13

52

2

3

2.6

0.55

0.21

3.5

0.85

3.3

0.8232726

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Reliability 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A1 (Continued ) Financial assets Southern European countries Frequency

Percentage

Min

Mean

SD

CV

4

4.0

0.00

4

3.4

3

Mean

SD

Frequency

Percentage

Min

Max

Mean

SD

CV

0.00

3.4

0.48989795 8

80

4

4

4.0

0

0.00

0.55

0.16

8

80

4

4

4.0

0

0.00

3.0

0.00

0.00

6

60

3

3

3.0

0

0.00

4

3.4

0.55

0.16

8

80

4

4

4.0

0

0.00

3

3.0

0.00

0.00

6

60

3

3

3.0

0

0.00

0

0.0

0.00

0.00

0

0

0

0

0.0

0.00

0.00

Mean

SD

3.6

0.52

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 151

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 4 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 3 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 15 60 3 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 17 68 3 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the 60 3 15 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 0 0 0 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

Germanic countries Max

152

3.8

0.71438423

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

17

68

3

4

3.4

0.55

0.16

8

80

4

4

4.0

0

0.00

19

76

3

5

3.8

1.10

0.29

10

100

5

5

5.0

0

0.00

15

60

3

3

3.0

0.00

0.00

6

60

3

3

3.0

0

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

23

92

4

5

4.6

0.55

0.12

8

80

4

4

4.0

0

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

19

76

3

5

3.8

1.10

0.29

10

100

5

5

5.0

0

0.00

3.9

0.74

4.0

0.60

4.5

0.58

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Reliability 7. The financial information under Fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting. 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A1 (Continued ) Financial assets Southern European countries Frequency

Percentage

Min

Germanic countries Max

SD

CV

Mean

SD

3.4

0.65

Frequency

Percentage

Min

Max

Mean

SD

CV

4.0

0.00

0.00

3.0

0.71

0.24

8

80

4

4

4.0

0.00

0.00

4.0

0.00

0.00

7

70

3

4

3.5

0.71

0.20

3.0

0.00

0.00

8

80

4

4

4.0

0.00

0.00

3.0

0.71

0.24

6

60

3

3

3.0

0.00

0.00

3.0

0.00

0.00

7

70

3

4

3.5

0.71

0.20

Mean

SD

3.6 3.6

0.52 0.52

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 153

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 4 4 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 60 2 4 15 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 20 80 4 4 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 15 60 3 3 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the 60 2 4 15 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 15 60 3 3 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

Mean

154

3.2

0.59

6

60

3

3

3.0

0.00

0.00

15

60

2

4

3.0

0.71

0.24

15

60

3

3

3.0

0.00

0.00

7

70

3

4

3.5

0.71

0.20

15

60

2

4

3.0

0.71

0.24

6

60

3

3

3.0

0.00

0.00

15

60

3

3

3.0

0.00

0.00

7

70

3

4

3.5

0.71

0.20

15

60

2

4

3.0

0.71

0.24

6

60

3

3

3.0

0.00

0.00

20

80

4

4

4.0

0.00

0.00

7

70

3

4

3.5

0.71

0.20

8

80

4

4

4.0

0.00

0.00

22

88

3

5

4.4

0.89

0.20

20

80

4

4

4.0

0.00

0.00

4.2

0.63

5

50

2

3

2.5

0.71

0.28

3.4

0.51

3.3

0.96

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Reliability 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A1 (Continued ) Financial assets Eastern and Central European countries Frequency

Percentage

Min

Max

Mean

SD

CV

90

3

5

4.5

1.00

0.22

85

3

5

4.3

0.96

0.23

90

4

5

4.5

0.58

0.13

95

4

5

4.8

0.50

0.11

60

2

4

3.0

0.82

0.27

0

0

0

0.0

0.00

0.00

80

3

5

4.0

1.15

0.29

80

3

5

4.0

0.82

0.20

Mean

SD

4.2

0.95145318

4.0

0.83405766

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 155

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than HCA to show 18 the fair and true view of the governmental entity 2. FVA is more relevant than HCA to 17 improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA to 18 improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 19 4. FVA is more relevant than HCA to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the timeliness of 12 governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 0 6. FVA is more relevant than HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency Reliability 7. The financial information under Fair 16 value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the 16 assets in a more objective manner than historical cost accounting.

70

3

5

3.5

1.00

0.29

14

70

3

4

3.5

0.58

0.16

18

90

4

5

4.5

0.58

0.13

18

90

4

5

4.5

0.58

0.13

16

80

3

5

4.0

0.82

0.20

15

75

2

5

3.8

1.50

0.40

68

1

5

3.4

1.52

0.45

68

2

5

3.4

1.14

0.34

72

2

5

3.6

1.14

0.32

84

2

5

4.2

1.30

0.31

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than HCA to show 17 the fair and true view of the governmental entity 2. FVA is more relevant than HCA to 17 improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA to 18 improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 21 4. FVA is more relevant than HCA to improve the comparability of the governmental financial statements of the governmental entity itself at previous times

3.9

1.13

3.5

1.23

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

14

156

9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A1 (Continued ) Financial assets Eastern and Central European countries Frequency

Percentage

Min

Max

Mean

SD

CV

14

56

1

4

2.8

1.10

0.39

16

64

3

5

4.0

0.82

0.20

14

56

1

5

2.8

1.79

0.64

16

64

2

4

3.2

0.84

0.26

15

60

2

4

3.0

0.71

0.24

14

56

1

4

2.8

1.30

0.47

22

88

3

5

4.4

0.89

0.20

21

84

3

5

4.2

0.84

0.20

17

68

1

5

3.4

1.52

0.45

23

92

3

5

4.6

0.89

0.19

Mean

SD

3.4

1.22

4.0

1.33

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

5. FVA could improve the timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency Reliability 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

157

158

Table A2 Descriptive statistics for property, plant and equipment by nationality of the SAI. Property, plant and equipment Anglo-American countries

Nordic countries

Frequency Percentage Min Max Mean SD

Mean SD 3.6

Frequency Percentage Min Max Mean SD

CV

1.16510569

Mean SD 3.2

5

4.0

0.71 0.18

18

72

2

5

3.6

1.14 0.32

5

3.4

1.14 0.34

17

68

2

4

3.4

0.89 0.26

5

4.4

0.55 0.12

17

68

2

4

3.4

0.89 0.26

4

3.6

0.55 0.15

15

60

2

4

3.0

0.71 0.24

2

1.6

0.55 0.34

13

52

2

4

2.6

0.89 0.34

5

4.4

0.55 0.12

17

68

2

4

3.4

0.89 0.26

0.89763418

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 3 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 2 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 22 88 4 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 18 72 3 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the 32 1 8 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 22 88 4 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

CV

Table A2 (Continued ) Property, plant and equipment Anglo-American countries

Nordic countries

Frequency Percentage Min Max Mean SD

Mean SD 2.9

Frequency Percentage Min Max Mean SD

CV

0.93710241

10

40

2

2

2.0

0.00 0.00

13

52

2

4

2.6

0.89 0.34

13

52

2

4

2.6

0.89 0.34

15

60

2

4

3.0

0.71 0.24

13

52

2

4

2.6

0.89 0.34

17

68

2

4

3.4

0.89 0.26

15

60

2

4

3.0

0.71 0.24

13

52

2

4

2.6

0.89 0.34

15

60

1

4

3.0

1.22 0.41

17

68

2

4

3.4

0.89 0.26

20

80

4

4

4.0

0.00 0.00

15

60

2

4

3.0

0.71 0.24

20

80

4

4

4.0

0.00 0.00

20

80

3

5

4.0

0.71 0.18

20

80

4

4

4.0

0.00 0.00

17

68

2

4

3.4

0.89 0.26

4.0

0.00

Mean SD 3.0

0.8304548

3.7

0.8232726

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 159

Reliability 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

CV

160

3.3

1.18

2.7

1.00

1.00

15

60

2

4

3.0

1.00

0.33

1.14

1.14

15

60

2

4

3.0

1.00

0.33

0.00

0.00

13

52

2

3

2.6

0.55

0.21

0.55

0.55

13

52

2

3

2.6

0.55

0.21

0.55

0.55

10

40

2

2

2.0

0.00

0.00

1.14

1.14

15

60

2

4

3.0

1.00

0.33

0.79437679

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 3 5 4.0 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 2 5 3.4 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 80 4 4 4.0 20 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 18 72 3 4 3.6 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 1.4 1 2 5. FVA could improve the 28 7 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 18 72 2 5 3.6 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

Table A2 (Continued ) Property, plant and equipment Anglo-American countries

Nordic countries

Frequency Percentage Min Max Mean SD

Mean SD 2.7

Frequency Percentage Min Max Mean SD

CV

1.24

8

32

1

2

1.6

0.55 0.55

13

52

2

3

2.6

0.55 0.21

10

40

1

4

2.0

1.41 1.41

13

52

2

3

2.6

0.55 0.21

12

48

1

4

2.4

1.14 1.14

13

52

2

3

2.6

0.55 0.21

15

60

2

4

3.0

1.00 1.00

13

52

2

3

2.6

0.55 0.21

15

60

1

4

3.0

1.41 1.41

15

60

2

4

3.0

1.00 0.33

20

80

4

4

4.0

0.00 0.00

15

60

2

4

3.0

1.00 0.33

15

60

2

4

3.0

1.00 1.00

23

92

4

5

4.6

0.55 0.12

20

80

4

4

4.0

0.00 0.00

15

60

2

4

3.0

1.00 0.33

3.5

0.85

Mean SD 2.7

0.69149181

3.8

1.13529242

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Reliability 7. The financial information under Fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

CV

161

162

Property, plant and equipment Southern European countries Frequency

Percentage

Min

Mean

SD

CV

Mean

SD

3.3

0.60647843

Frequency

4

3.4

0.55

0.16

8

4

3.4

0.55

0.16

3

3.0

0.00

4

3.4

3

5

Percentage

Min

Max

Mean

SD

CV

80

4

4

4.0

0

0.00

8

80

4

4

4.0

0

0.00

0.00

6

60

3

3

3.0

0

0.00

0.55

0.16

8

80

4

4

4.0

0

0.00

3.0

0.00

0.00

6

60

3

3

3.0

0

0.00

3.8

1.10

0.29

10

100

5

5

5.0

0.00

0.00

Mean

SD

3.8

0.72

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 68 3 17 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 68 3 17 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 15 60 3 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 17 68 3 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 3 5. FVA could improve the 60 15 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 19 76 3 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

Germanic countries Max

Table A2 (Continued ) Property, plant and equipment Southern European countries Frequency

Min

Germanic countries Max

Mean

SD

CV

Mean

SD

3.5

0.50741626

Frequency

Percentage

Min

Max

Mean

SD

CV

17

68

3

4

3.4

0.55

0.16

8

80

4

4

4.0

0

0.00

17

68

3

4

3.4

0.55

0.16

8

80

4

4

4.0

0

0.00

17

68

3

4

3.4

0.55

0.16

8

80

4

4

4.0

0

0.00

15

60

3

3

3.0

0.00

0.00

6

60

3

3

3.0

0

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0

0.00

19

76

3

5

3.8

1.10

0.29

10

100

5

5

5.0

0

0.00

3.9

0.74

Mean

SD

3.8

0.39

4.5

0.58

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174 163

Reliability 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Percentage

164

3.8

0.81

3.3

0.00

0.00

8

80

4

4

4.0

0.00

0.00

0.89

0.20

5

50

2

3

2.5

0.71

0.28

0.00

0.00

6

60

3

3

3.0

0.00

0.00

0.89

0.20

5

50

2

3

2.5

0.71

0.28

0.71

0.24

7

70

3

4

3.5

0.71

0.20

0.00

0.00

8

80

4

4

4.0

0.00

0.00

0.75

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than 80 4 4 4.0 20 HCA to show the fair and true view of the governmental entity 2. FVA is more relevant than 88 3 5 4.4 22 HCA to improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA 60 3 3 3.0 15 to improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 4. FVA is more relevant than HCA 22 88 3 5 4.4 to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 3.0 2 4 5. FVA could improve the 60 15 timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than 20 80 4 4 4.0 HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency

Table A2 (Continued ) Property, plant and equipment Southern European countries Frequency

Germanic countries

Min

Max

Mean

SD

CV

Mean

SD

3.4

0.77

Frequency

Percentage

Min

Max

Mean

SD

CV

15

60

2

4

3.0

0.71

0.24

7

70

3

4

3.5

0.71

0.20

15

60

3

3

3.0

0.00

0.00

6

60

3

3

3.0

0.00

0.00

15

60

2

4

3.0

0.71

0.24

7

70

3

4

3.5

0.71

0.20

15

60

3

3

3.0

0.00

0.00

6

60

3

3

3.0

0.00

0.00

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0.00

0.00

22

88

3

5

4.4

0.89

0.20

5

50

2

3

2.5

0.71

0.28

20

80

4

4

4.0

0.00

0.00

8

80

4

4

4.0

0.00

0.00

25

100

5

5

5.0

0.00

0.00

10

100

5

5

5.0

0.00

0.00

4.5

0.53

Mean

SD

3.3

0.62

4.5

0.58

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Reliability 7. The financial information under Fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Percentage

165

166

Property, plant and equipment Eastern and Central European countries Frequency

Percentage

Min

Max

Mean

SD

CV

80

1

5

4.0

1.73

0.43

72

1

5

3.6

1.67

0.46

76

1

5

3.8

1.64

0.43

80

1

5

4.0

1.73

0.43

64

2

5

3.2

1.10

0.34

76

3

5

3.8

0.84

0.22

64

2

5

3.2

1.64

0.51

84

2

5

4.2

1.30

0.31

Mean

SD

3.7

1.38796138

3.8

1.16510569

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Assets that are traded in an organized, active and liquid market Relevance 1. FVA is more relevant than HCA to show 20 the fair and true view of the governmental entity 2. FVA is more relevant than HCA to 18 improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA to 19 improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques 20 4. FVA is more relevant than HCA to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 16 5. FVA could improve the timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than HCA to 19 calculate the cost of rendering public sector services, improving the assessment of efficiency Reliability 16 7. The financial information under fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the 21 assets in a more objective manner than historical cost accounting

Table A2 (Continued ) Property, plant and equipment Eastern and Central European countries Percentage

Min

Max

Mean

SD

CV

18

72

3

5

3.6

0.89

0.25

16

64

3

4

3.2

0.45

0.14

22

88

3

5

4.4

0.89

0.20

20

80

2

5

4.0

1.41

0.35

19

76

3

5

3.8

0.84

0.22

20

80

3

5

4.0

1.00

0.25

60

1

5

3.0

1.83

0.61

60

1

5

3.0

1.83

0.61

55

1

5

2.8

2.06

0.75

SD

3.9

0.88

3.0

1.60

167

Assets that are not traded in an organized, active and liquid market Relevance 1. FVA is more relevant than HCA to show 12 the fair and true view of the governmental entity 2. FVA is more relevant than HCA to 12 improve the understandability of the governmental financial statements and, therefore, to improve the transparency of financial information 3. FVA is more relevant than HCA to 11 improve the comparability of the governmental financial statements among governmental entities, promoting the use of benchmarking techniques

Mean

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Frequency

60

1

5

3.0

1.83

0.61

11

55

1

5

2.8

1.71

0.62

13

65

2

5

3.3

1.50

0.46

13

65

2

5

3.3

1.50

0.46

13

65

2

5

3.3

1.50

0.46

12

60

2

4

3.0

0.82

0.27

12

60

2

4

3.0

0.82

0.27

17

85

3

5

4.3

0.96

0.23

15

75

2

5

3.8

1.50

0.40

14

70

2

5

3.5

1.29

0.37

15

75

3

5

3.8

0.96

0.26

3.4

1.18

3.6

1.06

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

12

168

4. FVA is more relevant than HCA to improve the comparability of the governmental financial statements of the governmental entity itself at previous times 5. FVA could improve the timeliness of governmental financial statements, providing useful information to adapt public sector entities to the current socio-economic framework 6. FVA is more relevant than HCA to calculate the cost of rendering public sector services, improving the assessment of efficiency Reliability 7. The financial information under Fair value accounting is more verifiable information than that under historical cost accounting 8. Fair value accounting measures the assets in a more objective manner than historical cost accounting 9. To perform financial audits, fair value accounting has more advantages than historical cost accounting 10. For regulatory and compliance purposes, fair value accounting has more advantages than historical cost accounting 11. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its objectivity 12. The introduction of methods and hypotheses used to measure fair value accounting in the notes to financial statements could improve its verifiability Viability 13. Currently, reliable and generally accepted methods to estimate FV measures exist 14. To perform financial audits, the cost of using FV measures is higher than using HC measures

Table A3 Statistical test. Parametric method: t-test. Paired t-test T-test statistics Mean

Reliability

Viability

Relevance

Reliability

AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries

Std. deviation

Std. error mean

Correlation

Paired differences Sig.

Mean

Financial assets that are traded in an organised, active and liquid market 5 5.3852 2.4083 0.7096 0.1794 −39.2000 17.0000

Std. deviation

Std. error mean

t

df

Sig. (2-tailed)

95% Confidence interval of the difference Lower

Upper

4.1473

1.8547

−44.3495

−34.0505

−21.1352

4

0.0000

−40.3333

5.4650

2.2311

−46.0685

−34.5981

−18.0778

5

0.0000

−40.5000

2.1213

1.5000

−59.5593

−21.4407

−27.0000

1

0.0236

Financial assets that are not traded in an organised, active and liquid market 16.6000 5 4.9800 2.2271 0.8909 0.0426 −38.8000 2.2804

1.0198

−41.6314

−35.9686

−38.0465

4

0.0000

2.1357

−45.6566

−34.6767

−18.8075

5

0.0000

56.2000

5

5.4955

2.4576

14.3333

6

3.3267

1.3581

54.6667

6

5.4650

2.2311

20.0000

2

0.0000

0.0000

60.5000

2

2.1213

1.5000

55.4000

5

4.7223

2.1119

13.3333

6

4.2740

1.7448

53.5000

6

6.8920

2.8137

0.3044

0.6518

0.5576

0.1607

−40.1667

5.2313

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Relevance

N

Correlations

169

Reliability

Viability

Relevance

Reliability

Viability

AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries AngloAmerican countries Non-AngloAmerican countries

17.5000

2

3.5355

2.5000

64.0000

2

0.0000

0.0000

−46.5000

3.5355

Property, plant and equipment that are traded in an organised, active and liquid market 6 5.2313 2.1357 0.8211 0.0452 −41.3333 3.1411 17.8333

59.1667

6

5.2694

2.1512

14.3333

6

3.3267

1.3581

59.1667

6

6.1779

2.5221

20.0000

2

0.0000

0.0000

66.5000

2

0.7071

0.5000

2.5000

−78.2655

−14.7345

−18.6000

1

0.0342

1.2824

−44.6297

−38.0369

−32.2323

5

0.0000

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Relevance

AngloAmerican countries Non-AngloAmerican countries

170

Viability

−44.8333

5.7764

2.3582

−50.8953

−38.7714

−19.0117

5

0.0000

−46.5000

0.7071

0.5000

−52.8531

−40.1469

−93.0000

1

0.0068

Property, plant and equipment that are not traded in an organised, active and liquid market 16.6667 6 4.8854 1.9944 0.5938 0.2140 −34.1667 4.7081 1.9221

−39.1076

−29.2258

−17.7758

5

0.0000

50.8333

6

5.4924

2.2423

13.3333

6

4.2740

1.7448

50.8333

6

6.0470

2.4687

17.5000

2

3.5355

2.5000

65.0000

2

0.0000

0.0000

0.3860

0.6294

0.4497

0.1806

−37.5000

4.7223

1.9279

−42.4557

−32.5443

−19.4516

5

0.0000

−47.5000

3.5355

2.5000

−79.2655

−15.7345

−19.0000

1

0.0335

Ranges Negative range N

Relevance Reliability Viability

Relevance Reliability Viability

Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries

Average range

Positive range Sum of ranges

N

Average range

Balanced Sum of ranges

N

Average range

Test statistics (j) Sum of ranges

Z

Sig. asintót. (2-tailed)

Financial assets that are traded in an organised, active and liquid market 0a 0.00 0.00 5b 3.00 15.00 0c 0.00 0.00

−2.041S 0.041

0g

0.00

0.00

−2.201S 0.028

0o 0.00

0.00

−1.342S 0.180

Financial assets that are not traded in an organised, active and liquid market 0d 0.00 0.00 5e 3.00 15.00 0f 0.00 0.00

−2.032S 0.042

0j

0.00

0.00

6k 3.50

21.00

0l

0.00

0.00

−2.207S 0.027

0p

0.00

0.00

2q 1.50

3.00

0r

0.00

0.00

−1.342S 0.180

0.00

0.00

6h 3.50

21.00

0m 0.00

0.00

2n 1.50

3.00

0i

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Table A4 Statistical test. Non-parametric method: Wilcoxon test.

171

172

Reliability Viability

Relevance Reliability Viability

Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries Anglo-American vs. non-Anglo-American countries

Property, plant and equipment that are traded in an organised, active and liquid market 0.00 0.00 6t 3.50 21.00 0u 0.00 0.00 −2.232S 0s

0.026

0y

0.00

0.00

6z

3.50

21.00

0aa

0.00

0.00

−2.201S

0.028

0ae

0.00

0.00

2af

1.50

3.00

0ag

0.00

0.00

−1.342S

0.180

Property, plant and equipment that are not traded in an organised, active and liquid market 0v 0.00 0.00 6w 3.50 21.00 0x 0.00 0.00 −2.201S

0.028

0ab

0.00

0.00

6ac

3.50

21.00

0ad

0.00

0.00

−2.207S

0.027

0ah

0.00

0.00

2ai

1.50

3.00

0aj

0.00

0.00

−1.342S

0.180

(a) Anglo-American < non-Anglo-American; (b) Anglo-American > non-Anglo-American; (c) Anglo-American = non-Anglo-American; (d) Anglo-American < non-AngloAmerican; (e) Anglo-American > non-Anglo-American; (f) Anglo-American = non-Anglo-American; (g) Anglo-American < non-Anglo-American; (h) Anglo-American > nonAnglo-American; (i) Anglo-American = non-Anglo-American; (j) Anglo-American < non-Anglo-American; (k) Anglo-American > non-Anglo-American; (l) AngloAmerican = non-Anglo-American; (m) Anglo-American < non-Anglo-American; (n) Anglo-American > non-Anglo-American; (o) Anglo-American = non-Anglo-American; (p) Anglo-American < non-Anglo-American; (q) Anglo-American > non-Anglo-American; (r) Anglo-American = non-Anglo-American; (s) Anglo-American < non-AngloAmerican; (t) Anglo-American > non-Anglo-American; (u) Anglo-American = non-Anglo-American; (v) Anglo-American < non-Anglo-American; (w) Anglo-American > nonAnglo-American; (x) Anglo-American = non-Anglo-American; (y) Anglo-American < non-Anglo-American; (z) Anglo-American > non-Anglo-American; (aa) AngloAmerican = non-Anglo-American; (ab) Anglo-American < non-Anglo-American; (ac) Anglo-American > non-Anglo-American; (ad) Anglo-American = non-Anglo-American; (ae) Anglo-American < non-Anglo-American; (af) Anglo-American > non-Anglo-American; (ag) Anglo-American = non-Anglo-American; (ah) Anglo-American < non-AngloAmerican; (ai) Anglo-American > non-Anglo-American; (aj) Anglo-American = non-Anglo-American; (S) based on positive range; (T) based on negative range.

M.P. Rodríguez Bolívar et al. / Journal of Policy Modeling 37 (2015) 136–174

Relevance

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