Cash or accruals for budgeting? Why some governments in Europe changed their budgeting mode and others not Hot

This paper investigates why central governments in some countries (especially the UK and Austria) have moved from a cash-based system to accruals for budgeting, while others (par-ticularly Belgium and Portugal) keep using a cash basis for their budgeting, given that both groups of countries share that their financial reporting system have become accruals-based. Our research shows that the two countries opting for a complete change to accruals empha-size the importance of consistency of the entire accounting system and the imperative to inform about resource consumption also in the budget. In sharp contrast, the two countries deciding for a partial change and for staying with cash budgeting argue that a clear and un-ambiguous view at cash spending is authoritative for their budgeting concept and that politi-cal decision makers would not accept an accrual-based budget. The change process in all four countries was influenced by several contextual factors, such as cash-accounting lega-cies and previous NPM-reforms. We conclude that stakeholders in government show more reluctance when deciding about a budgeting concept than about a financial reporting change which is perceived as less essential. We also conclude that the less ambitious reform mode (cash-based budgeting with accrual financial reporting) takes more implementation time than the more ambitious reform mode (accruals for budgeting and reporting).