Discussion to date has focused on whether business-style accrual accounting fits the public
sector, rather than analysing which alternative options of accrual accounting best serve the
needs of public sector stakeholders. This paper looks at what the primary users of
government accounting information actually need and describes a new analytical approach
that can be used to assess the existing public sector financial accounting standards. The
author then presents the most suitable conceptual framework for the public sector. The
paper argues that the income statement first approach is better than the balance sheet
approach for the public sector.