Transition to IPSAS : Achieving a Successful and Seamless Adoption in Nigeria – Part 4
IFRS Watch - Issue 7
Preconditions for a Move to Accrual Accounting
Given the technical and conceptual difficulties in the adoption of an accrual-based system, the following preconditions are considered to be critical to the success of a planned
transition to accrual accounting.
An acceptable cash accounting based system
A sound accounting system that can generate reliable cash-based data is an essential basis from which to start the move to an accrual framework. Entities that do not have such a reliable cash-based system should first concentrate on improving the existing systems and processes, before considering any move to accrual accounting.
It is critical that the planned introduction of accrual accounting is supported at the highest levels of the executive. To be effective, this support must be prominent and unambiguous. The executive should be seen to be transparently championing and supporting the philosophy of change, the reasons for change, the objectives of change, and the timetable for change. The support of the legislature is also essential, not only to ensure passage of any new financial reporting legislation, but also to endorse and utilize the changed financial reporting and evaluation regime that will follow.