Compliance in the First Four Years of AAS 27 Financial Reporting by Local Government: A Study of the New South Wales Experience

This paper reports on a longitudinal study of the levels of compliance for the first fouryears (1994 to1997) following the introduction of the Australian Accounting Standard(AAS 27). The annual reports of all 177 local government councils in NSW wereanalysed revealing a high level of compliance with the standard. The main cause fornon-compliance was the complexity of the recognition and treatment of assets. Inaddition a number of problems were identified, in particular the timeliness of thereports and the disproportionately high levels of depreciation expenses reported in theoperating statement. The increased complexities of the financial management in LocalGovernment imposed by AAS 27 required professional accounting competencies moreappropriately derived from a degree level education which contributed to a highturnover of accounting staff during the four years. Finally, the paper questions theviability of the proposed dismantling of AAS 27 and the possible impact this might haveupon the sector.