Analysis of Accounting Reforms in the Public Sector of Pakistan and Adoption of Cash Basis IPSAS

Abstract

Streamlining the accounting system in accordance with "world's best practices" will result in consistency and transparency in the financial management of the country, ensure good governance, boost the confidence of investors, and contribute to strengthening the economy. The public sector accounting system in Pakistan has been overhauled recently. The reforms have been implemented by the Federal Government of Pakistan (GOP), with the assistance of World Bank, through Project to Improve Financial Reporting and Auditing (PIFRA). This study describes the accounting reforms implemented by the GOP and the adoption of cash basis International Public Sector Accounting Standards (IPSAS) for financial reporting. We first describe the contents of the accounting reforms implemented in all levels of the country beginning in the 1990s and briefly introduce cash basis IPSAS. Second, we assess the compliance of Pakistan's accounting system with cash basis IPSAS and IPSAS-2 cash flow statement. Finally, we conclude that the financial statements of the GOP comply with the requirements of cash basis IPSAS. This study recommends transitioning from cash to accrual accounting system because Pakistan has reflected a satisfactory margin after the new reforms have been implemented.