An analysis on the impact of full application/implementation of IPSAS on financial performance in local authorities in Zimbabwe

Abstract

The study ought to analyse the impact of IPSAS adoption on financial performance of local authorities. Four objectives have been identified as follows: to determine the state of adoption of IPSAS in public sector, to assess the effect of IPSAS adoption on financial performance of local authorities, to examine the reasons to link the accrual accounting legislation to IPSAS as well as to determine reasons not to adopt accrual accounting in the public sector. The study used a descriptive research design in form of a survey. The research adopted the deductive approach as it seeks mainly to explore challenges and benefits of IPSAS adoption in the context of public sector. Since it was a quantitative approach, a close ended questionnaire was developed from the objectives of the study. With a target population of 1228 vendors, a sample size of 291 was used. Regression analysis was used to test the cause and effect relationship between the adoption of IPSAS and financial performance. Key results of the study showed that adoption of IPSAS is at a certain stage in the public sector as they have a transition phase.Main reasons why adoption of IPSAS is key were: to facilitate the consolidation of financial statements (M = 4.38).Respondents also agreed to a greater extent that IPSAS improves comparability in public or private institutions (M = 4.31) as well as enhancing both national and international comparability of financial information(M = 4.28).A regression model was used to test the cause and effect relationship between IPSAS adoption and public sector financial performance The researcher recommends training of users for a clean transition of the accounting reforms from cash basis to accrual based as well as total buy in from the government officials and key people in decision making of local authorities . Despite access limitation, the research was a success. The researcher therefore recommended that a further research be carried out in SADC countries as well as other African countries who have already adopted IPSAS or those aspiring to. Other researchers may consider using the same variables of this study to test whether IPSAS adoption yields a positive influence on financial performance.