ACCRUAL ACCOUNTING GAINS CHEERED: There is a huge transparency and accountability difference between cash accounting and accrual accounting approaches to tracking income and outgo, particularly at the level of the federal government. Truth-In-Accounting (TIA) has been pushing for the latter for years, and there are encouraging signs the message is being heard.

“Accrual accounting captures the full reality of government obligations and resources. It recognizes liabilities such as pensions and retiree health benefits when promises are made, not years later, when payments come due. Cash accounting often hides these long-term costs, allowing short-sighted decisions that burden future taxpayers,” TIA reports.

The good news is that governments worldwide are, according to TIA, “moving from cash-based accounting, which records transactions only when cash changes hands, to accrual accounting, which records the economic substance of transactions when they occur. This provides a far clearer, more honest picture of a government’s true financial position.”