The Accrual Accounting in the Public Sector: A Comparison between Italian Local Entities Principles and IPSAS with the Accrual Rules

The Italian local entities, from the 1st of January 2017, have to integrate the traditional accounting system used (such as legal accounting) with the accrual accounting. The introduction of accrual accounting in the public entities become very important, in the last years, not only in Italy. To confirm that, it is possible to see the Directive no.85, issued by the European Council. In this Directive, in fact, the Council done 2 requests: 1. Firstly, addressed to the Member States where requested to them to equip themselves with adequate governmental accounting systems to provide reliable data on the principle of "accrual" (Art. 3) (Grandis & Mattei, 2012; Jorge, Jesus & Laureano, 2016); 2. Secondly, to the European Commission that have to assess the adequacy of IPSASs for the Member States (Art. 16). By this new accounting system, introduced in the Italian local entities, arise the exigency to verify the adequacy of the Italian local entities accrual principle with respect the "accrual" rules. In this work, after explained the “Hierarchy Theory” construction to identify the right criteria to link costs and revenues, it is explained the investigation using the case study methodology (Scapens, 1990), done using institutional documentations (Corbetta, 2003). In fact, the first step is to study the actually law applied at the Italian local entities; particularly, the focus is to the accrual accounting principles, contained into the attached 4/3 of Legislative Decree no.118/2011, and the comparison of this with the “Hierarchy Theory”. Another requirement is to verify if IPSASs are compliant with the “accrual” rules and, also, if this corpus of standards could be easily applied at the Italian reality. The search result will allow proposing the needed changes to be done to the Italian legislation so that it is more responsive to the "accrual" rules and to identify the main difficulties in implementing the IPSAS in the Italian local entities, if it is decided to embark on a path with the accounting harmonization, which is consistent with Europe.