See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/324596169

Implementation of accrual accounting by Malaysian federal government: Are

the accountants ready?

Article  in  Journal of Accounting & Organizational Change · April 2018

DOI: 10.1108/JAOC-03-2017-0020

CITATION READS

1 1,169

3 authors:

Suhaiza Ismail Siti Alawiah Siraj

International Islamic University Malaysia International Islamic University Malaysia
71 PUBLICATIONS   392 CITATIONS    16 PUBLICATIONS   59 CITATIONS   

SEE PROFILE SEE PROFILE

Shahril Baharim
Accountant General's Department of Malaysia
3 PUBLICATIONS   37 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Waqf accounting & reporting in Malaysia View project

All content following this page was uploaded by Suhaiza Ismail on 31 July 2018.

The user has requested enhancement of the downloaded file.

 Journal of Accounting & Organizational Change
Implementation of accrual accounting by Malaysian federal government: Are the
accountants ready?
Suhaiza Ismail, Siti Alawiah Siraj, Shahril Baharim,
Article information:
To cite this document:
Suhaiza Ismail, Siti Alawiah Siraj, Shahril Baharim, (2018) "Implementation of accrual accounting by
Malaysian federal government: Are the accountants ready?", Journal of Accounting & Organizational
Change, Vol. 14 Issue: 2, pp.234-247, https://doi.org/10.1108/JAOC-03-2017-0020
Permanent link to this document:
https://doi.org/10.1108/JAOC-03-2017-0020
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

Downloaded on: 20 July 2018, At: 01:45 (PT)

References: this document contains references to 40 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 72 times since 2018*
Users who downloaded this article also downloaded:
(2018),"The emergence of an accounting practice: The fabrication of a government accrual
accounting system", Accounting, Auditing & Accountability Journal, Vol. 31 Iss 4 pp. 1045-1066
<a href="https://doi.org/10.1108/AAAJ-01-2016-2400">https://doi.org/10.1108/AAAJ-01-2016-2400</
a>
(2018),"Forming and transforming shared services: the performativity of management devices",
Journal of Accounting &amp; Organizational Change, Vol. 14 Iss 2 pp. 216-233 <a href="https://
doi.org/10.1108/JAOC-06-2016-0036">https://doi.org/10.1108/JAOC-06-2016-0036</a>

Access to this document was granted through an Emerald subscription provided by

For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald
for Authors service information about how to choose which publication to write for and submission
guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as
well as providing an extensive range of online products and additional customer resources and
services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the
Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for
digital archive preservation.

*Related content and download information correct at time of download.


JAOC
14,2
234
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)
Journal of Accounting &
Organizational Change
Vol. 14 No. 2, 2018
pp. 234-247
© Emerald Publishing Limited
1832-5912
DOI 10.1108/JAOC-03-2017-0020
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1832-5912.htm
Implementation of accrual
accounting by Malaysian federal
government
Are the accountants ready?
Suhaiza Ismail
Department of Accounting, Faculty of Economics and Management Sciences,
International Islamic University Malaysia, Kuala Lumpur, Malaysia
Siti Alawiah Siraj
International Islamic University Malaysia, Kuala Lumpur, Malaysia, and
Shahril Baharim
National Accounting Institute, Jabatan Akauntan Negara, Cyberjaya, Malaysia
Abstract
Purpose – The purpose of this paper is to examine factors influencing the readiness of public sector
accountants to implement the accrual accounting system in the Malaysian Federal Government. The
readiness was measured in terms change commitment and change efficacy.
Design/methodology/approach – The study uses a questionnaire survey that comprises three factors
(change valence, task knowledge and task availability) in predicting readiness to implement the accrual
accounting system. Multiple regressions were performed on a total of 165 usable responses received.
Findings – The results reveal that change valence, task knowledge and task availability are significant and
positively influence the change efficacy of the Federal Government to implement accrual accounting in
Malaysia. However, only change valance is a positively significant factor in influencing change commitment.
Originality/value – This study is important as it contributes not only by adding to the scant literature
assessing the readiness to implement the accrual accounting system but also by providing useful information
on determinants of readiness for accrual accounting implementation in supporting the Malaysian
Government’s financial transformation agenda.
Keywords Malaysia, Accrual accounting, Readiness, Federal government
Paper type Research paper
Introduction
In elevating the achievement of a developed nation status, Malaysia introduced the
Economic Transformation Programme in 2010. Under the programme, six Strategic Reform
Initiatives were introduced. One of the Strategic Reform Initiatives is called “Public Finance
Reform”. The main objective of this initiative is to strengthen the government’s finance in
ensuring stability and sustainability of public funds. In executing the Public Finance
Reform initiative, several measures have been introduced, one of which is the adoption of the
accrual accounting system by the Malaysian Federal Government (Economics
Transformation Programme, 2017).
Accrual accounting, as opposed to cash accounting, is an accounting basis that measures
the performance and position of an entity by recognizing economic events regardless of
when the cash transactions occur. Accrual accounting is common in the private sector, and
 the public sector’s adoption of the accrual accounting system is also not new. Governments Accrual
of several countries have implemented accrual accounting, including the UK, Canada, New accounting
Zealand, Australia, The Netherlands, Sri Lanka and Indonesia (Baker and Rennie, 2006).
The fundamental justification for the transition from cash to accrual accounting system by
the government is the drawbacks of cash accounting. Cash accounting fails to recognize
future commitments, guarantees and other contingent liabilities (Ball et al., 1999). It also fails
to provide details of how the resources are controlled by an entity, the cost of providing
goods and services and other financial information for assessing the financial position of an 235
entity (Peter Van Der Hoek, 2005; Arnaboldi and Lapsley, 2009; Lapsley et al.2009). Accrual
accounting is advantageous for the Governments as it provides full information about costs
and available resources which ultimately enhances efficiency, effectiveness, transparency,
good governance and accountability of the public sector to the society (Guthrie, 1998; Chan,
2003; Hodges and Mellett, 2003; Barton, 2005; Deaconu et al., 2009; Hyndman and Connolly,
2011; Monteiro and Gomes, 2013).
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

In Malaysia, in line with the Public Finance Reform initiative, the Prime Minister, Dato’
Seri Najib Tun Razak in 2011 announced that the Federal Government of Malaysia was to
adopt a full accrual-based accounting system in 2015 (Gomes and Sargiacomo, 2013;
Economics Transformation Programme, 2017). The government was highly committed to
accrual transition because of its benefits and embarked on intensive preparations for accrual
accounting adoption, including the establishment of several committees to review the
procedures, acts and regulations, to monitor the implementation of accrual accounting, to
develop relevant accounting standards, policies and information system, as well as to ensure
sufficient training on accrual accounting among public sector accountants and relevant
personnel. However, the implementation of accrual accounting system in the Federal
Government of Malaysia has been postponed twice. Initially, the implementation was
postponed from 2015 to 2017. Recently, it was further postponed until 2018. The
postponements of the transition, to some extent, indicate that the government is yet to be
ready to implement accrual accounting. The Ministry of Finance claimed that the
preparations are still ongoing that cause the delay in the implementation (Lee, 2015). This
postponement, therefore, inspires the researcher to scrutinize the Malaysian Federal
Government’s readiness to fully implement accrual accounting.
In addition, although several official documents on accrual accounting implementation
has emphasized on the need for an organization that makes the decision to move to accrual
accounting system to carefully consider its readiness in terms the pre-implementation
challenges to minimize the implementation and post-implementation risks (IFAC, 1994;
IFAC, 2006), there is scant theoretically informed empirical evidence on the factors
influencing the readiness to implement accrual accounting (i.e. pre-implementation stage).
Moreover, although several prior studies including Ryan (1998), Harun et al. (2012) and
Adhikari and Mellemvik (2011) have investigated the factors influencing accrual accounting
adoption, the studies were carried out when the accrual accounting have been implemented
in their countries. In other words, the studies are not investigating the “readiness” to
implement.
In light of the above motivations, using the organizational readiness to change theory,
the current study aims to examine factors influencing the readiness of the Malaysian
Federal Government to move towards accrual accounting, as perceived by public sector
accountants. In particular, the study investigates the influencing factors on readiness in
terms of change commitment and change valance. The unique contribution of this study is
that it offers empirical evidence on factors that are important in ensuring readiness of the
Federal Government for the transition to accrual accounting, which is currently very limited.
 JAOC More importantly, there is yet a theory-based empirical study which investigates the
14,2 organizational readiness for change on the issue of the readiness of a government to adopt
accrual accounting system. This remainder of this paper is structured as follows. The
following section offers a brief description of the theoretical framework. The subsequent
section provides a review of relevant literature and proposes hypotheses of the study. Then,
the next two sections provide a description of the research methodology used and results of
236 the study. The final section offers discussion of the main findings, implications, limitations
of the study and suggestions for future research.

Literature review, theoretical framework and hypotheses

Accrual accounting implementation in public sector
Prior studies on accrual accounting implementation in the public sector have focused on
benefits and usefulness of accrual accounting (Guthrie, 1998; Chan, 2003; Hodges and
Mellett, 2003; Barton, 2005; Deaconu et al., 2009; Hyndman and Connolly, 2011; Monteiro
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

and Gomes, 2013; PwC, 2013), challenges and barriers for accrual implementation (Harun
and Robinson (2010), factors influencing the adoption of accrual accounting (Ryan, 1998;
Harun et al., 2012; Adhikari and Mellemvik, 2011) and readiness to implement accrual
accounting (Azmi and Mohamed, 2014).
The usefulness of accrual accounting in the public sector as discussed in prior literature
includes its provision of more information for better decision-making (Hyndman and
Connolly, 2011), its regulation of full costs of government activities (Hodges and Mellett,
2003; Nistor et al., 2009) and its enhancement of efficiency, effectiveness and transparency
and accountability (Guthrie, 1998; Chan, 2003; Hodges and Mellett, 2003; Nistor et al., 2009;
Monteiro and Gomes, 2013; PWC, 2013). Moreover, accrual accounting provides information
on the full costs of government services, which is vital when considering alternatives for
service delivery options such as conventional, outsourcing or via public–private partnership
initiatives (Barton, 2005; Hyndman and Connolly, 2011. Despite its usefulness, implementing
accrual accounting in the public sector is very challenging. Based on studies by Harun and
Robinson (2010) in Indonesia, Tickell (2010) in Fiji and PWC (2013) in Malaysia, among the
challenges and barriers in adopting accrual accounting are legal issues, lack of political
support, inadequately skilled human resources, high labour turnover, insufficient
investment in capital equipment and incompatible information technology systems (Harun
and Robinson, 2010; PWC, 2013).
In terms of factors influencing adoption of accrual accounting, Ryan (1998) reported that
political and economic environments are the main factors initiating accrual accounting
implementation in Australia in the late 1970s. Similar factors of political will and economic
reforms were discovered by Harun et al. (2012) to have initiated accrual accounting adoption
by the Indonesian Government. A study on accrual adoption in New Zealand by Lye et al.
(2005) discovered six important factors in ensuring successful transition. These are key
people, axial principles, communicating ideas, contextual determinants, ethos and
knowledge.
Upping and Oliver (2012) investigated factors influencing transition from a cash-based to
an accrual-based accounting system in public universities in Thailand. The study revealed
that institutional capacity in terms of technological resources and knowledge of staff are the
important aspects required for the accounting change. Other influencing factors discovered
by prior studies include support from top management, interest of international
organizations and involvement of professional accounting bodies (Adhikari and Mellemvik,
2011; Azmi and Mohamed, 2014).
 There is limited prior research that specifically examines the readiness for the change Accrual
from a cash-based to an accrual-based accounting system, other than a study by Azmi and accounting
Mohamed (2014) that explored the extent of readiness among public sector employees of the
Malaysian Ministry of Education (MOE) to implement accrual accounting. The study
suggested that accounting employees in MOE indicated that they are ready to implement
accrual accounting and called for more study on the implementation of accrual accounting in
the Malaysian Government. However, their study focusses on only one ministry and has yet
to examine empirically the factors influencing readiness for accrual transition. Therefore, in 237
response to the call for further studies, the current study extends the work of Azmi and
Mohamed (2014) by covering more respondents from various ministries and empirically
examining the determinants of readiness for accrual accounting implementation in Malaysia
based on the theory of organizational readiness for change.

Theory of organizational readiness for change

Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

The theory of organizational readiness for change was proposed by Weiner (2009) based on
social cognitive theory and self-efficacy theory (Gist and Mitchell, 1992) and consists of
multi-level and multi-faceted constructs. The theory of organizational readiness for change
posits that readiness comprises two components, namely, change commitment and change
efficacy, and it is a function of the three factors of change valance, task knowledge and task
availability (Weiner, 2009). In ordinary language, the term “readiness” refers to “a state of
being both psychologically and behaviourally prepared to take action” in regards to the
change (Weiner, 2009). Weiner (2009) defined organizational readiness as change
commitment and change efficacy among organization members to implement organizational
change. Change commitment refers to the organization members’ obligation to accept
the change, while change efficacy is defined as a “comprehensive summary or judgment of
perceived capability to perform a new task (i.e. the change)”. In other words, change efficacy
relates to the level of capability of the organization member to implement the change. Higher
change efficacy means that the organization is more capable of implementing the change
which implies a greater readiness for change. In predicting organizational readiness, three
factors were proposed: change valence, task knowledge and task availability (Weiner, 2009).
Change valence refers to how the organization members value the particular change
(Weiner, 2009). The change is valuable if the organization believe the change is effective and
beneficial. The more the organization members value the change (i.e. greater change
valence), the more likely they will support, engage and accept the change and hence will be
more ready to implement the change. This is consistent with the experience of the New
Zealand Government at the early stage of the accrual accounting implementation whereby it
was highlighted that when various parties at the various government levels belief in the
benefits of accrual accounting their commitment and capability to move towards accrual
accounting were remarkable (IFAC, 1994). Based on the theory of organizational readiness
for change and the finding of prior literature, the following hypotheses are proposed:
H1a. There is a positive relationship between change valance and change commitment.

H1b. There is a positive relationship between change valance and change efficacy.

Task knowledge refers to information that is required by organization members for the
change. In other words, members of organization must possess appropriate and sufficient
knowledge regarding the change. In the context of the current study, higher task knowledge
means having more information and knowledge about using accrual accounting.
Essentially, it is referring to the knowledge of the accountants on the public sector accrual
 JAOC accounting standards. The importance of being conversant with the accounting standards
14,2 for accrual to ensure successful implementation of accrual accounting was clearly
highlighted in the report by the International Federation of Accountants (IFAC, 2011).
Similar finding on the importance of having sufficient knowledge for better commitment
and successful transition to accrual accounting was reported by Lye et al. (2005) and Upping
and Oliver (2012). Hence, the following hypotheses are proposed:
238 H2a. There is a positive relationship between task knowledge and change commitment.

H2b. There is a positive relationship between task knowledge and change efficacy.

Task availability is about availability of resources in the organization to support the change
(Weiner, 2009). The resources include human, financial and other physical resources. In this
study, relevant resources necessary for transition to accrual accounting include experts in
accrual accounting standards, accounting personnel, accounting information systems and
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

funding. IFAC (2011) has strongly emphasized on the critical need for sufficient resources
including human, financial and technological capacity in ensuring smooth transition to
accrual accounting. Several prior studies have also discovered that having sufficient
resources is crucial for successful transition to accrual accounting (Lye et al.2005; Upping
and Oliver, 2012). The greater the availability of these resources, the more likely the
organization will commit and be ready to embark on the change. Based on the theory and
prior literature, the following hypotheses are proposed:
H3a. There is a positive relationship between task availability and change
commitment.
H3b. There is a positive relationship between task availability and change efficacy.

Research methodology
Sample
The respondents of this study are the public sector accountants at the Accountant General’s
Department of Malaysia (JANM). In distributing the questionnaire, the researchers sought
assistance from the Research Unit, Accountant General Institute (i.e. a unit under the
Accountant General Department) to distribute the questionnaires to the accountants at Main
Office as well as at the various branches. Depending on the size of the offices, 2 to 15
questionnaires were sent to each office by the officer at the Research Unit. A total of 250
questionnaires were distributed. Each respondent received a cover letter explaining the
purpose of the study and a copy of the questionnaire. It is clearly stated on the cover letter
that the confidentiality of the respondents is assured. It took the respondents about 10 to
15 min to complete the questionnaire. After four weeks of distribution, the officer at the
Research Unit collected the completed questionnaires and passed them to the researchers. A
total of 165 respondents returned the completed questionnaire, representing a usable
response rate of 66 per cent.

Research instrument
In undertaking this study, a survey developed based on the Weiner’s organizational
readiness to change theory by Shea et al. (2014) was adapted. Shea et al. (2014) have
attempted to operationalize the organizational readiness for change theory by developing
the questionnaire instrument to investigate the organization readiness for change in the
context of health-care sector. As the questionnaire was originally developed for a policy
 change in health-care section and in a context of a Western country (i.e. USA), modifications Accrual
were made to suit the context and respondents of the current study and a pilot study was accounting
also conducted. The finalized survey consists of two main sections. Section A concerns the
demographic information of the respondents including gender, highest qualification, current
position, involvement in accounts preparation, length of related work experience, number of
accrual accounting training sessions or workshops attended and level of understanding of
accrual accounting.
Section B comprises 23 items measuring the readiness to implement accrual accounting 239
in terms of change commitment and change efficacy and three factors influencing the
readiness to change, that is, change valence, task knowledge and task availability. A six-
point Likert scale was used, from 1 being “strongly disagree” to 6 being “strongly agree”,
whereby the respondents were required to rate their level of agreement with each item.
Although the original instrument has been validated with desirable psychometric properties
(Shea et al., 2014), it is a newly developed instrument and was used in the context of health
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

care in the USA; therefore, a common factor analysis using principal axis factoring was
conducted. Both Bartlett’s Test of Sphericity (3529; degrees of freedom = 253 at p = 0.000)
and the Kaiser–Meyer–Olkin (KMO) Measure of Sampling adequacy (0.94) indicated that
factor analysis was appropriate for the data. The resulting analysis yielded five factors with
eigenvalues greater than unity extracting about 77 per cent of the variance. Table I
summarizes the item loadings for each factor. The five factors are consistent with Shea et al.
(2014) and were thus used in the present study.
Readiness to implement accrual accounting in terms of “change commitment” is
represented by three items: “We are committed to implement accrual accounting system”,
“We are motivated to implement accrual accounting system” and “We will do whatever it

Instrument Change Change Change Task Resources

items commitment efficacy valance knowledge availability

1. Readiness 1 0.849
2. Readiness 2 0.903
3. Readiness 3 0.779
4. Readiness 4 0.891
5. Readiness 5 0.912
6. Readiness 6 0.782
7. Readiness 7 0.762
8. Readiness 8 0.922
9. Readiness 9 0.910
10. Readiness 10 0.863
11. Readiness 11 0.762
12. Readiness 12 0.748
13. Readiness 13 0.824
14. Readiness 14 0.859
15. Readiness 15 0.809
16. Readiness 16 0.918
17. Readiness 17 0.783
18. Readiness 18 0.852
Table I.
19. Readiness 19 0.819
20. Readiness 20 0.775 Instrument items and
21. Readiness 21 0.917 item loadings from
22. Readiness 22 0.922 common factor
23. Readiness 23 0.783 analysis
 JAOC takes to implement accrual accounting system”. Likewise, readiness in relation to “change
14,2 efficacy” is represented by three statements: “We can support each other as we move to
accrual accounting system”, “We can coordinate tasks so that the implementation of
accrual accounting system goes smoothly” and “We can keep track of progress in
implementing accrual accounting system”. The “overall readiness to change” is measured
by aggregating all the items of change commitment and change efficacy. Higher scores
240 indicate a higher level of readiness to implement accrual accounting. The Cronbach’s alphas
for “change commitment” and “change efficacy” were 0.905 and 0.938, respectively.
Eight items measure the “change valence” factor: “We believe the accrual accounting
system will benefit the public”, “We believe it is necessary to implement the accrual
accounting system”, “We believe the implementation of accrual accounting system will be
successful”, “We see the implementation of accrual accounting system is timely”, “We
believe the implementation of accrual accounting system is cost-effective”, “We believe the
implementation of accrual accounting system will produce better information”, “We feel that
implementing the accrual accounting system is a good idea” and “We value the
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

implementation of accrual accounting system”. Mean score was computed based on the six-
point Likert scale. The higher score for change valance reflects greater level of benefits from
changing to accrual accounting. Cronbach’s alpha for change valence was 0.906.
Another factor that is “task knowledge” is derived from three statement as follows “We are
aware of the accrual accounting implementation schedule (roadmap) produced by Accountant
General’s Department (AGD)”, “We know the resources that are needed to implement the
accrual accounting (e.g. information, expertise or financial)” and “We know what each of us has
to do to implement the accrual accounting”. The higher score indicates a higher level of
knowledge on accrual accounting. The Cronbach’s alpha for task knowledge factor is 0.865.
The last factor that is “resources availability” is measured based on six items that are “We have
the accrual accounting system to record accrual based transactions”, “We have the expertise to
comply to the accrual accounting standards (i.e. MPSASs) in recording the accrual based
transactions”, “We have sufficient time to prepare for the accrual accounting implementation”,
“We have the information we need to implement the accrual accounting”, “We have sufficient
accounting personnel to implement the accrual accounting system” and “We have enough fund
to implement the accrual accounting”. The higher score reflects higher level of availability of
related resources for implementing accrual accounting. Cronbach’s alpha for this factor is 0.703.

Data analysis
The data were analysed using Statistical Package for Social Sciences (SPSS). Descriptive
statistics of frequency distributions and percentages were computed for the demographic
profiles of the respondents. In addition, a descriptive analysis of mean score and standard
deviation was computed for the Likert scale items. In testing the hypothesis, both Pearson’s
zero correlation and multiple regression analyses were conducted. While correlation
provides only an estimate of the association between variables, regression analysis reveals
the dependence of a variable on other explanatory variables. Thus, regression provides more
valid and reliable results. There are two multiple regressions developed. For both models,
the independent factors are the same; they are change valence, task knowledge and
resources availability. The only difference between the two models is the dependent variable
(i.e. readiness to implement accrual accounting). For Models 1 and 2, the readiness is
measured in terms of change commitment and change efficacy, respectively. Each model is
presented below:
Model 1
Y1 ¼ a0 þ b ıXı þ b 2X2 þ b 3X3 b G þ «
 Model 2 Accrual
Y2 ¼ a0 þ b ıXı þ b 2X2 þ b 3X3 b G þ « accounting
Where:
Y1 = Change Commitment;
Y2 = Change Efficacy;
a0 = intercept;
b = slope of regression line; 241
e = is the error term (RV);
X = independent variables, which includes:
X1 = Change Valence;
X2 = Task Knowledge; and
X3 = Task Availability.

Findings and discussion

Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

Demographic information
Table II shows the demographic profiles of the respondents. As depicted in Table II, over
two-thirds (67.5 per cent) of the respondents are female and the majority (65.9 per cent) are
degree holders. Almost half of the respondents are from senior accountant level, with 89.1
per cent of the respondents being involved in the preparation of accounts for the
government. In terms working experience, 75.8 per cent of the respondents have worked for
more than five years. About three-quarters (75.8 per cent) have experienced working in the
private sector. In total, 89.1 per cent of the respondents claim to have attended workshop or
training on accrual accounting.
Based on the background information, the respondents of the current study have
relevant qualifications and positions, considerable experience in both public and private
sectors, and mostly have been exposed to accrual accounting through workshops and
trainings. Hence, their responses are deemed appropriate and reliable for the current study.

Descriptive statistics
Table III shows the mean scores and standard deviations for all variables. The mean
scores for the variables range from 4.88 to 5.21, indicating that the respondents are of
the perception that they have a high level of commitment to move to accrual
accounting, reasonably capable and ready to implement the accrual accounting
system. The respondents strongly believe in the benefits of the accrual accounting
system. Likewise, in terms of knowledge on accrual accounting and resources
to support the transition, the respondents perceive that they know about accrual
accounting and have reasonably adequate resources to support the transition to the
accrual system.

Results of multiple regressions and correlations

Tables III and IV provides results of the Pearson’s zero correlation and multiple regression
for each of the two models. As depicted in Table IV, for Model 2, all the three factors –
change valence, task knowledge and task availability – have a significant positive influence
on change efficacy of accrual accounting transition. Consistent results were revealed by the
correlation analysis (Table III). The results imply that having a strong believe in the benefits
of the accrual system to the government, sufficient knowledge about accrual accounting
transition and high availability of resources supporting the transition, leading to a higher
level of readiness for accrual accounting implementation, particularly in terms of the
 JAOC Frequency (%)
14,2
Gender
Male 55 32.5
Female 110 67.5
Total 165 100.0

242 Highest education

Diploma 19 11.6
Bachelor 120 72.7
Master 21 12.7
Professional 5 3.0
Total 165 100.0
Position
Senior Accountant 81 49.1
Assistant Accountant 28 19.3
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

Assistant Senior Accountant 22 15.2

Others 34 23.4
Total 165 100.0
Account preparation
Yes 147 89.1
No 18 10.9
Total 165 100.0
Length of work experience in public sector
<1 year 6 3.6
1-5 years 34 20.6
6-10 years 66 40.0
11-15 years 30 18.2
16-20 years 10 6.1
>20 years 19 11.5
Total 165 100.0
Prior work experience in private sector
Yes 125 75.8
No 40 24.2
Total 165 100
Length of work experience in private sector
<1 year 17 13.6
1-5 years 81 64.8
6-10 years 27 21.6
Total 125 100.0
Have you attended any workshop/ training on accrual accounting
Yes 147 89.1
No 18 10.9
Total 165 100.0
Number of accrual workshop/training attended
1-3 times 58 39.5
Table II. 4-6 times 45 30.6
Summary of 7-9 times 24 16.3
demographic profile >10 times 20 13.6
of respondents Total 147 100.0
 proficiency and ability to implement. The results support findings of prior studies which Accrual
discovered knowledge and resources related to accrual accounting as necessary components accounting
for the adoption of the accrual-based system (Lye, Perera and Rahman, 2005; Harun and
Robinson, 2010; Tickell, 2010; Upping and Oliver, 2012; PWC, 2013; IFAC, 2014). Therefore,
H2a and H2b are supported.
For Model 1, only change valance factor is positively significant in influencing change
commitment. The remaining two factors (task knowledge and task availability) do not 243
significantly influence the change commitment. The result suggests that the more public
sector accountants value the accrual accounting system, the higher their commitment to
move to the new accounting system. The result is in line with previous literature (Lye et al.,
2005; Tickell, 2010; Upping and Oliver, 2012). The results therefore support H1a but not
H1b.

Implications of study, limitations and suggestions for future research

Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

Based on the theory of organizational readiness for change, the present study examines the
influencing factors for readiness of Malaysian Federal Government to move to the accrual
accounting system. The readiness was measured in terms of change commitment, change
valance and overall readiness for change. It is evidenced in this study that change valance,

Mean SD 1 2 3 4 5

1. Change commitment 5.21 0.608 1 Table III.

2. Change efficacy 5.08 0.698 0.08 1 Means, standard
3. Change valance 5.18 0.806 0.39* 0.45* 1
4. Task knowledge 5.01 0.695 0.09 0.39* 0.15*** 1
deviation and
5. Task availability 4.88 0.694 0.11 0.31* 0.04 0.27** 1 Pearson’s zero-order
correlations for all
Notes: *p < 0.001; **p < 0.05; and ***p < 0.1 variables

Standardized coefficient
Variables Beta t-value Significance

Model 1 – Change commitment

Change valence 0.287 4.045 0.000*
Task knowledge 0.094 1.439 0.152
Task availability 0.067 1.203 0.231
R square = 0.361
Adjusted R square = 0.34
Significance = 0.000
Model 2 – Change efficacy
Change valence 0.512 8.993 0.000*
Task knowledge 0.276 4.591 0.000*
Task availability 0.191 3.609 0.000*
R square = 0.376
Adjusted R square = 0.371
Significance = 0.000 Table IV.
Results of multiple
Note: *Significant at 1% level regressions
 JAOC task knowledge and task availability have a positive significant influence on change
14,2 commitment. Only change valance is significant to influence change efficacy. To some
extent, the result of the current study provides further evidence to support findings by Azmi
and Mohamed (2014) that Malaysian public sector employees, particularly public
accountants, are ready for accrual accounting implementation.
The results of the current study are expected to be beneficial to such various parties as
244 the Accountant General’s Department of Malaysia, public sector accountants, ministries in
particular and the Malaysian Government in general, in ensuring successful transition from
cash accounting to accrual accounting. As “change valance” is found to be significant in
influencing readiness to implement the accrual accounting system, the Malaysian
Government in general and the Accountant General’s Department of Malaysia in particular
may want to take proactive measures through campaigns, seminars and workshops to
propagate the benefits and usefulness of moving towards the accrual accounting system to
all public sector personnel of the ministries especially those involved in government
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

accounting transactions.
Although the government has made systematic preparation for the transition to the
accrual accounting system, documented in the “road-map” to accrual accounting, the
findings of this study offers a reminder to the government to continuously ensure
availability of experts and human capital, sufficient funding and adequate technical
resources in boosting its readiness to effectively embark on the accrual accounting system in
2017. The Accountant General’s Department of Malaysia in collaboration with Malaysian
Institute of Accountants and accounting professional bodies needs to organize more
training, workshops, seminars and conferences related to accrual accounting in the public
sector and make them compulsory for public sector accountants to equip them with the
necessary knowledge and skills on accrual accounting system for the transition.
This study, however, comes with limitations. First, it uses a questionnaire survey that
covers three factors in general. Future study may use other methods, such as interviews and
focus group discussions, which may provide richer information on the readiness for accrual
accounting transition influencing factors and may also discover other factors influencing
readiness. Second, the result of the present study may not be generalized to the governments
of other countries because different countries have different economic, political and social
environments, and this may influence the implementation of a new policy such as accrual
accounting system. To better understand the factors influencing readiness to implement
accrual accounting, future research may want to extent the distribution of the survey to
government personnel of other countries. Moreover, future studies may also consider cross-
country comparison in terms of readiness to move to accrual accounting. Further, as the
Malaysian Government is about to embark on the accrual accounting system, in the near
future studies should focus on the issues and challenges during the transition period, in
addition to other aspects of accrual accounting implementation in Malaysia.
In conclusion, this study adds to the growing literature on accrual accounting
implementation in the public sector and provides empirical evidence on factors affecting the
federal government’s readiness to implement the accrual system, an aspect which is lacking
in the current literature. The findings of the current study provide useful insights on the
critical factors to influence readiness to implement accrual accounting system which are
useful not only in the context of the Malaysian Government but also to the government of
other emerging economies that are considering or in the process of moving towards accrual
accounting system. Moreover, this paper has answered the call for more studies on accrual
accounting transition in Malaysia by Azmi and Mohamed (2014). In terms of theory, the
 present study contributes significantly to Weiner’s (2009) theory of organizational readiness Accrual
for change by providing empirical evidence to the newly developed theory. accounting

References
Adhikari, P. and Mellemvik, F. (2011), “The rise and fall of accruals: a case of Nepalese Central
government”, Journal of Accounting in Emerging Economies , Vol. 1 No. 2, pp. 123-143.
Arnaboldi, M. and Lapsley, I. (2009), “On the implementation of accrual accounting: a study of conflict 245
and ambiguity”, European Accounting Review, Vol. 18 No. 4, pp. 809-836.
Azmi, A.H. and Mohamed, N. (2014), “Readiness of Malaysian public sector employees in moving
towards accrual accounting for improve accountability: the case of ministry of education
(MOE)”, Procedia-Social and Behavioral Sciences, Vol. 164, pp. 106-111.
Baker, R.O.N. and Rennie, M.D. (2006), “Forces leading to the adoption of accrual accounting by the
Canadian federal government: an institutional perspective*/Les forces Ayant Mené
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

L’administration Fédérale Canadienne À adopter La comptabilité D’exercice: une perspective

institutionnelle”, Canadian Accounting Perspectives, Vol. 5 No. 1, pp. 83-112.
Ball, I., Dale, T., William, D.E. and Sacco, J. (1999), “Reforming financial management in the public
sector: lessons US officials can learn from New Zealand (No. Policy Study No. 258)”, Los
Angeles: Reason Public Policy Institute.
Barton, A. (2005), “Issues in accrual accounting and budgeting by government”, Agenda: A Journal of
Policy Analysis and Reform, Vol. 12 No. 3, pp. 211-226.
Chan, J.L. (2003), “Government accounting: an assessment of theory, purposes and standards”, Public
Money & Management, Vol. 23 No. 1, pp. 13-20.
Deaconu, A., Nistor, C.S. and Filip, C.I. (2009), “The effect of transiting from cash accounting to accrual
accounting on performance in the public sector”, Studia Universitatis Babes_Bolyai Oeconomica,
Vol. 54, pp. 115-129.
Economics Transformation Programme (2017), “Public Finance Reform (PFR)”, available at: http://etp.
pemandu.gov.my/Public_Finance_Reform-@-Public_Finance_Reform_(PFR).aspx (accessed
20 May 2017).
Gist, M.E. and Mitchell, T.R. (1992), “Self-efficacy: a theoretical analysis of its determinants and
malleability”, Academy of Management Review, Vol. 17 No. 2, pp. 183-211.
Gomes, D. and Sargiacomo, M. (2013), “Accounting and accountability in local government: an
introduction”, Accounting History, Vol. 18 No. 4, pp. 439-446.
Guthrie, J. (1998), “Application of accrual accounting in the Australian public sector–rhetoric or
reality”, Financial Accountability and Management, Vol. 14 No. 1, pp. 1-19.
Harun, H. and Robinson, P. (2010), “The adoption of accrual accounting in the Indonesian public
sector”, Research in Accounting in Emerging Economies, Vol. 10, pp. 233-250.
Harun, H., Van Peursem, K. and Eggleton, I. (2012), “Institutionalization of accrual accounting in the
Indonesian public sector”, Journal of Accounting & Organizational Change, Vol. 8 No. 3,
pp. 257-285.
Hodges, R. and Mellett, H. (2003), “Reporting public sector financial results”, Public Management
Review, Vol. 5 No. 1, pp. 99-113.
Hyndman, N. and Connolly, C. (2011), “Accruals accounting in the public sector: a road not always
taken”, Management Accounting Research, Vol. 22 No. 1, pp. 36-45.
IFAC (1994), “Occasional paper 1 - implementing accrual accounting in government: the New Zealand
experience”, International Federation of Government, New York, NY.
IFAC (2006), “Information paper – the road to accrual accounting in the United States of America”,
International Federation of Government, New York, NY.
 JAOC Lapsley, I., Mussari, R. and Paulsson, G. (2009), “On the adoption of accrual accounting in the public
sector: a self-evident and problematic reform”.
14,2
Lye, J., Perera, H. and Rahman, A. (2005), “The evolution of accruals-based crown (government)
financial statements in New Zealand”, Accounting, Auditing & Accountability Journal, Vol. 18
No. 6, pp. 784-815.
Monteiro, B.R.P. and Gomes, R.C. (2013), “International experiences with accrual budgeting in the
246 public sector”, Revista Contabilidade & Finanças, Vol. 24 No. 62, pp. 103-112.
Nistor, C.S., Deaconu, A. and Severin, A. (2009), “Stability and coherence in transition, a wish that can
be accomplished? The accounting system of Romanian public institutions”, Journal of
International Business and Economics, Vol. 9 No. 2, pp. 106-124.
Peter Van Der Hoek, M. (2005), “From cash to accrual budgeting and accounting in the public sector: the
Dutch experience”, Public Budgeting and Finance, Vol. 25 No. 1, pp. 32-45.
PwC (2013), “PwC Global survey on accounting and financial reporting by central governments:
Towards a new era in government accounting and reporting”, PwC.
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

Ryan, C. (1998), “The introduction of accrual reporting policy in the australian public sector: an
agenda setting explanation”, Accounting, Auditing & Accountability Journal, Vol. 11 No. 5,
pp. 518-539.
Shea, C.M., Jacobs, S.R., Esserman, D.A., Bruce, K. and Weiner, B.J. (2014), “Organizational readiness
for implementing change: a psychometric assessment of a new measure”, Implementation
Science, Vol. 9 No. 1, p. 1.
Tickell, G. (2010), “Cash to accrual accounting: one nation’s dilemma”, International Business &
Economics Research Journal (Iber), Vol. 9 No. 11, p. 71.
Upping, P. and Oliver, J. (2012), “Thai public universities: modernisation of accounting practices”,
Journal of Accounting & Organizational Change, Vol. 8 No. 3, pp. 403-430.
Weiner, B.J. (2009), “A theory of organizational readiness for change”, Implementation Science, Vol. 4
No. 1, p. 67

Further reading
Armenakis, A.A. and Harris, S.G. (2002), “Crafting a change message to create
transformational readiness”, Journal of Organizational Change Management, Vol. 15
No. 2, pp. 169-183.
Cole, M.S., Harris, S.G. and Bernerth, J.B. (2006), “Exploring the implications of vision, appropriateness,
and execution of organizational change”, Leadership & Organization Development Journal,
Vol. 27 No. 5, pp. 352-367.
DeVellis, R.F., Lewis, M.A. and Sterba, K.R. (2003), “Interpersonal emotional processes in adjustment to
chronic illness”, Social Psychological Foundations of Health and Illness, Wiley-Blackwell,
Hoboken, NJ, pp. 256-287.
Economics, P. (2013), “World in 2050, The BRICs and beyond: prospects, challenges and opportunities”,
PwC Macroeconomics.
Hair, J.F., Black, W.C., Babin, B.J., Anderson, R.E. and Tatham, R.L. (2010), Multivariate Data Analysis,
7th ed., Pearson, New York, NY.
Herscovitch, L. and Meyer, J.P. (2002), “Commitment to organizational change: extension of a three-
component model”, Journal of Applied Psychology, Vol. 87 No. 3, p. 474.
Luder, K. (1992), “A contingency model of governmental accounting innovations in the political
administrative environment”.
Madsen, S.R., Miller, D. and John, C.R. (2005), “Readiness for organizational change: do organizational
commitment and social relationships in the workplace make a difference?”, Human Resource
Development Quarterly, Vol. 16 No. 2, p. 213.
 Pallant, J. (2001), SPSS Survival Guide: A Step by Step Guide to Data Analysis Using SPSS, Open Accrual
University Press: McGraw-Hill Education, (accessed 1 January 2006).
accounting
Pallant, J. (2007), SPSS Survival Manual: A Step-by-Step Guide to Data Analysis Using SPSS Version 15,
McGraw Hill, Nova Iorque.
Tudor, A.T. and Mutiu, A. (2006), “Cash versus accrual accounting in public sector”, Unpublished
Doctoral Dissertation, University of Babes Bolyai.

Corresponding author
247
Suhaiza Ismail can be contacted at: suhaiza@iium.edu.my
Downloaded by Doctor Suhaiza Ismail At 01:45 20 July 2018 (PT)

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com

View publication stats