Is Russian Public Sector Accounting in the Process of Modernization? An Analysis of Accounting Reforms in Russia

• DOI: http://doi.org/10.1111/faam.12021
• Date: 01 November 2013
• Published date: 01 November 2013

Financial Accountability & Management, 29(4), November 2013, 0267-4424

Is Russian Public Sector Accounting

in the Process of Modernization? An

Analysis of Accounting Reforms in

Russia

TATIANA ANTIPOVA AND ANATOLI BOURMISTROV∗

Abstract: The major public sector accounting reform in Russia began in 2004

envisaging ideas of ‘top-down’ modernization through adoption of international

accounting ideas from GFS/IPSASs. However, there is a decoupling between

accounting practices and declared accounting norms. This is explained by ideas of

accrual accounting reform fitting very well into the top political context aiming

to achieve the international legitimization of Russia as a modern state, but

contradicting the Russian public sector accounting tradition. Successful accounting

reform, so far very much a ‘top-down’ push process, requires strong ‘context

ambassadors’ to stimulate ‘accounting curiosity’ and the processes of ‘bottom up’

accounting modernization.

Keywords: accounting reforms, public sector, transitional economies, accounting

harmonization, accounting modernization

INTRODUCTION

The pressures for New Public Management and public sector accounting reforms

in Western countries are widely discussed in the literature (Guthrie et al.,

2005; and Olson et al., 1998), while less is known about similar reforms

∗The authors are respectively Dr., Professor at the Institute of Certified Specialists, Perm,

Russia; and Professor, Dr. at the Bodø Graduate School Business, University of Nordland,

Norway. They are thankful to the participants of the Comparative International Government

Accounting Research (CIGAR) 13th biannual conference hold at University of Gent (Belgium)

on June 9–10, 2011, for comments and encouragements. The authors are also thankful to two

anonymous referees for their valuable comments and suggestions for how to improve the

manuscript.

Address for correspondence: Anatoli Bourmistrov, Professor, Dr., Bodø Graduate School of

Business, University of Nordland, N-8049 Bodø, Norway.

e-mail: Anatoli.Bourmistrov@uin.no

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RUSSIAN PUBLIC SECTOR ACCOUNTING & MODERNIZATION 443

and their outcomes in developing countries and countries with transitional

economies. The rhetoric of reforms promises increased efficiency, transparency,

and accountability of public sector organizations through the adoption of private

sector accounting techniques, and in this sense, the rhetoric also promises

modernization of the public sector. However, how this is done and what the

effects of this modernization are is a less studied field.

Despite the fact that the appropriateness of accrual accounting adoption for

public sector modernization seems to be taken for granted and is perceived

today around the world as self-evident, accrual accounting reforms face many

challenges. These challenges are mainly based on the assumptions of the commonality

of accrual accounting technical and managerial applications in different contexts

(Lapsley et al., 2009) and that it is possible to harmonize the application and

use of accrual accounting across the economic sectors and countries. This

implies that accounting is a context neutral accounting technique which is

applicable in many different contexts, situations and traditions (Day et. al.,

2007). Thus, the ideology behind the development of international accounting

systems such as GFS or IPSASs can be understood in terms of a uniform and

political neutral set of standards based on accounting theories developed by

the accounting profession in the Anglo-Saxon tradition, and further which may

be universally applied in any country of the world. However, public sector

accounting in developing countries and transitional economies very often has

unique historical roots. Understanding of the past, present and future of

government accounting cannot thus be separated from understanding of what

can be described as an ‘accounting regime’ (Jones and Dugdale, 2001).1Changes

in the accounting regime throughout the country’s history may contribute to

the introduction of new accounting techniques, but at the same time can also

preserve techniques from previous regimes and leave what can be termed

as ‘accounting sediments’ (G˚

arseth-Nesbakk, 2007; Timoshenko, 2006; and

Bourmistrov, 2001). The presence of a particular accounting tradition as a

‘historical sediment’ may complicate and even contradict the ideas of accounting

harmonization. In this sense, realization of accrual accounting reforms in the

public sector implies that change in accounting practices will require more than

just rhetoric and political will; it will also require serious efforts to break with

previously well institutionalized accounting traditions (e.g., ter Bogt and van

Helden, 2000).

Research shows that even with the adoption of GFS and IPSASs by many

countries, the lack of accounting homogeneity is still evident between adopting

countries, meaning that variation of accounting practices is still an essential

characteristic of governmental financial reporting (Benito et al., 2007; and

Brusca and Condor, 2002). To improve our understanding of where and how

the adoption of accrual accounting in the public sector fails as a modernization

measure, we need to better understand how public sector accounting is

embedded in and influenced by its economic, political, cultural and country-

historical specific context.

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444 ANTIPOVA AND BOURMISTROV

Following this reasoning, the present paper aims to describe and analyze

public sector accounting reform in the Russian Federation, especially in terms of

the links between political ideas related to the propagation of accrual accounting

and the challenges related to its materialization in accounting practice. Being

influenced by international institutions such as IFM and WB, Russia set its

course of promoting accrual accounting in Russia as a sign of ‘modernization’

and ‘progress’ (Timoshenko and Adhikari, 2009a; and Bourmistrov, 2006).

Modernization is traditionally associated with bridging the gap between less

developed and more developed countries (Lipset, 1959; Rostow, 1960; and Apter,

1965). In this sense, the adoption of New Public Management, its policies and

techniques, such as accrual accounting, borrowed from the private sector, can

be understood as an important tool for modernizing governments in developing

countries and countries with transitional economies. This paper focuses on

understanding accrual accounting reform in the public sector as a modernization

attempt in contemporary Russia. It is associated with the centralized efforts

of the federal government aimed at the reform of the state administration

and public services based on Western ideas. Despite great ambitions, current

literature demonstrates that top-down or state-led modernization policy in

Russia has many inconsistencies and does not bring about the desired results

(e.g., Kliment, 2010; and Connolly, 2011). Despite this, public sector accounting

in Russia has taken a dynamic lead in terms of the scope and pace of changes

as compared to other accounting areas, such as commercial accounting, banking

and insurance. On the other hand, there is evidence of many challenges related

to the adoption of accrual accounting in practice for public sector organizations.

The storyline of this paper is as follows: Having not made any substantial

changes in the public sector accounting for many decades, dramatic, complex and

ambiguous reforms, inspired by international practices, were introduced by the

Russian Federal government in 2004 (Melnik and Antipova, 2010). Numerous

new accounting instructions for public sector organizations were introduced

with an idea of bringing changes to the Russian public sector, making it more

transparent, efficient and accountable through the power of accrual accounting

and enabling the illumination of values and good use of public sector resources.

In this process, practicing accountants were supposed to play along. However,

after many years of reforms, Russia still finds itself at a very early stage in

the reform process. The findings in this paper, based on survey and interviews,

draw a picture of practicing accountants who are unaware of the reform’s aims

and benefits, and are reluctant to ‘unlearn’ the old accounting traditions. We

analyze these findings by mobilizing institutional theory: the ‘travel of ideas’.

We demonstrate that the ideas of public sector accounting reform fit very well

into the top political context aimed at achieving international legitimization

for Russia as a modern state, but contradict the current Russian public

sector accounting tradition which influences the local practice of professional

accountants. Reforms seemed to have failed to mobilize the epistemic accounting

community in order to de-institutionalize the old tradition which is embedded in

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