Accounting for inventories by the government of Malta and the implications of IPSAS 12

Abstract

Purpose: The purpose of this study is to acquire knowledge about the accounting treatment of stock by the Government of Malta. Surely, it entails an analysis of the current accounting treatment of inventory in the government departments, and how inventories are to be accounted for once accrual accounting is fully implemented, and thus, IPSAS 12 becomes applicable. The study discloses problems that may be faced when the transition occurs, and examines whether the use of IPSAS 12 will affect the quality of information in the financial statements. Design: The objectives of the study were fulfilled through personal interviews with five government officials. These interviews were semi-structured using open-ended questions, relating to the process of stock recording and the compliance with the 'Stock Control Procedure' circular. Findings: The study suggests that the implementation of IPSAS 12 is expected to result in an enhancement in the quality of information in the financial statements, especially inventory reporting. On the other hand, the transition to full accrual accounting system involves large costs and problems which cannot be ignored. Presently, some of the problems encountered are mainly due to the responsible officials being accounts illiterate resulting in wrong compliance with the 'Stock Control Procedure' circular, which has similar requirements of IPSAS 12. Conclusions: It is concluded that the Government needs to tackle these issues if it wants to gain full benefit from the transition to an accrual accounting system and eventually achieve overall better quality of information from the system. Value: It is expected that this dissertation will encourage improvements in this area of government accounting. This can be achieved by continuous training o