The Paradox of Accrual Accounting Reform: Transparency, Complexity, and Misalignment in the Public Sector

HRMARS - The adoption of accrual accounting in the public sector has been widely promoted as a reform to enhance transparency, accountability, and efficiency. However, emerging evidence suggests a paradox in which these intended benefits are not consistently realised. This conceptual paper critically examines the negative effects of accrual accounting reform by synthesising existing literature across five key themes: evolution over time, theoretical frameworks, research methods, geographical contexts, and organisational settings. Drawing primarily on institutional theory, the paper develops an integrative framework that explains how external pressures drive the adoption of accrual accounting, often resulting in decoupling between formal compliance and practical use. It further identifies a critical source of misalignment at the asset level, where accounting treatment may not reflect the underlying economic intent, leading to distorted decision-making and governance outcomes. By linking macro-level institutional dynamics with micro-level accounting mechanisms, the study provides a comprehensive explanation of why accrual accounting reforms may produce unintended consequences. The paper concludes with practical recommendations aimed at improving the relevance, usability, and contextual alignment of accounting systems in the public sector.