The Impact of Municipal Reporting Requirements on Municipal Officials' Fixed Asset Acquisition Decisions: A Laboratory Experiment (Governmental, Accounting, Depreciation)
Carpenter, Frances H.
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Permalink
https://hdl.handle.net/2142/71391
Description
Title
The Impact of Municipal Reporting Requirements on Municipal Officials' Fixed Asset Acquisition Decisions: A Laboratory Experiment (Governmental, Accounting, Depreciation)
Author(s)
Carpenter, Frances H.
Issue Date
1985
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
The choice of measurement focus has been a long standing controversy in municipal reporting. An assumption implicit in much of this debate is that the degree of efficiency with which municipal resources are allocated is dependent upon the choice of measurement focus. This research explores the assumption that a change in fixed asset reporting, a major issue in the measurement focus debate, will result in a change in municipal officials' decision outcomes.
In the first portion of this research, two means by which financial reporting requirements can affect municipal decisions are identified. First, reporting requirements may have a direct impact on municipal officials' decisions; that is, all other things being equal, a change in reporting requirements will result in a change in municipal decisions. Second, reporting requirements may effect a change in municipal decisions through the external users of financial statements. In this case, labeled an indirect impact, reporting requirements cause external users to change the demands they place on municipal officials. These changed demands, in turn, cause municipal officials to alter their decisions. Accounting investigations, conducted primarily in the private sector, provide little support for the expectation of a direct impact. Somewhat more support can be found in the political science literature for the expectation that municipal officials will change their decisions in response to demands from potential financial statement users.
The second portion of this research is an empirical study of the effects of fixed asset reporting requirements and demands from potential external report users on municipal decisions. Based upon a case instrument, 46 city managers were asked to support one of two municipal vehicles for acquisition. Both reporting requirements and user demands were manipulated across subjects. The decision task involved a tradeoff between immediate and long-term cost savings, thus representing a large number of decisions that, in total, greatly affect the cost of municipal operations.
Three inferences can be drawn from the empirical results. First, the participants tended to minimize long-term costs. Second, the results indicate that the information content of different fixed asset reporting requirements may have caused accounting data to be used differently in the decision task. Finally, although external user demand had no observed effect on the dependent variable measures, participants implied in the reasons for their decisions that the user demand could affect other resource allocation decisions.
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