Research On Local Government Liabilities Accounting

Government debt is climbing and debt owed by local government is the main reason of causing national debt crisis. At the end of year2010, the national local governments’ debt accounted for107174.91hundred million Yuan,67109.51hundred million Yuan of which are legally binding debt responsible by national government, which is accounting for62.62%of the total debt; Government also bears the responsibility to guarantee the debt of23369.74hundred million Yuan, or21.80%of the total debt; The government may bear some responsibility for other related debt of16695.66hundred million Yuan, which is15.58%of the total debt. One of the causes of financial risk is the government not being solvent, unable to repay the former debts while keep making new borrowing. This behavior led to the increase of government debt. Therefore, only a thorough understanding of the local government debt situation could helps the government to measure, to prevent and to control the financial risks in advance. The local government liabilities information is provided by the government accounting, but the existing government accounting basis, in term of recognition, measurement and reporting, does not reflect the overall and complete government liabilities situation.Based on the accounting issues raised by the local government debt, I analyzed the manifestations and characteristics of the local government debt to identify the main issue of causing government debt. According to Hana Polackova Brixi’s description of the fiscal risk matrix, we found that the hidden liabilities and the contingent liabilities are the reason most likely to cause the financial risks. Because of the government use the cash basis as the accounting affirmance, this part of the liabilities was hidden, information users could not discover these important messages. And when they finally noticed, those liabilities had already caused the financial risks. Therefore, in order to prevent and to resolve the financial risks, the government must conduct a reasonable way to recognize, to measure and to report all liabilities on books. Through the study of how the foreign local governments treat their liabilities, we could learn many valuable lessons. We combined these lessons with China actual accounting condition to improve the existing reporting standard and to develop a reporting standard not only fulfill the local governments need but also could fully reflect the liabilities information.The first part of the article is a basic introduction of thesis topic’s background, research significance, research methods, research ideas and the content of this research, and it also introduced some domestic and foreign national debt references. The second part of the article is analysis of the local government current debt situation, and combined with the relevant scenarios illustrated by Huainan City in Anhui Province to explain the characteristic of the local government debt situation, and to understand the causes of the local government liabilities crisis and their harmful. The third part of the article is to show us that current budget accounting adapt by the accounting recognition basis exists many problems, so we believe a gradual implementation of the accrual basis is our future recognition basis of local government liabilities. The fourth part is to introduce the measurement methods of local government liabilities, to propose the present value method should become the major measurement method, and to suggest other measurement methods to measure the local government liabilities. The fifth part of the article is to propose an appropriate and suitable accounting reporting standard for our local government financial reports by studying how foreign local government monitoring and reporting their debt on their financial reports. The final section had summarized the major conclusions of this research, illustrated innovation ideas of the research and also insufficiency of the research. I hope this thesis could provided some theoretical reference for future local government liabilities research, and also provided some new ideas for local government liabilities research from the accountancy point of view.