Digital transformation and the accounting for intangible assets in the public sector

What is it about?

This paper looks at how public sector entities account for intangible assets, like software, cloud computing, Artifical Intelligence (AI) as they undergo digital transformation. It focuses on how such assets are reported in accordance with International Public Sector Accounting Standards (IPSAS). The paper undertakes an empirical analysis how public sector entities account for intangible assets and identifies key challenges, especially around accounting for software development, cloud computing, and artificial intelligence systems. It questions whether IPSAS 31 (which covers intangible assets) is adequate to handle these new challenges. The paper provides recommendations for improving accounting standards and suggests ways in which standard-setters can update their guidance to keep pace with digital changes. These insights are relevant not only for public sector accounting but also for the private sector, as both face similar challenges in adapting to the digital age.

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Photo by Luis Benito on Unsplash

Photo by Luis Benito on Unsplash

Why is it important?

The digital transformation of public sector entities presents significant challenges for the accounting profession. This study enhances the understanding of financial reporting for intangible assets by public sector entities in the digital age and offers insights that are of interest to accounting standard setters both in the public and the private sector.

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