MOTIVATION AND ABNORMAL ACCRUAL CHARACTERISTICS ON FINANCIAL STATEMENTS OF LOCAL GOVERNMENTS IN INDONESIA

Abstract

Purpose - The specific purpose of this study is to prove whether there is manipulation or management of accounting numbers (abnormal accruals) in Government Financial Statement (LKPD), and what factors cause the practice of abnormal accruals in Indonesia’s LKPD.

Design/methodology/approach - This study uses quantitative research methods with secondary data. Data analysis used independent t-test, correlation test, multiple linear regression test. The population in this study is all provincial governments in Indonesia.

Findings - The results of the study prove that there is a positive and significant correlation between abnormal accruals and a surplus deficit in LKPD in Indonesia. There is the management of accounting data (abnormal accruals) on the Local Government Financial Report (LKPD) so that the surplus-deficit value is close to zero, with the motive to provide effective and efficient financial performance information. AA that occurs is AA depreciation expense. However, there is no significant correlation between AA and AA for receivables, payables, and leverage, meaning that the AA that occurs is not due to the management or manipulation of the value of receivables, debt, and leverage.

Practical implications – The results of this study serve as input for regulators to make appropriate accounting policies related to the accrual basis of accounting so that financial statement information is of higher quality, namely relevant (correct) and reliable (reliable) for decision making.

Social implication - Financial reports are expected to present actual financial statements so that they can be used, relied upon, and relevant for making important local government decisions.

Originality value - The originality of this research is established to prove whether there is abnormal accrual management in district/city government LKPD in Indonesia, what specific account causes this abnormal accrual, and what motivates the local government to carry out this practice is the novelty of this research and will provide information contribution to science. In addition, it also helps provide a basis for consideration for local governments to review accounting standards that regulate accrual policies so that financial reports can be of higher quality and used for decision making.