Creative Accounting in Poland’s Sub-Sector of Local Governments

Iwona Franczak
European Research Studies Journal, Volume XXIV, Issue 4, 997-1017, 2021
DOI: 10.35808/ersj/2647


Purpose: With regard to the import and currency of problems associated with assessing local governmental units’ indebtedness, efforts to identify conditions shaping acceptable levels of debt are justified through application of accounting policy instruments. With the above in mind, the primary intentions of this article are to test whether Poland’s local governmental units adjust acceptable levels of debt through the use of goals and instruments of accounting policy and to indicate the determinants for applying instruments of accounting policy to adjust allowable levels of debt by local governmental units. Approach/Methodology/Design: The econometric analysis linked data in time periods with cross-referenced data, creating a cross reference/time attempt. Estimated econometric models based on such data create a group called ‘panel data models’. The panel of data for the 130 government units, organized into 6 periods after identifying outliers produced a study sample of N = 678. All calculations for the study were done using the GRETL 2020b program. Findings: The performed literature review and empirical studies confirmed the primary hypothesis, and as such declare that goals and instruments of accounting policy influence the measure and adjustment of allowable levels of indebtedness by local governmental units. Practical Implications: The research should be considered in light of the global pandemic. The corona virus pandemic critically burdens the finances of local governments world-wide. Local governments frequently stand ‘on the front’ in the battle with the corona virus. There is no doubt that there will be subsequent research regarding ‘camouflaging’ of debt in the financial reporting of local governmental units as long as the pandemic continues. Originality/Value: This study has shown significant relationship between local indebtedness and accounting policy of these entities.

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