A conceptual investigation on the necessity of preparing consolidated financial statements in the public sector

The public sector has faced a series of reforms, which have had a great influence on the development of public accounting and reporting system. This paper shows that the most important issue that has resulted from these reforms is the preparation of consolidated financial statements in the public sector. The public sector consolidated financial statements are one of the most challenging topics of worldwide research and also, became a debated issue both for international regulatory body and for governments. However, the objective of this article is to investigate the need for consolidated financial statements in the public sector and to outline the activity of the international regulatory bodies in order to issue specific standards regarding this current topic. So as to reach this main objective of the research, this paper explores the scientific literature regarding this issue and then it followed the steps taken by regulators in the development of international standards regarding consolidated financial statements. This paper emphasizes on the importance of the introduction and presentation of consolidated financial statements by public sector entities and reveals the link between these types of reports prepared by entities from private sector and public one. The main conclusion of this conceptual paper is that public sector entities should prepare consolidated financial statements and the regulators and governments play an important role in taking and introducing these practices into the public sector.