The main purpose of the public sector financial reporting in the early days was to demonstrate compliance with legal and contractual provisions. These provisions did not require the determination and reporting of profit. Thus, accrual accounting was less practised or known in the public sector. However, due to the growing establishment of business-type government agencies, the need for improvement in the accounting and reporting practices of those entities is essential. With a view to disclosing more meaningful information of the financial statement prepared by the government entities, many countries have begun to change their accounting techniques from cash basis to accrual accounting. The shift towards a comprehensive accrual-oriented public sector accounting and financial reporting structure began to take place in the late 1980s, most notably in New Zealand and Australia. In Malaysia, a Treasury Circular No.4 on the implementation of accrual accounting in the federal government was issued on 28 March 2013. This circular has stipulated that all reporting entities in the Malaysian public sector are expected to produce financial statements prepared using the Accruals basis, for the first time in the financial year beginning on or after 1st January 2015. However, key challenges surrounding issues such as awareness, infrastructure, training and political will must be addressed before the benefits will become fully apparent. The continuous improvements in the public sector financial management of the Malaysian government were partly attributed to the extensive use of ICT in various government agencies. The integrated government accounting system anchored by the Government Financial Management Accounting System (GFMAS) as well as the Standard Accounting System for Government Agencies (SAGA) was the main impetus for the successful transformation and implementation of Accruals Accounting in the Malaysian public sector.

Elaborate on the implementation of Accruals Accounting by Malaysian Local Authorities and discuss issues inherent in the accounting treatment of heritage assets, military equipment and infrastructure assets.