This paper examines whether accounting practice deviates from the accounting regulation, and focuses especially on whether local government in Norway has a diverse accounting practice of provisions and contingent liabilities. The study elucidates redress programs relating to institutional child abuse, as a contingent liability; and how this kind of liability is integrated into the accounting system of Norwegian local government. The accounting practice was mapped using a web-based survey, including all municipalities and counties which have established a redress program.
Over recent years, the accounting system in Norway has gradually evolved from a modified cash system to a modified accrual system. The survey shows that the accounting practice varies. Also few of the municipalities consider the redress program as a contingent liability which should be recognized as a provision. In fact, many of the municipalities use cash-based accounting. This could indicate that the accounting regulation is difficult to understand, and that the Norwegian Local Government Accounting Standard Board, or the Board, fails to guide the municipalities. Another interpretation of the result could be that the accounting practice deviates from the accounting regulation, and that the municipalities are slow adapters of new regulations. My hypothesis that municipalities in bad financial condition will postpone incorporation of bad news, such as contingent liabilities, is neither supported nor rejected by this study.
