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PurposeThe aim of this research is to illustrate how a change from cash‐based accounting to accruals‐based accounting in the core public sector of New Zealand occurred.Design/methodology/approachThe grounded theory research strategy is used in a field study setting.FindingsThe findings suggest that there were six antecedents of the change – key people, axial principles, communicating ideas, contextual determinants, ethos, and knowledge. All of these converged to create the synergistic process of change that led to policy innovations. In this change process, accounting change was a means to an end, where accrual accounting was introduced in order to achieve ministerial control and measure performance of government entities to provide relevant information for management decision making.Research limitations/implicationsSince this is a case study based on a single country, not all analytical categories will be relevant to other contexts/countries. However, the study provides a conceptual framework that identifies constructs that are insightful for other settings.Practical implicationsThe findings of the study will be useful to researchers and policymakers interested in appreciating the causes and catalysts of major policy shifts in public sector accounting. The findings suggest that there are no general reform formats that can be applied to all countries.Originality/valueThe insights were derived from participants who were directly involved in the change. The strength of grounded theory strategy used in this study was that, by not being bound by an a priori theory, one was able to ground one's understanding in the factors surrounding the change.

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Extant research in evaluation of accounting harmonisation has mainly focused on measurement of harmonisation and evaluation of its impact on share market indicators. Within these themes, however, researchers have been studying the impact of formal harmonisation on material harmonisation, and share prices and returns. Given the important role formal harmonisation plays in accounting harmonisation, this study introduces a methodology for the measurement of formal accounting harmony between countries. The methodology introduced in this paper can be used to identify areas of harmony or disharmony for policy-making purposes. It also provides means of gaining valuable insights into the nature of harmony or disharmony between different countries' accounting rules. Finally, it creates new grounds for examining various other aspects of accounting harmonisation.

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