Abstract. In considering the adequacy of adopting accruals and IPSASs, this paper tests the appropriateness of existing modified accrual accounting and financial reporting system in Croatian public healthcare sector. The paper indicates that accounting information system contains discrepancies and constraints in assuring true and fair view of organization’s financial position and performance. Our statistics confirms low level of cost and managerial accounting methods development, and external and internal financial reporting convergence.

Having in mind its specificities, we argue that Croatian public healthcare sector represents a segmental accounting subsystem within the integral public sector accounting framework, where accruals implementation might prove justifiable.

Keywords: public healthcare; government accounting; financial reporting; empirical analysis: Croatia.