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Accounting conservatism: A review of the literature

George W. Ruch (University of Alabama, Culverhouse School of Accountancy, United States)
Gary Taylor (University of Alabama, Culverhouse School of Accountancy, United States) *

Journal of Accounting Literature

ISSN: 0737-4607

Article publication date: 27 February 2015

Issue publication date: 28 February 2015

1926

Abstract

We review and analyze the accounting literature that examines the effects of accounting conservatism on financial statements and financial statement users. We begin by analyzing how conservatism affects the reported numbers on the financial statements. These studies primarily evaluate how conservatism affects earnings quality, including earnings persistence and the presence of earnings management. Next, we assess the effect of accounting conservatism on the users of the financial statements. We identify three primary users of the financial statements: (1) equity market users (2) debt market users and (3) corporate governance users. Within each of these categories, we analyze the findings of prior research and explore unanswered research questions. By analyzing the effects of accounting conservatism from a diverse range of research topics, we inform the discussion on the costs and benefits of accounting conservatism.

Keywords

Citation

Ruch, G.W. and Taylor, G. (2015), "Accounting conservatism: A review of the literature", Journal of Accounting Literature, Vol. 34 No. 1, pp. 17-38. https://doi.org/10.1016/j.acclit.2015.02.001

Publisher

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Emerald Publishing Limited

Copyright © 2015, Emerald Publishing Limited

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