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Article
Publication date: 1 July 2005

Tony Kang

Accounting accruals are at the heart of most accounting systems. A basic premise of accrual accounting is that it provides a more timely and relevant performance measure…

Abstract

Accounting accruals are at the heart of most accounting systems. A basic premise of accrual accounting is that it provides a more timely and relevant performance measure than cash flows through a better matching of revenues and expenses. While some prior studies suggest that managers use individual accrual‐related disclosure items in an opportunistic manner, hindering market participants’ ability to predict future firm performance, the market’s expectation about future firm performance will become more accurate and consistent under accrual accounting if the market properly uses such information to set expectations about future firm performance. Consistent with this idea, our evidence shows that the frequency of accrual‐related disclosure is positively (negatively) associated with analysts’ forecast accuracy (dispersion). We interpret this finding as the presence of more detailed accrual‐related disclosure requirements enhancing the market participants’ ability to predict earnings.

Details

Accounting Research Journal, vol. 18 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 11 October 2021

Mengyao Cheng

This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and…

Abstract

Purpose

This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and accruals between the firms.

Design/methodology/approach

Using 278,452 pair-year observations over the years 2003–2019, the author evaluates the research question using regression models.

Findings

Closeness in cash flows and closeness in accruals both increase accounting comparability and the effect of closeness in cash flows is greater. The effect of closeness in earnings is greater than the combined effects of closeness in cash flows and accruals. Earnings quality strengthens, while product closeness weakens, the effects of closeness in earnings and closeness in cash flows.

Originality/value

To the best of the authors’ knowledge, this study is the first to empirically test the link between the closeness in earnings components and accounting comparability. This study is also the first to examine cash flows versus accruals in the context of accounting comparability.

Details

Review of Accounting and Finance, vol. 20 no. 5
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 26 October 2021

Francisco Sánchez, Begoña Giner and Belén Gill-de-Albornoz Noguer

This paper investigates whether the greater flexibility of International Financial Reporting Standards (IFRS) in contrast to accounting models that were used before those…

Abstract

Purpose

This paper investigates whether the greater flexibility of International Financial Reporting Standards (IFRS) in contrast to accounting models that were used before those standards became mandatory meant a significant change in the magnitude of accruals recognized in the accounting income.

Design/methodology/approach

18,126 observations are analyzed on 1,881 non-financial companies in 19 European countries in 2000–2012. A difference-in-differences regression method is used. The treatment sample includes companies that were required to adopt IFRS as from the 2005 fiscal year, while the control sample comprises companies that voluntarily adopted IFRS prior to 2005.

Findings

Compared to prior accounting standards, the mandatory adoption of IFRS increased the absolute value of accruals. This result is seen only in those companies where the magnitude of accruals is negative. The observed effect is independent of the degree of similarity between IFRS and prior standards.

Originality/value

This paper complements the literature analyzing the effect of IFRS on the financial statements and on the financial-economic indicators of companies. It analyzes the component of accounting income that is most sensitive to the use of professional judgment: accruals. Focusing on observed accruals helps avoid an error in measurement that can be made when working with the discretionary component of accruals. Additionally, a longer time horizon than in previous studies is considered.

Propósito

Este trabajo investiga si la mayor flexibilidad de las Normas Internacionales de Información Financiera (NIIF) respecto a los modelos contables que se empleaban antes de que dichas normas fueran obligatorias supuso un cambio significativo de la magnitud de los ajustes por devengo reconocidos en el resultado contable.

Diseño/metodología/enfoque

Se analizan 18.126 observaciones de 1.881 empresas no financieras de 19 países europeos en 2000–2012. Se utiliza la metodología de regresión del tipo diferencia en diferencias. La muestra de tratamiento incluye empresas que adoptaron obligatoriamente las NIIF, lo que tuvo lugar en el ejercicio contable 2005, y la muestra de control está compuesta por empresas que las adoptaron voluntariamente antes de 2005.

Hallazgos

Con respecto a las normas contables previas, la adopción obligatoria de las NIIF incrementó el valor absoluto de los ajustes por devengo. Este resultado se observa solamente en el grupo de empresas donde la magnitud de los devengos es negativa. El efecto observado es independiente del grado de similitud entre las NIIF y las normas previas.

Originalidad/valor

Este trabajo complementa la literatura que analiza el efecto de las NIIF sobre los estados financieros y los indicadores económico-financieros de las empresas, analizando el componente del resultado contable más sensible al uso del juicio profesional: los devengos. El hecho de centrarse en los devengos observados permite evitar el error de medición en el que se incurre cuando se trabaja con el componente discrecional de los mismos. Adicionalmente, se analiza un horizonte temporal más amplio que en trabajos previos.

Details

Academia Revista Latinoamericana de Administración, vol. 35 no. 1
Type: Research Article
ISSN: 1012-8255

Keywords

Article
Publication date: 1 March 2007

Susana Margarida Jorge, João Baptista da Costa Carvalho and Maria José Fernandes

Until the end of 1997, governmental accounting in Portugal was characterised as essentially cash-based budgetary accounting, using singleentry as the bookkeeping method…

Abstract

Until the end of 1997, governmental accounting in Portugal was characterised as essentially cash-based budgetary accounting, using singleentry as the bookkeeping method. The only compulsory accounting system was Budgetary Accounting. As many countries all over the world, nowadays Portugal is implementing a reform of the whole governmental accounting, which has as most important innovations the use of double-entry within a system compulsorily integrating accrual-based Financial and Cost Accounting along with Budgetary Accounting (still essentially cash-based). The main purpose of this paper is to describe and analyse the reform and current situation of governmental accounting in Portugal, especially discussing the accrual basis implementation. In particular, it shows that not only governmental accounting reform in Portugal has been going towards international harmonization, but also problems that have arisen are common to others faced by several countries. Perspectives of future evolution are also presented.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 19 no. 4
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 21 May 2018

Adriana Bruno and Irvine Lapsley

The purpose of this paper is to add to our understanding of the nature of accrual accounting by examining the process involved in its construction, as a dynamic and…

1344

Abstract

Purpose

The purpose of this paper is to add to our understanding of the nature of accrual accounting by examining the process involved in its construction, as a dynamic and controversial process. This paper reveals how it is built and constantly modified, reinforced or negated during the process of implementation.

Design/methodology/approach

This paper’s focus on a government initiative with multiple actors present in the laboratory. Specifically, this study offers a close examination of the day-to-day activities of a laboratory case study; it focuses on participant observation in video conference calls. The discussions held by the project teams are analyzed to extend our inquiry into the most intimate aspects of fact construction (Latour and Woolgar, 1979). These excerpts illustrate the processes of accrual accounting construction and open up the possibility of studying the emergence of accrual accounting through the lens of an action net.

Findings

The evidence collected reveals the absence of a well-defined template for implementing accrual accounting in government. These results reveal an elaborate process of improvisation and fabrication in the design of this accounting system and a fragile network in action.

Originality/value

Prior research on accrual accounting in government focuses on the examination of existing accrual accounting systems with somewhat puzzling results on lack of use. In this study, the perspective has been shifted from focusing on accrual accounting as self-evident (Lapsley et al., 2009) to examine its construction. This paper examines this tension between the apparent certainties as espoused by practitioners and the problematic nature of accrual accounting in government. It extends our knowledge of “black box accrual accounting,” and shows that it is a fluid object with significant discretion in the determination of practice.

Details

Accounting, Auditing & Accountability Journal, vol. 31 no. 4
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 4 June 2018

Sabrina Gigli and Laura Mariani

The purpose of this paper is to examine the change from cash accounting to accrual accounting, identifying and assessing the institutional and organisational barriers that…

Abstract

Purpose

The purpose of this paper is to examine the change from cash accounting to accrual accounting, identifying and assessing the institutional and organisational barriers that may affect this process. A specific focus on knowledge gaps is provided.

Design/methodology/approach

The study employs a mixed method design, combining action research activities, a survey, and in-depth qualitative interviews in the setting of Italian public universities.

Findings

The findings highlight a low degree of compliance with the accrual accounting system and budgeting system, which is the result of the lack of an accrual accounting culture in the Italian public sector.

Originality/value

The analysis confirms some barriers to the transition highlighted by previous literature and also adds further explanations of such limitations in terms of the lack of skills and accounting knowledge of the universities’ administrative staff possesses.

Details

International Journal of Public Sector Management, vol. 31 no. 7
Type: Research Article
ISSN: 0951-3558

Keywords

Article
Publication date: 6 November 2018

Sylvia, Eko Ganis Sukoharsono, Yeney Widya Prihatiningtias and Roekhuddin

The purpose of this paper is to evaluate the merits of accrual-based accounting for the public in an Indonesian local government. It gives insights into the connection…

Abstract

Purpose

The purpose of this paper is to evaluate the merits of accrual-based accounting for the public in an Indonesian local government. It gives insights into the connection between the new practices and responses from government apparatus.

Design/methodology/approach

The paper applies genetic structuralism from Pierre Bourdieu to study the interrelation of habitus, field and capital in the accrual accounting implementation.

Findings

The result indicates a symbolic dominance of central government in the implementation of accrual-based accounting in the local government. Accrual accounting is considered to be a technique of government accountability which is independent from political and social situation.

Practical implications

The accrual accounting implementation preoccupies the government officials in their study of the preparation of financial statements while its utilization to increase the public welfare is still ignored.

Social implications

The government still prioritizes accountability and transparency for managerial and political purposes. Hence, the public interest is less superior compared with the formalities established between governments – the central government and local governments – and the regional legislator.

Originality/value

This paper contributes to the evaluation of the alignment of government policy with the public interest.

Details

Journal of Accounting & Organizational Change, vol. 14 no. 4
Type: Research Article
ISSN: 1832-5912

Keywords

Article
Publication date: 1 March 2006

Josep L. Cortes

In this paper an analysis is made of significant accounting and budgetary reforms that have recently been introduced within the framework of a broader reform called New…

Abstract

In this paper an analysis is made of significant accounting and budgetary reforms that have recently been introduced within the framework of a broader reform called New Public Management. These reforms have led to the adoption of the accrual basis in accounting in many developed countries (i.e. the effects of transactions or events are recognized when they take place, irrespective of the moment when cash is paid or received). However, in 2003 it has only been adopted in budgeting by three of them: New Zealand, Australia and the United Kingdom. In this paper the international situation is analyzed with a view to the future adoption of the accrual basis in budgeting.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 18 no. 1
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 9 September 2013

Sandra Cohen, Nikolaos Kaimenakis and George Venieris

The purpose of this paper is to explore the coexistence of cash accounting and accrual accounting systems through an investigation of the roles they fulfill in Greek…

1503

Abstract

Purpose

The purpose of this paper is to explore the coexistence of cash accounting and accrual accounting systems through an investigation of the roles they fulfill in Greek municipalities.

Design/methodology/approach

The survey results are based on the answers of the financial department principals of 106 municipalities to a structured questionnaire. The roles of accounting investigated are informed by Ansari and Euske's model.

Findings

It appears that cash accounting information prevails in the major function of decision making, with accrual accounting information playing a secondary role. Larger municipalities seem to use accounting data more extensively than smaller ones for negotiations, both in accrual and cash terms.

Originality/value

The study sheds light on the actual use of accrual accounting information in a public sector setting, where customarily decisions were based on cash accounting considerations.

Details

Journal of Applied Accounting Research, vol. 14 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 25 June 2019

Latifa Hamisi Mbelwa, Pawan Adhikari and Khandakar Shahadat

The purpose of this paper is to investigate the factors that have resulted in the effective implementation of accrual accounting reforms in the Central Government of Tanzania.

Abstract

Purpose

The purpose of this paper is to investigate the factors that have resulted in the effective implementation of accrual accounting reforms in the Central Government of Tanzania.

Design/methodology/approach

The paper relies on the ideas of institutional theory and some aspects of decision-usefulness so as to delineate the external pressures enforcing the Government of Tanzania to embrace accrual accounting and the factors complicating its implementation at organisational level (within government entities). The authors draw on quantitative techniques and the explanatory and cross-sectional survey research strategies and methods for data analysis.

Findings

Our findings suggest that the coercive pressures from donors and auditors along with the normative pressures surfaced by the training of employees generate a significant impact on designing the effective administrative model of accrual accounting. In a lesser extent, pressures from the National Board of Accountants and Auditors and cultural factors are positively correlated to the implementation of accrual accounting in the Tanzanian context. Of the factors the authors examined, the management changes are proved to be least effective. Unawareness of the key stakeholders has caused weak political and regulatory commitments. Accrual accounting implementation is further exacerbated by inadequate technical and personnel competence. Ultimately, the implementation of the accrual accounting has increased significant managerial accountability though a major segment of such behaviour is unexplained by the factors the authors employed in the study.

Practical implications

The effective implementation of accrual accounting relies on improvements in cultural and human-related issues. What is important to understand is that accrual accounting is more of a management reform incorporating changes in broader aspects of institutional and accountability mechanisms, rather than just an adoption of particular accounting technologies. Without such broader changes, accrual accounting reforms can be detrimental providing the technocrats and government officials with a space for manipulating financial information, Tanzania serving as an example.

Originality/value

The study highlights the case of an emerging economy in which accrual accounting is actually in effect and has impacted on managerial accountability, but is struggling to engender intended results and outcomes at organisational level.

Details

Journal of Accounting in Emerging Economies, vol. 9 no. 3
Type: Research Article
ISSN: 2042-1168

Keywords

1 – 10 of over 4000