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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.

The purpose of this paper is to investigate the effect of operating cycle on the differential persistence of accruals and cash flow, and the market reaction to the different components of earnings across firms with various operating cycles.

By examining the US public firms' earnings and the capital market reaction to different components of earnings, from 1964 to 1993, it is found that the longer the operating cycle, the lesser will be the persistent of accruals.

This result is consistent with Sloan's theory that the differential persistence of accruals is attributable to estimation errors in accruals. Moreover, the market efficiency test shows that the mispricing of accruals is greater for firms with longer operating cycle, indicating that investors fixate on earnings, while ignoring the persistence of accruals among firms with different earnings quality.

This paper adds to the growing literature that has begun to examine the factors affecting accrual persistence and accrual mispricing by indicating that the length of operating cycle can play a role. In addition, it provides fresh evidence that the market fixates on earnings, thus emphasizing the importance of contextual analysis of financial statement. Finally, it corroborates Sloan and Xie that estimation errors in accruals drive the lower persistence of accruals.

The purpose of this paper is to replicate Richardson et al.’s (2005) study on how accrual components’ reliability affects earnings persistence and whether investors anticipate the lower earnings persistence through stock return. In this study, the authors use more recent data to examine whether the previous results still hold.

The authors run the analysis using Richardson et al.’s (2005) design of ordinary least squares and report the results using Fama and Macbeth’s (1973) procedures.

The results corroborate Richardson et al.’s (2005) conclusions that lower reliability of total accrual (accrual components) leads to lower earnings persistence.

This study replicates Richardson et al. (2005) using more recent US data. The results in this paper confirm the general conclusion in the original study: less reliable accruals lead to lower earnings persistence.

The aim of this study is to investigate whether debt maturity matters for the choice of earnings management strategy (i.e. accruals earnings management and real earnings management).

The sample involves 486 American listed firms extracted from fortune 1,000 over the period 2006–2014. Panel data regression models are employed to empirically test the impact of short-term debt and long-term debt on manager's choice of earnings management form. The generalized least square technique is applied to estimate the parameters of the regression models.

The results show that managers are more likely to manage earnings through real activities and reduce their use of accruals earnings management once short debt is increasing because the latter induces heavy lender's scrutiny. The managers move hence to real earnings management due to a lower possibility of being discovered. Moreover, the results reveal a simultaneous use of accruals earnings management and real earnings management for firms with high long-term debt. This finding highlights that long-term debt does not produce regular lender's enforcement allowing managers to use both earnings management techniques to reach earnings targets.

This research has two limitations. Like many other studies, the measure of discretionary accruals is subject to measurement errors. Moreover, the sample exclusively involves large firms extracted from Fortune 1,000. Therefore, the attained results may be not available for small and medium firms.

The findings have implications for both researchers and lenders. For researchers, the present work points out that the decision about the debt maturity structure is crucial for all managers because they establish their earnings management policy accordingly. For lenders, the findings imply that increasing scrutiny effectively constrains accounting manipulations but does not eliminate earnings management activities altogether. The managers move to another earnings management strategy (i.e. real earnings management). This evidence may support the lenders and the creditors in their decision-making processes.

This paper adds to the accounting literature by providing new and interesting evidence on the role of debt maturity on the trade-off between the earnings management tools. Prior studies provided mixed finding for the issue of earnings management in levered firms. The findings of this study should be viewed as a first step to understand the mixed results on this issue. While most papers focus on one earnings management form when they examine the earnings management in levered firms, the authors highlight the impact of debt on both accruals and real earnings management simultaneously.

The purpose of this paper is to analyse the reasons why Sri Lanka adopted International Public Sector Accounting Standards (IPSAS) recently. Many less developed countries (LDCs) have introduced IPSAS during the recent past. However, little research has been conducted to study the New Public Financial Management and accrual accounting and their impact on LDCs.

Using a qualitative approach, the methods of this paper consist of interviews, a documentary review and participatory observation in the Ministry of Finance and Planning (MOFP) and Auditor General’s Department of Sri Lanka, and present a critical interpretation supported by the perspective of globalisation.

The findings of the research indicate that the public sector reforms and the transition from cash accounting to accrual accounting in the public sector have been strongly affected by the global pressures imposed by international agencies such as International Public Sector Accounting Standards Board (IPSASB) and the World Bank (WB). Empirical evidence shows the dysfunctional impact of globalisation in the public sector accounting standards as there are major structural issues yet to resolve. There are increasing doubts over whether the change to accrual accounting is worth the costs and the additional risks involved.

The results of the interviews are based on the knowledge and past experiences of interviewees. What is generalisable is an understanding of the processes and mechanisms that relate to the way the public sector accounting functions.

This paper adds new literature on public sector accounting in LDCs, which recognises the nexus and interests of international agencies and practice of public sector accounting.

I reexamine the conflicting results in Frank, Lynch, and Rego (2009) and Lennox, Lisowsky, and Pittman (2013). Frank et al. (2009) conclude that firms can manage book income upward and taxable income downward in the same period, implying a positive relation between aggressive book and tax reporting. Lennox et al. (2013) conclude the relation is negative and aggressive book reporting informs users that aggressive tax reporting is less likely. I identify four key differences in the research designs across the two studies, including measures of aggressive book reporting, measures of aggressive tax reporting, sample time periods, and empirical models. I systematically examine whether each of these differences is responsible for the conflicting results by altering the key difference while holding other factors as constant as possible. I find the relation between aggressive book and tax reporting is driven by the measure of aggressive book reporting, as the relation is positive for some subsets of firms and negative for others. Firms accused of financial statement fraud have a negative relation while nonfraud firms exhibit a positive relation. Using discretionary accruals, I also look for, but do not find a “pivot point” in the relation between aggressive book and tax reporting. I provide a better understanding of the relation between aggressive book and tax reporting by identifying research design choices that are responsible for prior results. I show that measures of both discretionary accruals and financial statement fraud are necessary to gain a more complete picture of the relation between aggressive book and tax reporting.

We analyze the quality of accounting information reported by public firms in Latin America and United States of America.

To reach our objective, an exploratory and descriptive research was developed. To analyze the dimensions of accounting information quality, the operational model present in literature were applied which assess the persistence in earnings (Dechow & Schrand, 2004), the level of conservatism (Ball & Shivakumar, 2005), accounting earnings management (Pae, 2005) and accruals quality measurement (Dechow & Dichev, 2002), in a sample composed of publicly traded companies in the markets of Latin America and the North America (represented by USA), totaling 2,526 companies, from 2005 to 2011.

Our results evidenced that financial reporting of Latin-American companies are less conservative (except for Brazilian companies) and has similar level of earnings management in comparison to the North-American ones. Concerning to the quality of accruals it was observed that there are significant differences especially related to accruals of Brazilian companies.

Our results suggest differences in the quality of accounting information, originated by the economic environment where the company is inserted. So, investors must be careful when they are comparing firms between these markets, because the results were different for some cases, which may lead the investors to make misallocation of his resources.

We expanded previous literature by the use of various proxies for accounting quality, comparing firms on emerging markets with the major capital market (USA), and the crises period of time.

The objective of this study is to examine the perceived usefulness of accrual accounting-based financial information for accountability and for supporting decision-making in public sector organisations.

A questionnaire survey adapted from Kober et al. (2010) was used to survey Malaysian Federal Government accountants to ascertain their views on the usefulness of accrual accounting information across 12 situations regarding accountability and decision-making. Mean scores and mean score ranking were computed on a total of 165 usable responses received. The independent t-test was conducted to investigate the differences in the perception between “accountants with” and the “accountants without” prior work experience in the private sector.

The study provides evidence that Malaysian Federal Government accountants consider accrual accounting information as very useful for decision-making. The three most important decision-usefulness indicators in the survey are “To assist in managing the department’s assets and liabilities”, “To assess cash flow needs of a department” and “For departmental resource allocation decisions”. The least useful accrual accounting information as perceived by the Malaysian public sector accountants is “To assist in discharging the department’s accountability obligations”.

The study provides valuable insights into the extent to which accrual accounting information is considered useful for accountability and decision-making, lending support to the Malaysian Government’s reform agenda of moving towards using accrual accounting in public sector organisations at the federal level.

Purpose – Previous studies distinguish revenue management based on discretionary accruals; the research of studies is to investigate the factors that affect the finance manager at the discretionary accrual in General financial information statement.

Design/Methodology/Approach – Literature review models used in research aimed at detecting any company that performs the company’s discretion to fulfill the accrual of interests internally. This research study also discusses the relationship between earnings and discretionary manager behavior.

Findings – The researcher wants to re-examine the hypothesis of market efficiency on Indonesia’s capital market. The current company information technology uses greatly influences worldwide investor interest to invest on Indonesian’s capital market. Emerging Indonesia Capital market status becomes very interesting to be studied.

Originality/Value – It also presented the shortcomings of current research and the trends for future study in capital market.

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.

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

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.

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.