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2002, Discussion of the Quality of Accruals and Earnings: The Role of Accrual Estimation Errors, The Accounting Review, 77(Supplement): 61-69.
5) To our knowledge, there are no existing studies that examine the quality of accruals measures for strictly financial firms.
Richardson et al formally offered the relationship between the reliability of accruals and the stability of accruals by providing an analytical errors-in-variables model.
Their findings showed that there is no significant relationship between the quality of accruals and the quality of audit.
In Section III, the sample is discussesed and a negative association between accruals, long-term asset accruals, and future profitability is established.
2005) point out that different reliabilities associated with various operating accruals should result in different implications for future profitability.
Discretionary accruals that differ significantly from those of a reporting entity's peers are a strong indication of earnings management.
00 Build 549 has now built into its accrual engine advanced features that allow customers to re-run accrual policies or rules for any date range.
Under the cash basis, revenue is recognized when cash is collected from customers and expenses are recognized when they are paid; under the accrual basis, however, revenue is recognized when it is earned and expenses are recognized as they are incurred.
Ali, Hwang and Trombley (2000) identified evidence contrary to the naive investor hypothesis in relation to large firms that are accompanied by analysts or held by institutional investors (the hypothesis postulates that the predictive capacity of accruals in relation to future earnings is small in these cases), and that asset price, trading volume and transaction costs do not condition the predictive capacity of accruals for future returns.
2009) have found that, in competition with classificatory shifting and earnings guidance, UK firms are less likely to use accruals and real operation management in attempts to achieve analyst forecasts.
As Kothari (2001) notes, given that accruals are a major component of earnings, the overreaction to accruals and underreaction to earnings changes are quite intriguing.