Relationship between optional accruals and accounting conservatism

Document Type : Original Article

Authors

10.22034/iaar.2012.104679

Abstract

This inquiry is aimed at studying the relationship between "Unexpected Accruals " and "Accounting Conservatism " in the capital markets of Iran. The accruals in this inquiry are divided into the unexpected accruals and the expected accruals categories and are measured using Jones model. In order to examine the relationship between accruals (expected or unexpected) and conservatism Basu model is applied.
The suppositions made in this research are as follows:

Unexpected accruals hold a meaningful link with accounting conservatism.
Expected accruals have a meaningful link with accounting conservatism.
Expected and unexpected accruals represent accounting conservatism to a similar extent.
Considering the above suppositions, expected and unexpected accruals are the independent variables and conservatism is the dependent variable.

Based an a sample composed of 720 year-company among the corporations accepted in the stock exchange of Tehran between the years 1378 to 1386, the results suggest that the unexpected accruals have a meaningful relationship with accounting conservatism. on the other hand the analysis done in this study indicates absence of a meaningful relationship between the expected accruals and accounting conservatism.
Therefore it can be claimed that expected and unexpected accruals do not represent conservatism to a similar extent.
 

Keywords

Accounting and Auditing Research
Volume 4, Issue 15
October 2012
Pages 134-155

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