Nelson, 2003, Management of the Loss Reserve Accrual and the Distribution of Earnings in the Property-Casualty Insurance Industry, Journal of Accounting and Economics, 35: 347-376.
Dichev, 2002, The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors, The Accounting Review, 77(Supplement): 35-59.
Dichaw Dichoo studied the role of accruals in order to measure the companies' performance better in a time series.
In their research Francis et al state that accruals are the diagnostic criteria for the ambiguity existed in the company's future cash flow.
When converting from the cash basis income to accrual basis income, depreciable assets are treated essentially the same as prepaid expenses because depreciable fixed assets represent long-term prepayments (deferrals).
See Table 7a for the resulting accrual basis income statement.
According to Lev and Nissim (2006), accrual
anomaly is not eliminated in the function of systematic structural factors that prevent investors from consistently forming profitable strategies to exploit accrual
anomaly, thus restricting the opportunity for arbitrage.
This is probably because (1) managers engage in accrual
manipulation and real activities manipulation at the same time and (2) some manipulation methods, for example abnormal production costs, have a positive effect on abnormal accruals
and a negative effect on abnormal CFO, at the same time that they reduce discretionary expenses.
In this section, we describe our abnormal accrual
estimation process, our abnormal return measures, various implementation and research design choices, and the sample selection process.
Note that other theories such as accrual
reliability make no such predictions.
are made in strict adherence to GAAP requirements and are relatively objective.
policies and rules enhancements are estimated to reduce the time required to configure accruals
policies and rules by 80%.