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Critical Accounting Policy Disclosures, Measurement Uncertainties and Accrual Persistence

Title data

Rupertus, Hendrik ; Bravidor, Marcus:
Critical Accounting Policy Disclosures, Measurement Uncertainties and Accrual Persistence.
2019
Event: 35th European Accounting Association Doctoral Colloquium in Accounting , 25.05.2019 - 28.05.2019 , Larnaca, Zypern.
(Conference item: Workshop , Speech )

Abstract in another language

The communication of measurement uncertainties in financial reporting is of increasing concern for investors, analysts, regulators, and auditors. Since 2001, U.S. firms have been encouraged to disclose their highly uncertain accounting policies and estimates, which have a material impact on how the financial condition of a firm is presented (‘critical accounting policies’, CAPs). We find that accruals which are flagged as CAPs are less persistent with respect to future cash flows. This is consistent with the SEC’s intention that CAPs should capture instances of greater measurement uncertainties embedded in the underlying accrual-based measure. We argue further that the lower persistence of single uncertain accruals is not equal across firms and industries. Using CAPs, we find that uncertain accrual components are not less useful in predicting future cash flows per se; it also depends on their importance and, to a certain extent, the specificity for a given firm. Thus, we empirically document that CAP disclosures provide a suitable channel for communicating measurement uncertainties embedded in accounting estimates and are useful to identify CAP characteristics, which affect cash flow forecasts.

Further data

Item Type: Conference item (Speech)
Refereed: Yes
Keywords: corporate disclosure; measurement uncertainty; critical accounting policies; accounting estimates; cash flow prediction; accrual persistence
Institutions of the University: Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X > Chair Business Administration X - Univ.-Prof. Dr. Rolf Uwe Fülbier
Profile Fields > Emerging Fields
Profile Fields > Emerging Fields > Governance and Responsibility
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 12 Jun 2019 07:09
Last Modified: 12 Jun 2019 07:09
URI: https://eref.uni-bayreuth.de/id/eprint/49465