The incremental information content of accruals: evidence based on the exponential smoothing of levels and trends in pre-tax earnings, funds flow and cash flow

Article Abstract:

A study was conducted using 104 UK firms' accounting earnings from 1975-1993 to determine whether incremental information content beyond earnings exist in current and noncurrent accruals. The increase in explanatory power traced to funds flow and cash flow can be enhanced by approximating the unexpected information in reported numbers by exponentially considering previous values. The unexpected information helped in considering the sum of the deviations from the approximated level. Further improvements can be made by properly handling such surprises.

Accrual Accounting, Corporate Profits, Pretax, Research, Cash flow, Accrual basis accounting, Corporate profits

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Boundary conditions for ratios with positively distributed components

Article Abstract:

The ratio of two positively distributed variables where the numerator is a component of the denominator is described in terms of its statistical properties. Johnson's bounded distribution, which is proposed as a model for such ratios, is formulated as a ratio of lognormal variates. This analysis should be of significance to the body of accounting research where an understanding of the behaviors of this type of ratios is relevant to the interpretation of fitted models.

Models, Ratio analysis

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The Timeliness of Income Recognition by European Companies: An Analysis of Institutional and Market Complexity

Article Abstract:

Research on European companies indicates that variations across markets and jurisdictions concerning earnings timeliness and conservatism are partially explained by the tension between market and regulatory effects. The effect of stock price changes on earnings appears to be driving greater conservatism in accounting in Europe.

Europe, Forecasts, trends, outlooks, Corporate Profits, Forecasts and trends, Profit, Market trend/market analysis, Comparative analysis, Stock markets, Stock market, Accounting procedures

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