Modelling the accruals process and assessing unexpected accruals*

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Table 3: Generalisation of Accruals Model to Different Categories of Accruals Accrual Drivers Total accruals Total working capital accruals Noncurrent operating accruals Operating accruals Financing accruals Shortterm accruals TACC a CNI da ga CNI t t u, t t t u, t1 d CNI dd gd CNI t u, t1 t t u, t1 t u, t1 t t u, t1 m CNI dm gm CNI TWC a OIB d OIB t t u, t t u, t1 TWC TWC t daTWC t u, t1 gaTWC OIB t ddTWC t u, t1 gdTWC OIB t mTWC u, t1 OIB t dmTWC t u, t1 gmTWC OIB Ct u Ct NCO d DA dd gd DA t t u, t1 t t u, t1 NCO NCO NCO t u, t1 t t u, t1u mNCODA dmNCO gmNCO DA It I t NOA a OI da ga OI t t u, t t t u, t1 NOA NOA NOA d OI dd gd OI t u, t1 t t u, t1 NOA NOA NOA t u, t1 t t u, t1 mNOAOI dmNOA gmNOA OI FIN a NFE da ga NFE t t u, t t t u, t1 FIN FIN FIN d NFE dd gd NFE t u, t1 t t u, t1 FIN FIN FIN t u, t1 t t u, t1 mFINNFE dmFIN gmFE NFE t u, t t u, t1 t u, t1 t u, t1 aTWCOIB daTWCOIB dTWC OIB ddTWCOIB t u, t1 t u, t1u mTWC OIB dmTWCOIB Ct Ct u, t t u, t1 t t u, t1 DA mNCODA dmNCO gmNCO DA t WC t DA Table 3 summarizes the accruals model applicable to total working capital accruals (∆TWC), non-current operating accruals (∆NCO), operating accruals (∆NOA), financing accruals (∆FIN), and short-term accruals (∆WC – DA). 54
Table 4: Summary of the Bias in Unexpected Accruals for the Encompassing Model NACC NACC0 j Cell 1: t, j AbACC j NACC NACC0 j Cell 4: t, j AbACC j NACC NACC0 j Cell 7: Uncertain AbACC 0 AbACC 0 AbACC 0 Cell 2: t, j AbACC j Cell 5: t, j AbACC j Cell 8: , AbACC t j j Cell 3: Uncertain Cell 6: t, j AbACC j Cell 9: , AbACC t j j Table 4 summarizes the bias in unexpected accruals relative to abnormal accruals for the encompassing model. WC DA REV REV REV NCO NCO t t u, t1 u, t u, t1 u, t1 u, t j j 0, t 1, t j 2, t j 3, t j 4, t j 5, t j t, j represents the error term extracted from the encompassing model. t, j NACC ( j 55 AbACC ) represents the j normal (abnormal) accruals based on the observation specific parameter from the encompassing model and NACC ( AbACC ) represents the normal (abnormal) accruals based on the regression parameter from the encompassing model.
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Modelling the accruals process and
Page 3 and 4: insights into what unexpected accru
Page 5 and 6: attributed to the firm‟s biased a
Page 7 and 8: 2 Direct and indirect method to cal
Page 9 and 10: flow associated with income recogni
Page 11 and 12: change in net financial obligations
Page 13 and 14: t t TACC CNICFt T t t t titti CNI
Page 15 and 16: period of income recognition and ca
Page 17 and 18: expenses or receive less revenue in
Page 19 and 20: any accounting distortions (conserv
Page 21 and 22: this paper). Combining the normal a
Page 23 and 24: 4 Assessing unexpected accruals mea
Page 25 and 26: firm j and the benchmark firms. The
Page 27 and 28: If there is no deviation in operati
Page 29 and 30: accruals is highly positive (negati
Page 31 and 32: These restrictions respectively imp
Page 33 and 34: The second source of contamination
Page 35 and 36: Even if the use of changes in cash
Page 37 and 38: The item m m CNI , 1 a a CNI
Page 39 and 40: Hence, to manage earnings downward
Page 41 and 42: 6 Conclusion My analysis reveals th
Page 43 and 44: References Ball, R., Shivakumar, L.
Page 45 and 46: Appendix 1: Derivation of Normal Ac
Page 47 and 48: accrued (initiated deferred) propor
Page 49 and 50: The portion of underlying income in
Page 51 and 52: Hence, the correlation between norm
Page 53: Table 2: Summary of Accruals Compon
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