To manage or reserve accruals? Evidence from a balanced-budget requirement reform Pierre Donatella
Uploaded by Pierre Donatella     Uploaded date: March 03, 2023    
Publication date
March 02, 2023
Paper language
In 2013, an accounting reform permitted Swedish municipalities to voluntarily adopt a system with accrual reserves that was designed to increase flexibility in meeting budget requirements and decrease regulatory incentives to engage in earnings management. However, since a system with accrual reserves imposes potentially undesirable transparency from the perspective of politicians, it is unclear whether the (regulatory) benefits of adopting accrual reserves are perceived to exceed the (political) costs. The authors found that municipalities with higher levels of earnings management were less likely to adopt a system of accrual reserves, and they attribute this to political incentives to avoid transparency.
Accrual accounting; balanced-budget requirement; earnings management; incentives; municipalities; public sector; regulatory incentives; political incentives
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Financial accounting
Type of Paper
Published paper

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