To manage or reserve accruals? Evidence from a balanced-budget requirement reform Pierre Donatella

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Uploaded by Pierre Donatella     Uploaded date: March 03, 2023    
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Publication date
March 02, 2023
Paper language
Abstract
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.
Keywords
Accrual accounting; balanced-budget requirement; earnings management; incentives; municipalities; public sector; regulatory incentives; political incentives
Email
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Category
Financial accounting
Type of Paper
Published paper

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