Accounting Seminar（2013-19）

Topic：Is the Timing Role of Accrual Accounting Disappearing?

Speaker: X. Frank Zhang,Yale University

Discussant:Lina Wu Le Luo , Peking University

Time:: Tuesday, 17 December,14:00-17:00pm

Location:Room216, Guanghua Building 2

Organizer:Department of Accounting, MPAcc GSM, PKU

Abstract：

This study examines thetiming roleof accrual accounting, a smoothing of temporary timing fluctuations in operating cash flows via accruals. We show that the timing role has dramatically declined over the past fifty years and has largely disappeared in more recent years. This is demonstrated by a temporal decrease in the adjusted R2 and a temporal increase in the coefficient on contemporaneous cash flows in accrual models based on Dechow (1994) and Dechow and Dichev (2002). We explore several potential reasons for the observed attenuation and find that an increase in cash flow volatility, one-time and non-operating items, and loss firms explain over half of the overall decline. On the other hand, a temporal change in the matching between revenues and expenses and an increase of the accrual accounting role in the asymmetrically timely recognition of gains and losses do not significantly contribute to the documented attenuation.

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