Modeling Total Accruals in an International Environment: The Impact of Alternative Measures

38 Pages Posted: 28 Dec 1998

See all articles by Jane Hamilton

Jane Hamilton

La Trobe University

Jayne M. Godfrey

University of Auckland

Graeme Byrne

La Trobe University - Faculty for Regional Development

Abstract

International researchers investigating earnings management, and standard-setters, analysts, and auditors relying upon evidence of earnings management in their deliberations, require earnings management models to appropriately classify accruals as discretionary or non-discretionary. We examine whether refining the property plant and equipment (PPE) variable in the Jones (1991) accruals model to accommodate international differences in data availability and accounting GAAP improves the model?s explanatory power. Explanatory power increases only when the model uses gross, rather than net, PPE measures. Adjustments for international accounting differences such as amortization of intangibles and asset revaluations do not improve the model?s explanatory power. This indicates that the model is robust to international settings.

JEL Classification: M41, M43, D82, C89

Suggested Citation

Hamilton, Jane Maree and Godfrey, Jayne M. and Byrne, Graeme, Modeling Total Accruals in an International Environment: The Impact of Alternative Measures. Available at SSRN: https://ssrn.com/abstract=141333 or http://dx.doi.org/10.2139/ssrn.141333

Jane Maree Hamilton (Contact Author)

La Trobe University ( email )

PO Box 199
Bendigo, Victoria 3550
Australia
61 3 54447292 (Phone)
61 3 54 447998 (Fax)

Jayne M. Godfrey

University of Auckland ( email )

12 Grafton Road
Auckland, 1010
New Zealand

Graeme Byrne

La Trobe University - Faculty for Regional Development ( email )

Bendingo
Australia

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