The Accrual Anomaly Under Different Accounting Standards - Lessons Learned from the German Experiment

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Date: September-October 2008
From: Journal of Business Finance and Accounting(Vol. 35, Issue 7-8)
Publisher: Wiley Subscription Services, Inc.
Document Type: Report
Length: 298 words

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Byline: Christoph Kaserer (1), Carmen Klingler (1) Keywords: accrual anomaly; earnings persistency; conservative accounting; true and fair view accounting; accounting standards; accounting regulation; empirical accounting research; German GAAP; IFRS/IAS; US-GAAP; corporate governance Abstract: Abstract: Several studies document that investors systematically overreact to accrual-based accounting information. We address the question to what extent this accrual anomaly is related to different accounting standards. We provide empirical evidence that the accrual anomaly is also present in Germany. However, this anomaly seems mainly to be driven by firms presenting their financial statements under IFRS or US-GAAP, while the anomaly is unlikely to exist for those firms complying with German GAAP. It is argued that introducing true and fair view accounting, like IFRS, that relies on difficult-to-verify information, may not be suitable to improve accounting information quality in the context of a weak corporate governance system. Author Affiliation: (1)The authors are from the TUM Business School, Department for Financial Management and Capital Markets and Centre for Entrepreneurial and Financial Studies (CEFS), Technische Universitat Munchen, and Ernst & Young, Germany. They would like to thank the anonymous referee, Holger Daske, Bernhard Gegenfurthner, Emre Karaoglu, Claudio Loderer, Ulf Schiller, Martin Wallmeier, as well as the participants of the 2007 annual conference of the Swiss Society of Economics and Statistics, the 2007 annual conference of the European Financial Management Association, the 2006 London Business School Accounting Symposium, the ODEON-CEFS seminars in entrepreneurship and finance, Munich, the 2005 Accounting Research Workshop at the University of Berne, and the 2005 annual conference of the American Accounting Association, San Francisco, for helpful comments. The normal caveat applies. Article History: (Paper received January 2006, revised version accepted February 2008) Article note: (*) Address for correspondence: Christoph Kaserer, TUM Business School, Technische Universitat Munchen, Arcisstr. 21, D-80290 Munchen, Germany., e-mail:

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Gale Document Number: GALE|A186022191