Date of Award

1991

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Accounting

First Advisor

Bart P. Hartman

Abstract

Two theories of accounting accruals form the core of this study. The theory of the functions of accounting accruals is induced from observation of accounting accruals. One type of accounting accrual reflects incomplete transactions under a system of cash receipts and cash disbursements. The function of these accruals is to convey data about economic events associated with incomplete cash transactions. These accruals are referred to as syntactically redundant accruals. The second type of accounting accrual presents messages in a different format than their counterparts in a system of cash receipts and cash disbursements. The function of these accruals is to enable accounting data users to perceive messages that may be unclear when signaled under a system of cash receipts and cash disbursements. These accruals are referred to as semantically redundant accruals. The theory of the functions of accounting accruals states that accounting accruals are syntactically redundant or semantically redundant in function. The theory of the pragmatic information of accounting accruals states that accounting accruals contain pragmatic information because of their functions. A hypothesis associated with these theories asserts that the pragmatic information of accounting accruals decreases as the financial statement time frame increases. Cash-flow and accrual data were obtained from COMPUSTAT and provided to a neural network to generate forecasts of cash flows from operations. The forecasted cash flows were used to calculate an error metric that functioned as a measure of pragmatic information. A variant of the Bonferroni procedure was used to detect differences between means of error metrics and to test research hypotheses. The results indicated that syntactically and semantically redundant accounting accruals contain pragmatic information. Hypothesis tests, however, provided evidence that only annual accounting accruals contain pragmatic information. Hypothesis tests also indicated that no difference exists between the pragmatic information contained in syntactically redundant accounting accruals and the pragmatic information contained in semantically redundant accounting accruals. Finally, the results of hypothesis tests presented no evidence of a negative relationship between the pragmatic information of accounting accruals and the financial statement time frame.

Pages

164

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