Accounting Estimates: Pervasive, Yet of Questionable Usefulness

摘要: Estimates and projections are embedded in most financial statement items. These estimates potentially improve the relevance of information by providing managers means to convey investors forward-looking, inside (e.g., on future collections from customers via bad debt provision, or expected assets' cash flows reflected impairment charges). On other hand, quality is compromised by: (i) increasing difficulty making reliable forecasts a fast-changing, often turbulent economy, (ii) frequent managerial misuse manipulate data. Given prevalence accounting data, whether these opposing forces result an improvement not arguably fundamental issue accounting.We examine this study contribution accruals focusing major use - prediction enterprise earnings. Our extensive tests, reflecting both statistical economic significance estimates, indicate that, large, they embed do terms enhancing performance. Accruals flows, beyond that achieved current only marginally This latter improvement, however, appears be economically insignificant. Thus, objective difficulties generating volatile their appear offset positive role conveying forward looking investors.