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Where the dirty surplus accounting flows are?

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Purpose – The purpose of this paper is to locate the specific items from the financial statements that
are responsible for the dirty surplus accounting flows and how important they are in its explanation.
Design/methodology/approach – It is generally accepted that some country accounting rules
allow some operations that can generate dirty surplus in the annual statements. Working on this
basis, it is necessary to consider information at the same time across firms and across time, using
panel data econometric techniques. A static panel data estimated by generalized least squares can be
used to correct correlations between firms and account numbers or a dynamic panel data estimated
by GMM-SYS with instrumental variables to avoid endogeneity.
Findings – Results show that in a static panel data model, the income statement items have a lower
explicative power of balance sheet items variations, having higher explicative power a dynamic one
(AR(1)). Results show that, specifically, financial assets, debts and book value capture the dirty
accounting flows.
Research limitations/ implications – Working in differences reduces the explicative power of
the income statement and working in levels could be inconsistent if it is impossible to contrast,
first, stationary in data due to their shortage. It is suggested that future works increase the
frequency of the observed data, and contrast the cointegration as a way to check the accounting
relationships.
Practical implications – It is important to evaluate whether the income statement can (or cannot)
explain the financial position of a firm. Also it is important to know where dirty surplus accounting
flows are located can be useful for firms’ valuation.
Originality/value – The econometric technique proposed in the paper deals with the main
limitation in accounting research: information is bigger in cross-section (number of firms) than in
time series (economic periods).

Keywords Accounting, Income, Financial reporting, Surpluses

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Informasi Detail

Judul Seri

Review of Accounting and Finance

No. Panggil

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Penerbit

: Emerald Group., 2008

Deskripsi Fisik

Review of Accounting and Finance Vol. 7 No. 3, 2008 pp. 308-328

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

AKUNTANSI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

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