Effect of Growth and Managerial Reporting Behavior on Accounting Conservatism

Abstract

The purpose of this study is to investigate the impact of growth and discretionary accruals as the measure for evaluation of managerial reporting behavior on accounting conservatism in financial reports. Differential Timeliness (DT) is used as a measure for evaluation of conservatism. The data is derived from the financial statements of 43 manufacturing firms in Tehran Stock Exchange (TSE) during 1380-1387. Using data analysis by the method of multi-variables linear regression, the results represent a negative relationship between differential timeliness and discretionary accruals that is statistically significant. In addition, the results indicate lack of meaning relationship between growth and DT. According to the results of the study, it is suggested that for evaluation of conservatism in financial reporting, discretionary accruals shloud be used. The firms with higher discretionary accruals indicate lower level of conservatism in comparison with the firms with low discretionary accruals and vice versa .With conservatism, profits of the period approximately equal to cash flow while discretionary accruals gradually turn into zero.

Keywords

• accounting conservatism
• discretionary accruals
• differential timeliness
• managerial reporting behavior