Expenses incurred for business operations ( business expenses) must be accounted for in the same period as revenue derived from those operations.
#Matching principle. for free#
Journal of Applied Business Research 11(3): 38-46.Click here for free trial What is the Matching Principle?īeing a part of GAAP - Generally Accepted Accounting Principles, the matching principle determines the causal relationship between spending and earnings. Using financial statement data to identify factors associated with fraudulent factors associated with fraudulent financial reporting. The effects of matching principle on incremental value relevance and relative pricing multiples between accounting information. Firm life-cycle stages, revenue-expense matching, and the differential patterns of expense recognition. The matching principle and earnings quality. The change in accounting environment and the matching principle. Earnings management using classification shifting: An examination of core and special items. Contemporary Accounting Research 21: 461-489. How are earnings managed? An examination of specific accruals. Expert Systems with Applications 32: 995-1003. Data mining techniques for the detection of fraudulent financial statements. Framework for the Preparation and Presentation of Financial Statements. International Accounting Standards Board (IASB). Journal of Accounting and Economics 20: 125-153 Managing earnings using classification shifting: Evidence from quarterly special item. Have financial statements lost their relevance? Journal of Accounting Research 37(2): 319-352.įan, Y., A. Journal of Accounting Research 34(Supplement): 135-155.įrancis, J. Repeated accounting write-offs and the information content of earnings. Changes over time in the revenue-expense relation: Accounting or economics? The Accounting Review 86(3): 945-974.Įlliott, J., and D.
Matching and the changing properties of accounting earnings over the last 40 years. Empirical study about the earning manipulation of enforcement firms. An analysis of the corporate characteristics of companies reporting aggressive accounting.
Journal of Accounting and Economics 24: 39-67.Ĭhoi, K. Changes in the value relevance of earnings and book values over the past forty years. Using nonfinancial measures to assess fraud risk. Financial Analysts Journal 55(5): 24-36.īrazel, J. Financial ratio, discriminant analysis, and the prediction of corporate bankruptcy. Mason, Ohio: Thompson-Southwestern.Īltman, E. This study contributes to the literature by providing evidence on the importance of the level of the causal relation when examining the degree of matching.Īlbrecht, W. This result implies that the investigation of the matching model at a strong level of the causal relation between revenues and expenses is more effective than that at a weak level of the causal relation, with regard to examining the degree of matching for fraud firms. Empirical results suggest that the degrees of matching are different between fraud and non-fraud firms only at the strong level of the causal relation between revenues and expenses.
Given that managing earnings is easier when using non-operating items than when using operating items, the degree of matching is (not) lower for fraud firms than for non-fraud firms at the strong (weak) level of the causal relation between revenues and expenses. Fraud firms have stronger incentives for managing earnings. A stronger causal relation exists between revenues and operating expenses than between revenues and total expenses that include non-operating expenses as well as operating expenses. This paper examines whether the degree of matching for poor-performing fraud firms varies depending on the strength of the causal relation between expenses and revenues.
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