A Study Of The Impact Of Accrued Item To Future Earning

With the continuous development of economy of our country,people’s disposable income levels have increased greatly, the continuous improvement of investment demand has become an inevitable trend.Securities investment has a relatively low threshold, and it is easy to be accepted by people compared to bank financial management products,bonds and insurance. Accounting earnings is an important reference index before making investment decision. However, accounting earnings is not a perfect index because it changes flexibly greatly within the scope of the accounting rules. Earnings management theory believes that the sum of accounting profit(narrow sense’s accounting earnings) is as the same as the sum of cash flow in the entire life cycle of an enterprise. However,due to the accounting profit partly relies on professional judgment, but cash flow is objective and difficult to be manipulated, so at some point,the accounting profit will not be consistent with the cash flow, this leads to a manipulation space of accounting profits.Easy maneuverability of accounting earnings make earnings quality has received the extensive concern of investors. Earnings quality refers to the level of the company’s accounting earnings reflects the true level of profitability. More real the current accounting earnings reflect the profitability, the higher the quality of earnings. Current higher earnings quality is easy to bring a better future accounting earnings, so the currentaccounting earnings are easy to bring huge returns to investors. On the other hand, if the current accounting earnings are difficult to reflect the profitability, then the earnings quality is low. The current earnings with poor quality bring the low future accounting earning, thus the current accounting earnings will be misleading to users of accounting information, and let them make unreasonable or even completely wrong investment decisions. To sum up, the current earnings quality will affect the future earnings, and the investment decision-making in some extent depends on the future earning, so the evaluation of the current earnings quality becomes the important subject of investment analysis, while the total accruals is one of the important index to evaluate the quality of the earning.Total accruals as an important index to evaluate the quality of the earnings, its essence is to observe whether the current accounting earning has the support from cash flow. Through the index, investors can grasp the overall quality of earnings. By selecting the appropriate total accruals separation model, we can divide total accruals into manipulated accruals and non-manipulated accruals. Manipulated accruals is a lack-of cash flow accounting profit part which is manipulated by management, the existence of manipulated accruals will make the current accounting profits inflated, but the future accounting profits is tend to decline. That is to say, the manipulated accruals can explain or predict future earnings.Due to the manipulated accrual is a part of the total accruals, then total accruals, of course, also have the ability of explaining or predicting future earnings.By viewing the domestic and foreign related research literature, we find that the current studies of accruals focused on the comparison of the predicted ability of total accruals, manipulated accruals and operating cash flow, T years total accruals’ influence on T + 1 years earnings, and the applicability in securities market of China of several kinds of commonly used total accrued item separation model. There are three aspects deficiencies in existing research: First, most studies are based on mixed sample data or a specific industry data, there are lack of comparison and analysis of the results of the different industries. The second, there are lack of comparison and analysis of the predicted ability between total accruals and manipulated accruals. The third, existing research confined to the influence of T year accruals to T + 1 year earnings, there are lack of the influence of T years accruals to T + 1 year earnings after.In order to make up for the defects mentioned above, we take the influence of accruals to future earnings for subject and focus on the analysis of the influence of accruals to future earning based on basic theory of accounting, earnings management and accruals. Basic train of thought and method is: By establishing regression models of one factorand multi-factors for samples data of the retail industry, the construction industry and the real estate industry, we inspect the impacts of their total accruals and manipulated accruals to future earnings, including if there’s any impact, the degree of influence, the ability of explaining, the direction of impact and the length of time. The result shows that, different industries have different impacts, even contrary impacts. So we should analyze business attributes and business models of different companies before making investment decision.