Accruals Model

Accruals is the term that the accounting recognition of assets and liabilities that have not yet been realized as a cash flow. By the accruals enable revenue or expenses to be recognized before payment occurs. The purpose of this concept is to make sure that all revenues and costs are recorded in the appropriate statement at the right time.   

Mathematically we know that  TAt = NIt – CFOt

So, the total accruals are the difference between Net Income and Cash Flow from Operation at a time t.

And these total accruals are decomposed in Discretionary accruals & Non-discretionary accruals which are denoted as DA &NDA.

DA: Discretionary Accruals are adjustments to cash flows selected by the manager. DA can be calculated if we know the NDA.

DAt = Accrualst  –  NDAt

NDA: Non-discretionary accruals are accounting adjustments to the firms cash flows mandated by accounting standard-setting bodies. Such as depreciation, obligation of lease financing.  

Accruals Model or Non-discretionary accruals models by the researchers or how can we determine Discretionary accruals or Non-discretionary accruals are as below:

1.      Healy(1985): Nondiscretionary accruals represent as the mean total accruals from the estimation period. 

NDAt  = Σ TAt / Tt

DAt  = TAt – NDAt

2.      DeAngelo(1986): This model uses last period’s total accruals as the measure of nondiscretionary accruals. Thus the, the DeAngelo model for non discretionary accruals is :

NDAt   = TAt-1
DAt = TAt   – NDA

3.      Dechow and Sloan(1991)

NDAt =r1 + r2 median1 (TAt)

DAt=NDAt-TAt

4.      Jones(1991) proposes a model that relaxes the assumption that nondiscretionary accruals are constant.

TAt / At-1=a0(1/ At-1)+a1(∆REVt / At-1) + a2(PPEt  / At-1) +ξt

DAt = (TAt / At-1) – [a0(1/ At-1) + a1(∆REVt / At-1) + a2(PPEt  / At-1)]

5.      Dechow (1995): Modified Jones model have a highest power to detecting earnings management. And use the modified Jones model.

TAt / At-1= a0(1/ At-1)+a1(∆REVt - ∆AR t / At-1) + a2(PPEt  / At-1) +ξt

DAt = (TAt / At-1) – [a0(1/ At-1) + a1(∆REVt  - ∆AR t   / At-1) + a2(PPEt  / At-1)]

Attribution theory

Attribution theory

귀인이론

Attribution theory (Weiner, 1980, 1992) is probably the most influential contemporary theory with implications for academic motivation. It incorporates behavior modification in the sense that it emphasizes the idea that learners are strongly motivated by the pleasant outcome of being able to feel good about themselves. It incorporates cognitive theory and self-efficacy theory in the sense that it emphasizes that learners' current self-perceptions will strongly influence the ways in which they will interpret the success or failure of their current efforts and hence their future tendency to perform these same behaviors.
According to attribution heory, the explanations that people tend to make to explain success or
failure can be analyzed in terms of three sets of characteristics:
First, the cause of the success or failure may be internal or external. That is, we may succeed or fail because of factors that we believe have their origin within us or because of factors that originate in our environment.
Second, the cause of the success or failure may be either stable or unstable. If the we believe cause is stable, then the outcome is likely to be the same if we perform the same behavior on another occasion. If it is unstable, the outcome is likely to be different on another
occasion.
Third, the cause of the success or failure may be either controllable or uncontrollable. A controllable factor is one which we believe we ourselves can alter if we wish to do so. An uncontrollable factor is one that we do not believe we can easily alter.

Note that this factor is distinct from the previous two categories. An internal factor can be controllable (we can control our effort by trying harder) or uncontrollable (most people cannot easily change their basic intellectual ability or change from being an introvert to
being an extrovert). Likewise, an external factor can be controllable (a person failing a difficult course could succeed by taking an easier course) or uncontrollable (if calculus is difficult because it is abstract, it will still be abstract no matter what we do).

An important assumption of attribution theory is that people will interpret their
environment in such a way as to maintain a positive self-image. That is, they will attribute
their successes or failures to factors that will enable them to feel as good as
possible about themselves. In general, this means that when learners succeed at
an academic task, they are likely to want to attribute this success to their
own efforts or abilities; but when they fail, they will want to attribute their
failure to factors over which they have no control, such as bad teaching or bad
luck.
The basic principle of attribution theory as it applies to motivation is that a person's own
perceptions or attributions for success or failure determine the amount of
effort the person will expend on that activity in the future.
There are four factors related to attribution theory that influence motivation in education: ability, task difficulty, effort, and luck. In terms of the characteristics discussed previously, these four factors can be analyzed in the following way:

Ability is a relatively internal and stable factor over which the learner does not exercise much direct control. Task difficulty is an external and stable factor that is largely beyond
the learner's control. Effort is an internal and unstable factor over which the learner can exercise a great deal of control. Luck is an external and unstable factor over which the learner exercises very little control.

Note that it is the learner's perception that determines how attributions will influence future effort. A learner may believe that he is a "lucky person" - and for him luck would be an internal
and stable characteristic over which he exercises little control. In other words, for this person "luck" is really what the preceding list calls an "ability" or personality characteristic. Likewise, a person may believe that she expended a great deal of effort, when in fact she did not, or
that an objectively easy task was difficult. The basic principle of attribution heory as it applies to motivation is that a person's own perceptions or attributions for success or failure determine the amount of effort the person will expend on that activity in the future.
http://education.calumet.purdue.edu/vockell/edPsybook/Edpsy5/edpsy5_attribution.htm

Fair disclosure VS Full disclosure

적정공 시 VS 완전공시

Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD, is a regulation that was promulgated by the U.S. Securities and Exchange Commission (SEC) in August 2000. The rule mandates that all publicly traded companies must disclose material information to all investors at the same time.
The regulation sought to stamp out selective disclosure, in which some investors (often large institutional investors) received market moving information before others (often smaller, individual investors).
Regulation FD fundamentally changed how companies communicate with investors by bringing more transparency and more frequent and timely communications, perhaps more than any other regulation in the history of the SEC.
Most of the corporate announcements are issued in press releases or during the conference calls and are summarized at websites.
Full Disclosure
1. The U.S. Securities and Exchange Commission's (SEC) requirement that publicly-traded companies release and provide for the free exchange of all material facts that are relevant to their ongoing business operations.

2. The general need in business transactions for both parties to tell the whole truth about any material issue pertaining to the transaction.
Full disclosure is that the supplying of large amounts of information to help investors make their own prediction of future firm performance.

The full disclosure principle states that any future event that may or will occur, and that will have a material economic impact on the financial position of the business, should be disclosed to probable and potential readers of the statements. Such disclosures are most frequently made by footnotes. For example, a hotel should report the building of a new wing, or the future acquisition of another property.
Full Disclosure Principle requires that all situations, circumstances and events that are relevant to financial statement users have to be disclosed. In other words, all of a company’s financial records and transactions have to be available for viewing.


Read more: http://www.investopedia.com/terms/f/fulldisclosure.asp#ixzz1ixdTV4VD
Read more: http://wiki.answers.com/Q/What_is_full_disclosure_principle#ixzz1ixmcLTpK

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