Accruals Management to Avoid The Current Ratio Falling Below One: An Empirical Analysis Among Nonprofits

Lancksweerdt, Lode; Caneghem, Tom Van; Reheul, Anne-Mie

doi:10.1177/0899764020977677

Cited by 5 publications

(5 citation statements)

References 30 publications

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“…Our study adds to the growing body of research on accounting choices in not-for-profit organizations. While it is well documented that not-for-profit organizations manage accruals to report favorable accounting information (Lancksweerdt et al, 2021; Leone & Van Horn, 2005), the literature on the management of pension assumptions is relatively new and unresolved. This study makes several contributions to the literature.…”

Section: Discussionmentioning

confidence: 99%

“…Jegers (2013) and Nguyen and Soobaroyen (2019) find evidence of earnings management in not-for-profits in Belgium and the United Kingdom, respectively. Lancksweerdt et al (2021) provide evidence from Belgium that not-for-profits adjust working capital accruals to drive the current ratio above one. We accordingly test the following two-part hypothesis: Hypothesis 3a (H3a): Annual changes in the ERR and discount rate assumptions are uncorrelated with annual changes in financial conditions.…”

Section: Hypothesis 1 (H1)mentioning

confidence: 93%

“…Some studies model accounting bias as routine adjustments in accounting and operating systems in pursuit of financial reporting targets, such as a slightly positive and stable net income (Eldenburg et al, 2011). Other studies model accounting bias as affecting a subset of not-for-profits in which incentivizing conditions cross a threshold where the likelihood of accounting bias increases (Lancksweerdt et al, 2021). A third approach models accounting bias as a function of conditions that are common throughout the not-for-profit sector.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Misleading Motives: Incentives for Accounting Bias in Not-for-Profit Pension Plans

Gupta,

Matkin

2023

Nonprofit and Voluntary Sector Quarterly

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In this study, we examine whether not-for-profit organizations actively manage their pension accounting assumptions and whether their assumptions are, as prior research suggests, more aggressive than those of for-profit organizations. Using a 17-year panel dataset collected from audited financial statements, we compare the accounting assumptions (the expected rate of return and the discount rate) of not-for-profit and for-profit firms. We also examine the not-for-profit sample alone to test for accounting bias motivated by various financial incentives. We model accounting assumptions as levels (between-firms) as well as changes over time (within-firms). Contrary to prior research, we find no evidence that not-for-profits use more aggressive assumptions than for-profits. Furthermore, we find that most of the accounting biases of not-for-profits are explained by between-firm variation rather than within-firm variation, suggesting that although not-for-profits use biased assumptions, they may not actively adjust them to target financial benchmarks.

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Section: Discussionmentioning

confidence: 99%

Section: Hypothesis 1 (H1)mentioning

confidence: 93%

Section: Introductionmentioning

confidence: 99%

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Misleading Motives: Incentives for Accounting Bias in Not-for-Profit Pension Plans

Gupta,

Matkin

2023

Nonprofit and Voluntary Sector Quarterly

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“…• Financial Recognition of unique aspects of financial management in non-profit organisations has been of some consideration in existing research (Chabotar 1989;Lancksweerdt et al 2021;Searing 2018). Our research suggests that the renewed focus on effective financial management at a unit-cost level of service provision is vital during NDIS implementation and, if ignored, may adversely affect future sustainability, thereby threatening the viability of these non-profit disability service providers.…”

Section: • Communicationmentioning

confidence: 99%

Risk and Opportunity—The Leadership Challenge in a World of Uncertainty—Learnings from Research into the Implementation of the Australian National Disability Insurance Scheme

Rosenbaum¹,

More²

2021

JRFM

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This paper considers the risks and opportunities inherent in a major national change process through a descriptive approach to the implementation challenges for Australian non-profit disability service providers as they grapple with the implementation of the transformational National Disability Insurance Scheme (NDIS). It highlights the leadership challenges associated with the newly developed NDIS Implementation Framework and, in doing so, recognises the risk and opportunity issues contained with that implementation process. The research used grounded theory coupled with framework analysis in a qualitative study that, in part, sought to identify leadership characteristics deemed necessary to minimize risks, capitalize on opportunities, and support positive change outcomes leading to successful NDIS implementations amongst several participating organisations, each with differing demographics and at different stages in the implementation process. The findings, which have been grouped into phases, suggest a range of leadership attributes at key phases of the NDIS implementation that are necessary to minimise implementation risks and maximise opportunities associated with the NDIS. These phases have been identified as: (i) An input phase where the emphasis must be on internal change preparedness and external environmental impacts and drivers; (ii) A process phase where the emphasis is on direct implementation issues; and (iii) An outcomes phase where active consideration needs to be on organisational mission sustainability, as well as the risk and opportunity challenge. The study is crucial in revealing leadership challenges and lessons for large scale change and risk management in the non-profit sector, within and beyond the specific case of Australia’s NDIS implementation, useful for both scholars and practitioners.

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“…12 12 These measures have occasionally been used to examine accounting quality for certain types of not‐for‐profit organizations, examples being Jegers (2013) who used distribution of earnings, and Lancksweerdt et al (2021) who used accrual quality.…”

mentioning

confidence: 99%

Determinants and quality of audits and reviews of small charities financial statements

Yang

Simnett

2023

Int J Auditing

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Using a random sample of 500 Australian small charities, we first identified the determinants for the 56 charities disclosing audit/review reports (53 audits and three reviews) from the 110 voluntarily lodging annual reports. Sequential logistic regression showed that lodging charities are larger, rely more on government grants and use accrual accounting, while factors explaining the disclosure of audit/review reports are charities' deductible gift recipient status, organizational age, and again the use of accrual accounting. Second, for the 53 audit engagements identified, we examined audit quality using five measures and identified significant concerns, including only 34% fully complying with the reporting requirements of Australian/International Auditing Standard 700. Third, tracing the 500 charities from 2014 to 2018, plus 100 more of the largest public‐interest small charities, little change was identified in provision of audits versus reviews. The implications of our findings for charities, audit firms, regulators and standard‐setters were considered.

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Accruals Management to Avoid The Current Ratio Falling Below One: An Empirical Analysis Among Nonprofits

Cited by 5 publications

References 30 publications

Misleading Motives: Incentives for Accounting Bias in Not-for-Profit Pension Plans

Misleading Motives: Incentives for Accounting Bias in Not-for-Profit Pension Plans

Risk and Opportunity—The Leadership Challenge in a World of Uncertainty—Learnings from Research into the Implementation of the Australian National Disability Insurance Scheme

Determinants and quality of audits and reviews of small charities financial statements

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