Review of Accounting Studies

, Volume 22, Issue 1, pp 288–319 | Cite as

Articulation-based accruals

  • Ryan Casey
  • Feng Gao
  • Michael Kirschenheiter
  • Siyi Li
  • Shailendra Pandit


We build an articulating financial statements model in which the beginning and ending balance sheet amounts are explicitly linked to accruals. We distinguish accruals based on the source financial statement of the accruals, either the cash flow statement, balance sheet, or statement of owners’ equity. We then examine how the accrual-generating source affects the relations between accruals and future earnings and stock returns. While prior studies document a negative association between accruals and future earnings and returns, we find accruals relating to the current operating section of the balance sheet are positively associated with future earnings. Further, accruals originating from net financial asset via the statement of owners’ equity are positively associated with future returns. We also show that equity investment and discontinued asset accruals differ from operating asset accruals in their association with future earnings.


Financing accruals Operating accruals Financial statement articulation 

JEL Classifications

M40 M41 



We wish to thank James Ohlson (the editor) and an anonymous referee for their valuable inputs. We also thank the Center for Education and Research in Financial Reporting Quality (CERFRQ) of the University of Illinois at Chicago for financial assistance. Also we wish to thank S&P Capital IQ and participants at the first annual CERFRQ conference on financial reporting quality, the 2015 Conference on Convergence of Financial and Managerial Accounting Research, and the 3rd Pan-IIM World Management Conference for comments and suggestions.

Supplementary material

11142_2016_9385_MOESM1_ESM.docx (82 kb)
ESM 1 (DOCX 82 kb)


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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  • Ryan Casey
    • 1
  • Feng Gao
    • 2
  • Michael Kirschenheiter
    • 3
  • Siyi Li
    • 3
  • Shailendra Pandit
    • 3
  1. 1.University of DenverDenverUSA
  2. 2.Rutgers Business SchoolNew BrunswickUSA
  3. 3.University of Illinois at ChicagoChicagoUSA

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