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Impact Of Accounting Conservatism Onto Investment

Author

Listed:
  • Josip Cicak

    (University of Rijeka)

  • Ana Marija Sikiric

    (University of Rijeka)

  • Marko Tomljanovic

    (University of Rijeka)

Abstract

The paper discusses the main factors that determine the level of accounting conservatism, with all the consequences for the future business prospects. Described factors of conservatism in accounting are mainly caused by the motives of management, from tax motives, the maximum possible conservative accounting policies, to the motive of access to the capital markets with the least possible conservatism, or by using aggressive accounting policies. This paper studies the theoretical assumptions of conservatism in an enterprise, with the possible consequences resulting in hidden reserves or, in the opposite case, the hidden losses in future reporting periods. The aim of this paper is to examine the impact of accounting conservatism onto the reported financial position and business results and, indirectly, on the investment. Since the combination of chosen accounting policies affects financial reports, a model i offered to measure the impact of the selected accounting policies onto the financial statements. Investors are thus provided opportunities for better risk assessment of investments.

Suggested Citation

  • Josip Cicak & Ana Marija Sikiric & Marko Tomljanovic, 2016. "Impact Of Accounting Conservatism Onto Investment," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 25(1), pages 145-158, june.
    • Handle: RePEc:avo:emipdu:v:25:y:2016:i:1:p:145-158
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    More about this item

    Keywords

    accounting conservatism; conservatism factors; the impact of conservatism onto investment;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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