The usefulness of accrual-based surpluses in the Canadian public sector

Farshadfar S., Schneider T., Bewley K.

Journal of Accounting and Public Policy, vol.41, no.5, 2022 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 41 Issue: 5
  • Publication Date: 2022
  • Doi Number: 10.1016/j.jaccpubpol.2022.106961
  • Journal Name: Journal of Accounting and Public Policy
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, PAIS International, Public Administration Abstracts, Public Affairs Index
  • Keywords: Surpluses, Accruals, Cash flows, Conservatism, Public sector, Canada
  • TED University Affiliated: No


© 2022 The Author(s)This paper investigates the usefulness of accrual-based surpluses for predicting future cash flows and surpluses in the context of the Canadian public sector. We provide evidence that surpluses incrementally enhance the ability of operating cash flows to predict future cash flows and surpluses. Analysis of our accrual quality model illustrates that accrual accounting is useful in the public sector for mitigating the noise in operating cash flows. We also find that decomposing surpluses into operating cash flows and accruals enhances the ability of surpluses to forecast future cash flows and surpluses, indicating that aggregate and disaggregated surpluses are positively related to both relevance and reliability. Our test results do not indicate the presence of conservatism in the Canadian public sector, and confirm that the usefulness of surpluses in making predictions is independent of selected control factors.