engleski

Interdependence of Accounting Provisions and Company's Financial Performance

The provision is a liability of uncertain timing and amount, and as such it offers considerable latitude of discretion with regard to measurement. Thus, the accounting provisions could be used as earnings management tool or to enhance the company’s financial performance. The aim of our research is to provide empirical evidence concerning the level of provisions with regard to company’s financial performance (liquidity, solvency and profitability ratios) as well as its characteristics (size, ownership and industry), based on a study of 92 Croatian listed companies in 2009. The results indicate that the provisions’ recognition and measurement pattern is related to cash flow ratio, debt ratio, return on assets and cash return on sales, as well as size and industry. Also, the comparison of Croatian results and a similar study on a sample of European Union countries has been done in order to explore matching national accounting cultures and the recognition of provisions.

accounting provisions; financial performance; size; ownership; financial ratios

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