Banca de DEFESA: Dimmitre Morant Vieira Gonçalves Pereira

Analysis of the Effects of the Accruals Accounting Regime on the Production of Accounting Information of Brazilian Municipalities: Empirical Evidence on the Practice of Managing Equity Results through Discretionary Accruals and its Determinants

earnings management, discretionary accruals, political budget cycles, public sector, institutional factors

The process of accounting reforms in the Brazilian public sector, with the adoption of the Accrual Basis of Accounting (ABA), has raised concerns about the quality of accounting information and the practice of earnings management. Given the need to investigate the impacts of this implementation, this study had the general objective of analyzing the existence of evidence on earnings management practices through discretionary accruals in Brazilian municipalities, identifying their main determining factors. The relevance of the research lies in its effort to fill a gap in the literature regarding the causes and consequences of ABA implementation in the public sector, aiming to build a robust theoretical foundation. To this end, a two-stage methodology was adopted. In the first stage, an econometric model was applied to detect and measure the magnitude and direction of discretionary accruals, in order to isolate the discretionary component from total accruals. In the second stage, a Probit model was used to investigate the relationship between discretionary accruals and the behavior of marginal results, testing the purpose of earnings management. The results confirmed the presence of earnings management. The study validates the hypothesis that municipalities manage results to report small surpluses near zero, a practice that is more prominent in pre-election and election years. The analysis demonstrated that this manipulation is influenced by political-institutional factors, revealing a cyclical pattern of discretionary accruals. Furthermore, greater political competition is associated with a higher level of management, while the quality of fiscal information acts as an inhibitor. Finally, the size of the municipality and the existence of a pension fund (RPPS) are positively related to the magnitude of discretionary accruals, indicating the influence of the complexities and pressures inherent to these entities.