Warranty Provisions …more like Earnings Management Provision?

Abstract

This thesis explores the realm of accounting disclosure concerning warranties provisions and its relation to earnings management. Provisions for warranties require estimates and judgment for future claims, resulting in an accrual that can be used for earnings management, consequently undermining the usage of financial reports. This thesis builds on prior research, asking the question if Swedish firms are using warranty provisions as a tool for earnings management. The findings of this thesis indicate that there are minor implications for earnings management in Swedish firms. This consequently calls for further research on firm specific characteristics that are associated with earnings management through warranty provisions,