Accounting Papers

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Journal Article

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Contemporary Accounting Research





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This study investigates the association between the accuracy of revenue forecasts and the accounting activities of budget preparation and internal accounting report preparation. While both budgets and internal reports are widely used, empirical evidence concerning their influence on the prediction of future performance is extremely limited. Consistent with the availability of formal accounting information improving predictive performance, we observe that internal accounting report preparation significantly improves forecast accuracy. However, partitioning firms by forecasting difficulty reveals that the accuracy benefits from internal reports preparation are only observed for firms with high uncertainty. Further, the results provide limited support for linkages between budget preparation and forecast accuracy. While we observe that the use of budget preparation and internal accounting report preparation is a function of firms’ structural and environmental characteristics, firms do not appear to adopt these activities as a function of forecasting difficulty, but rather as a function of predicted changes in future growth.

Copyright/Permission Statement

This is the peer reviewed version of the following article: Cassar, G. and Gibson, B. (2008), Budgets, Internal Reports, and Manager Forecast Accuracy. Contemporary Accounting Research, 25: 707–738., which has been published in final form at [http://dx.doi....06/car.25.3.3. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving


absolute forecast error, budgeting, forecasting, internal reporting

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Accounting Commons



Date Posted: 27 November 2017

This document has been peer reviewed.