Abstract
This paper aims to provide evidence of an unintended observable consequence of International Financial Reporting Standards (IFRS) adoption by examining opportunistic use of earnings management through revenue as well as expense items classification shifting in the year of transition. Design/methodology/approach-To document classification shifting, the authors take advantage of the Korean mandatory IFRS adoption in 2011, when broad discretion was given to publicly traded companies' managers to present operating profits. Findings-It is found that companies strategically use both revenues and expenses to manage core earnings at the time of transition by shifting other income as a common tactic to improve their operating performance and special expenses just tomeet or beat earnings targets. Originality/value-Given the concerns of the Securities and Exchange Commission (SEC) about classification shifting behavior and the debate over whether the SEC should mandate the use of IFRS for US companies, the findings of this study are timely and contribute to authors' understanding of the unintended consequences of mandatory IFRS adoption.
| Original language | English |
|---|---|
| Pages (from-to) | 333-355 |
| Number of pages | 23 |
| Journal | International Journal of Accounting and Information Management |
| Volume | 25 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2017 Jan 1 |
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All Science Journal Classification (ASJC) codes
- Management Information Systems
- Accounting
- Management of Technology and Innovation
Cite this
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Earnings management using revenue classification shifting-evidence from the IFRS adoption period. / Noh, Minyoung; Moon, Doocheol; Parte, Laura.
In: International Journal of Accounting and Information Management, Vol. 25, No. 3, 01.01.2017, p. 333-355.Research output: Contribution to journal › Article
TY - JOUR
T1 - Earnings management using revenue classification shifting-evidence from the IFRS adoption period
AU - Noh, Minyoung
AU - Moon, Doocheol
AU - Parte, Laura
PY - 2017/1/1
Y1 - 2017/1/1
N2 - This paper aims to provide evidence of an unintended observable consequence of International Financial Reporting Standards (IFRS) adoption by examining opportunistic use of earnings management through revenue as well as expense items classification shifting in the year of transition. Design/methodology/approach-To document classification shifting, the authors take advantage of the Korean mandatory IFRS adoption in 2011, when broad discretion was given to publicly traded companies' managers to present operating profits. Findings-It is found that companies strategically use both revenues and expenses to manage core earnings at the time of transition by shifting other income as a common tactic to improve their operating performance and special expenses just tomeet or beat earnings targets. Originality/value-Given the concerns of the Securities and Exchange Commission (SEC) about classification shifting behavior and the debate over whether the SEC should mandate the use of IFRS for US companies, the findings of this study are timely and contribute to authors' understanding of the unintended consequences of mandatory IFRS adoption.
AB - This paper aims to provide evidence of an unintended observable consequence of International Financial Reporting Standards (IFRS) adoption by examining opportunistic use of earnings management through revenue as well as expense items classification shifting in the year of transition. Design/methodology/approach-To document classification shifting, the authors take advantage of the Korean mandatory IFRS adoption in 2011, when broad discretion was given to publicly traded companies' managers to present operating profits. Findings-It is found that companies strategically use both revenues and expenses to manage core earnings at the time of transition by shifting other income as a common tactic to improve their operating performance and special expenses just tomeet or beat earnings targets. Originality/value-Given the concerns of the Securities and Exchange Commission (SEC) about classification shifting behavior and the debate over whether the SEC should mandate the use of IFRS for US companies, the findings of this study are timely and contribute to authors' understanding of the unintended consequences of mandatory IFRS adoption.
UR - http://www.scopus.com/inward/record.url?scp=85027281963&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85027281963&partnerID=8YFLogxK
U2 - 10.1108/IJAIM-07-2016-0071
DO - 10.1108/IJAIM-07-2016-0071
M3 - Article
AN - SCOPUS:85027281963
VL - 25
SP - 333
EP - 355
JO - International Journal of Accounting and Information Management
JF - International Journal of Accounting and Information Management
SN - 1834-7649
IS - 3
ER -