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The Influence of Improvements in Accounting Standards on Earnings Management: The Case of IFRS
Author(s) -
NavarroGarcía Juan Carlos,
MadridGuijarro Antonia
Publication year - 2014
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12020
Subject(s) - accrual , accounting , earnings management , international financial reporting standards , business , incentive , german , order (exchange) , quality (philosophy) , accounting standard , financial accounting , earnings , accounting information system , finance , economics , philosophy , archaeology , epistemology , history , microeconomics
This article examines the effect of improvements in the quality of International Financial Reporting Standards (IFRS) on the level of earnings management. In order to achieve this aim, we study the accounting quality of German listed companies through discretionary accruals yielded from 1998 to 2006. We assess the effectiveness of efforts by the International Accounting Standards Board to improve IFRS by using two indices that consider the revision process of the standards, and their mandatory application. Our results indicate that the improvement of accounting standards quality significantly reduces the level of reported negative discretionary accruals of the German listed firms during the period of analysis, once incentive variables are controlled. Further, companies gradually assume the quality of the new standards from the moment they can be voluntarily applied.