Open AccessRevenue standard and earnings management during the COVID-19 pandemic: A comparison between IFRS and GAAP
Author(s) -
Mohammed M. Yassin,
Osama Samih Shaban,
Dea’a Al-Deen Omar Al-Sraheen,
Khaldoon Ahmad Al Daoud
Publication year - 2022
Publication title -
journal of governance and regulation
Language(s) - English
Resource type - Journals
eISSN - 2306-6784
pISSN - 2220-9352
DOI - 10.22495/jgrv11i2art7
Subject(s) - revenue , accounting , earnings , business , revenue recognition , earnings management , international financial reporting standards , flexibility (engineering) , economics , accounting information system , financial accounting , management
International Financial Reporting Standards 15 — Revenue from Contracts with Customers (IFRS 15) was issued to inhibit the use of revenues for earnings management purposes. During COVID-19, the standard was used to manage earnings (Lopatta, Alexander, Gastone, & Tammen, 2020). This study aims to explain earnings management practices by using a revenue standard. An online questionnaire was distributed by Momentive Inc. (formerly SurveyMonkey Inc.) to accountants working in two different contexts: Jordan as an IFRS country and the USA as a Generally Accepted Accounting Principles (GAAP) country. A convenience sample of 304 questionnaires from both countries was valid for analysis. The findings of ordinary least square (OLS) regression suggest that, during COVID-19, both users used the revenue standard as a tool to manage earnings. In addition, IFRS users were more conservative than GAAP users in terms of existing contracts, while both of them were the same in terms of future contracts. The results should help policymakers and regulators to rethink the flexibility given to managers in dealing with revenue contracts. In addition, they should help managers efficiently manage the revenue contracts.