The impact of IFRS adoption on accrual-based earnings management : evidence from Russia
1University of Oulu, Oulu Business School, Department of Accounting, Accounting
|Online Access:||PDF Full Text (PDF, 1.5 MB)|
|Persistent link:|| http://urn.fi/URN:NBN:fi:oulu-201405211443
|Publish Date:|| 2014-06-02
|Thesis type:||Master's thesis
This paper examines the impact of the IFRS adoption on earnings management and earnings quality in Russia. Despite the fact that multiple surveys and papers focus on earnings quality, earnings management and IFRS research, these topics are still actively being studied. This research is motivated by the increase of attention to the IFRS implementation process in Russia. The process of harmonization of Russian Accounting Standards with IFRS takes long time as there are significant differences between these two standards. The reasons for that are Russian economic and political issues.
Existing academic research shows controversial results concerning the impact of the IFRS adoption on earnings quality. Some research provides evidence that the IFRS adoption brings significant benefits to a country as it improves disclosure quality and informational environment around the IFRS adoption. However, several studies argue, that, at the same time, IFRS give significant flexibility and discretion to managers. This does not always mean the improvement of disclosure quality. In this paper we provide one more examination of how IFRS influences earnings quality.
This thesis studies the accrual-based type of earnings management. The empirical analysis employs the linear regression model which includes a dependent variable (discretionary accruals) and several control variables. The Jones model is used for the estimation of discretionary accruals as a measure of earnings management. The sample used for the analysis contains 577 observations of Russian companies from various industries during the period 2006–2012.
This research proves that IFRS adoption increases accruals-based earnings management which leads to lower earnings quality in Russian companies. The results of the empirical research support the hypothesis that a positive correlation exists between IFRS adoption and earnings management. The results show that Russian companies use downward earnings management (income minimization) mostly. Finally, this paper demonstrates that IFRS do not always have a positive impact on the quality of accounting information. The adoption of IFRS in Russia is close to the final steps, but it is still not clear if it brings real benefits to the Russian business environment.
The limitations of this study are the usage of the Jones model instead of the Modified Jones model and the relevancy of data set.
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