Real Activities Manipulation (RAM) and Accrual-based Earning Management Pre and Post IFRS Adoption in Indonesia

Abstract

Abstract-The purpose of this study is to investigate the impact of the adoption of International Financial Reporting Standards (IFRS) on accrual-based earnings management (EM) and real activities manipulations (RAM). The research is motivated by the fact that past studies have indicated the existence of no significance levels of earning management for Indonesia in particular before IFRS. We used t-test paired sample and regression analysis, and used sample of manufacturing companies listed in the Indonesia Stock Exchange, in the timeframe 2010-2014. We find evidence statistically significant shift from accrual-based earning management to RAM after the adoption of IFRS, indicating the replacement of one form of earning management with the other. Another result of this study is the accrual-based earnings management practices statistically significant differ (downward) in the period pre and post the adoption of IFRS, while RAM practices significantly differ (upward) between period pre and post the adoption of IFRS, and except RAM measured by abnormal CFO. While the results of two other RAM was measured by abnormal production and abnormal discretionary expense differ significantly (upward) in the period after the adoption of IFRS.

Pengaruh Manajemen Laba Riil terhadap Kinerja Perusahaan setelah Konvergensi IFRS

“…Seperti yang telah dijelaskan sebelumnya, REM terbagi atas tiga cara, yaitu dengan memaksimalkan penjualan, mengurangi tingkat produksi, serta mengurangi beban diskresional perusahaan (Roychowdhury, 2006). Purwanti (2016) menegaskan bahwa sesungguhnya standar akuntansi bertaraf internasional seperti IFRS dapat menjadi pengontrol atas tindakan manajemen laba. Namun pada kenyataannya, penerapan IFRS khususnya di negara berkembang belum cukup untuk menurunkan manajemen laba.…”

An Empirical Study on the Influence of Media Attention on Real Earnings Management

“…However, excessive earnings management has triggered behaviors such as profit manipulation and false information disclosure that have seriously impaired the healthy development of the capital market. Roychowdhury [1], Purwanti [2] and others point out that companies can control earnings not only through accruals but also through real activities. The diversification, concealment and complexity of earnings management methods have brought severe challenges to governance.…”