Reporting Regulatory Environments and Earnings Management: U.S. and Non-U.S. Firms Using U.S. GAAP or IFRS

Abstract

Based on data collected from 616 experienced financial officers who use U.S. GAAP or IFRS and are domiciled in the U.S., Europe, or Asia, we examine how reporting standards (U.S. GAAP versus IFRS) and domicile (U.S. versus non-U.S.) affect earnings management (real versus accrual). U.S. firms using U.S. GAAP rely more heavily on real methods than non-U.S. firms that use either IFRS or U.S. GAAP and U.S. firms using IFRS. U.S. firms using U.S. GAAP operate in an environment that encourages real over accruals methods; specifically, U.S. GAAP facilitates detection of earnings management, and enforcement is more effective in the U.S. Further, the likelihood and amount of earnings management do not differ across conditions, suggesting that firms using less accruals earnings management tend to fully compensate by increasing real methods. So stronger reporting environments do not necessarily reduce total earnings management, but instead encourage substitution of real for accruals methods.

A cross‐country study on the relationship between financial development and earnings management

“…To test the trade‐off between AEM and REM, we examine the association between the ratio of AEM to REM and financial development. Following Evans, Houston, Peters, and Pratt (), we calculate the ratio of | REM | to | A_ACC | and regress the ratio on FD . Specifically, we employ the ratio in place of the earnings management variables in Equation .…”

Unconditional Accounting Conservatism and Real Earnings Management

“…Real earnings management will impact on cash flows directly and make the future earnings more uncertainty. Therefore, Evans et al (2015) believes that without constraining earnings by the financial reporting regulation policies, management teams would prefer to the accrual-based earnings management. However, the current change of internal control and information disclosure regulation environment make real earning management more attractive than before for the management teams.…”

Incentivos para a adoção e a utilização da linguagem XBRL pelas companhias em sua comunicação com o mercado

“…A literatura aponta a implementação das IFRS ou USGAAP como fator inibidor do gerenciamento de resultados (Grecco, 2013;Cardoso, de Souza, & Dantas, 2015;Evans et al, 2014). Surge, então, a Hipótese G2:…”

“…Dessa forma, não se pode afirmar que a utilização desse GAAP inibe o gerenciamento de resultados. A literatura aponta a implementação das IFRS ou a utilização do USGAAP como inibidores do gerenciamento de resultados (Grecco, 2013;Evans et al, 2014;Cardoso et al, 2015). De acordo com Firth (1979), Cooke (1992), Ahmed e Courtis (1999), Botosan (1997), Botosan e Plumlee (2002), Cruz (2010), quanto maior a empresa, maior a pressão para apresentar melhores resultados e aumentar a divulgação de informações financeiras, pois são objeto de maior atenção por parte de investidores e analistas.…”

“…A bibliografia levantada explica que a utilização das IFRS ou do USGAAP diminui o gerenciamento de resultados (Grecco, 2013;Cardoso et al, 2015;Evans et al, 2014).…”