Abstract
In January 2009, Chile will require its listed companies to adopt IFRS. Malaysia has a tradition of modifying the IFRS before adopting them. Chile's legal system is based on the French Civil Law tradition and Malaysia's legal system is based on the English common law tradition. Hence, this study investigates whether the listed firms in these two countries use deferred tax expenses to manage their earnings. It also studies the factors that affect the amount of deferred tax expenses reported. The study finds that beyond total accruals, deferred tax expenses are not incrementally useful to detect earnings management. Further, the amount recognized as deferred tax expenses is significantly associated with changes in operating cash flows, and in Chile, it is also related to the level of institutional ownership in listed firms.
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