Abstract
This study aims at providing empirical evidence about the impacts of IFRS convergence on earnings management and examining the differences of the level of earnings management between before and after full IFRS convergence.The research objects were manufacturing companies registered on the Indonesia Stock Exchange (BEI) for 4 years (2010-2013). The sampling technique used was purposive sampling. The number of samples taken from the purposive sampling for each year was 85 companies. The main variables used in this study were IFRS and earnings management. The hypothesis analysis used multiple regression analysis of data by using discretionary accruals developed by Jones (1991) and the analysis of t-test difference test.The results show no difference between the earnings in the period of before and after convergence. The results of the difference test analysis also reveal that there is no difference in the level of earnings management between the period of before and after convergence. Based on this study it can be concluded that the IFRS convergence does not guarantee a decrease in earnings management of manufacturing companies listed on BEI.Keywords: earnings management, IFRS convergence, discretionary accrual
Highlights
Globalization leads to the development of Multi NationalCorporations (MNC)
Research on the effect of International Financial Reporting Standards (IFRS) convergence on the level of earnings management in the banking sector has been done by Santy et al (2012) resulting a conclusion that IFRS convergence has no significant effect on earnings management and that there is no difference in the level of earnings management significantly between before and after IFRS convergence
One of the objectives of the establishment of IFRS is to equalize the use of rules in accounting practices in different countries, so this can facilitate investors in detecting earnings management performed by companies
Summary
When the business world is becoming borderless there will be problems emerging if the accounting standard used in a particular country differs from the one used in other countries. This issue leads to the emergence of the need for international accounting standards to facilitate investors/ potential investors and creditors/ potential creditors in understanding financial reports presented by each company in different countries. Commissions), IFAC (International Federation of Accountants) propose the idea to establish international accounting standards known as IFRS (International Financial Reporting Standards). Standards (IFRS), formerly known as International Accounting Standards (IAS), was issued to achieve the objective of preparing high quality international financial reporting standards. A number of studies have shown that the IFRS convergence can improve the quality of accounting information, one of which is shown by a decrease in earnings management in some countries
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