The Impact of IFRS Adoption in Romania upon the Earnings Management of the Bucharest Stock Exchange Entities

Abstract

The adoption of IFRS in Romania affects the performance of the companies which are going to apply them for the first time. While the listed companies have mandatory adopted the International Financial Reporting Standards (IFRS) for consolidated financial statements, the individual financial statements are compulsory to be reported under IFRS only from 2012. A comparison between Romanian Accounting Standards (RAS) and IFRS, in terms of earnings management metrics, was realized upon the entities that are listed on the Bucharest Stock of Exchange (BSE). Significant improvements were observed in the year of adoption when variability of earning management regarding the variability of net income, the variability of cash flows, the correlation between accruals and cash flow and the value toward positive earnings metrics were analyzed.