Earnings Management and Classification Shifting through Affiliates
Other Title
盈餘管理和關係企業間損益之移轉
Journal
會計評論
Journal Issue
53
Pages
1-34
Date Issued
2011
Author(s)
古又帆(Yo-Fan Ku)
Abstract
This paper examines whether firms manage earnings by classification shifting through affiliates. Classification shifting involves reporting revenues, expenses, gains, and losses on a different line in the income statement from what GAAP requires. Consistent with McVay (2006), our results show that those firms with income-decreasing special items have significantly large unexpected core earnings, and the unexpected core earnings will reverses in the year after a firm reports special items. We also find that, in the parent company report, firms with income-decreasing income from investments have significantly large unexpected core earnings, and the unexpected core earnings reverses in the following year. Overall, the evidence is consistent with our prediction that the accounts of ”special items” and ”incomes from investments” can be used to inflate core earnings.
Type
journal article