The Impacts of Accounting Flexibility on Strategic Earnings Reporting

• Main Authors: Pey-Hwan Gau, 高珮洹
• Other Authors: Ching-Lung Chen
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/58978907899844800595

碩士 === 國立雲林科技大學 === 會計系碩士班 === 100 === Generally Accepted Accounting Principle (GAAP) allows managers basing on their somewhat professional judgment in order to enhance usefulness in financial statements to reflect the real operating information. However, this discretion also provides managers to use judgment which is given by GAAP to influence the users of financial statements about firm’s earnings performance. We know the discretion provided by the GAAP to some extent can be measured as accounting flexibility, in turn, effects managerial strategic earnings reporting. Using listed firms in Taiwan Securities Exchange (TSE) during 1994~2010, this study is motivated to investigate the association between firm’s accounting flexibility and accrual-based earnings management. This study uses principal component analysis to extract factor score as a comprehensive index to measure the accounting flexibility (FACTOR) with three flexibility variables and examines the influence of accounting flexibility comprehensive index on managerial strategic earnings management decisions. The empirical results reveal that the lower accounting flexibility together with manager’s aggressive income-increasing motivation is negatively associated with accrual-based earnings management. Alternatively, the lower accounting flexibility together with manager’s strategic income-decreasing motivation is positively associated with accrual-based earnings management. These results suggest that manager’s strategic earnings reporting is constrained by the lower accounting flexibility and supports the argument of Barton and Simko (2002). This study demonstrates some diagnostic checks and evidences the results are robust to the various specifications.