A literature analysis of the relationship between fair value accounting and earnings management

The application of fair value has started early in Jordan, which was a bone of contention among supporters and opponents. This study came to provide empirical evidence on the relationship between fair value and financial manipulation. The study extracted data from 45 companies’ annual reports during a ten-year period (1997- 2006) five years before and after the application of fair value to examine the relationship among the application of fair value accounting and the presence of manipulation in financial statements. The result indicates that the number of firms that manipulated information in the financial statements had increased after applying fair value accounting. The results have policy implications, one of which is that the Jordanian government should either enact new regulations or modify the current regulations in the face of an increasing number of manipulations by firms after the application of fair value accounting. These regulations are needed to increase both the managements’ and accountants’ responsibility towards the firms and to enhance the business ethics of the organization.

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Fair Value Accounting and Earnings Management Using LLP and Realized Gains and Losses: Study in Banking Industry Listed on Indonesia Stock Exchange

Jurnal Economia ◽

10.21831/economia.v14i2.19560 ◽

2018 ◽

Vol 14 (2) ◽

pp. 126-137

Author(s):

Ice Maria Ulfa ◽

Bambang Subroto ◽

Zaki Baridwan

Keyword(s):

Earnings Management ◽

Empirical Evidence ◽

Banking Industry ◽

Stock Exchange ◽

Fair Value ◽

Fair Value Accounting ◽

Loan Loss ◽

Trade Off ◽

Gains And Losses ◽

The Impact

Abstract: Fair Value Accounting and Earnings Management Using LLP and Realized Gains and Losses: Study in Banking Industry Listed on Indonesia Stock Exchange. This study examines whether earnings management can be limited by the implementation of fair value accounting in banking industry. The main contribution of this study is providing provide empirical evidence about the impact of fair value accounting on earnings management in Indonesia. Earnings management is proxied by loan loss provision (LLP), the realized of gains and losses, and the trade-off between realized gains and losses and LLP following Bratten et al (2013). The study provides empirical evidence that earnings management is still performed by banks, by using LLP, realized gains and losses and also occurs trade-off between LLP and realized gains and losses as means to perform earnings management in accordance with the needs of management. If banks are exposed to fair value accounting, managers will have more flexibility in reporting banks’ financial performance to present a desired earning, by providing them with additional earning managements tools. These findings can be informative for policymakers, banking practitioners, and academics. Keywords: earnings management, fair value accounting, LLP, realized gains and losses, trade-off LLP and realized gains and losses.Abstrak: Akuntansi Nilai Wajar dan Manajemen Laba menggunakan CKPN dan Realized Gains and Losses: Studi pada Industri Perbankan yang terdaftar di Bursa Efek Indonesia. Studi ini bertujuan untuk meneliti apakah manajemen laba dapat dibatasi oleh penerapan akuntansi nilai wajar dalam industri perbankan. Kontribusi dari penelitian ini adalah untuk memberikan bukti empiris tentang dampak penerapan akuntansi nilai wajar pada manajemen laba di Indonesia. Manajemen laba diproksikan oleh cadangan kerugian penurunan nilai (CKPN), realized of gains and losses, dan trade-off antara realized of gains and losses dan CKPN mengikuti model penelitian Bratten et al (2013). Studi ini memberikan bukti empiris bahwa manajemen laba masih dilakukan oleh bank menggunakan CKPN, realized of gains and losses dan juga terjadi trade-off antara CKPN dan realized of gains and losses sebagai sarana manajemen laba sesuai dengan kebutuhan manajemen. Konsekuensi dari paparan bank terhadap akuntansi nilai wajar dapat meningkatkan fleksibilitas manajer dalam melaporkan penghasilan yang diinginkan dengan memberikan mereka alat manajemen laba. Temuan-temuan tersebut dapat bersifat informatif bagi pembuat kebijakan, anggota industri perbankan, dan akademisi. Kata kunci: manajemen laba, akuntansi nilai wajar, CKPN, realized gains and losses, trade-off CKPN dan realized gains and losses.

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Fair Value Accounting, Earnings Management, and the Case of Bargain Purchase Gain

SSRN Electronic Journal ◽

10.2139/ssrn.3167597 ◽

2018 ◽

Author(s):

Steven B. Lilien ◽

Bharat Sarrukai Sarath ◽

Yan Yan

Keyword(s):

Earnings Management ◽

Fair Value ◽

Fair Value Accounting ◽

Accounting Earnings ◽

Accounting Earnings Management

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THE APPLICATION OF FAIR VALUE ACCOUNTING IN BOSNIA AND HERZEGOVINA

ACTA ECONOMICA ◽

10.7251/ace1931149p ◽

2019 ◽

Vol 17 (31) ◽

Author(s):

Amira Pobrić

Keyword(s):

Earnings Management ◽

Bosnia And Herzegovina ◽

Fair Value ◽

Financial Statement ◽

Fair Value Accounting ◽

Fair Value Measurement ◽

Value Measurement ◽

Level 2 ◽

Infor Mation

This study investigates the application of fair value ac- counting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study sug- gest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the com- panies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in fi- nancial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose infor- mation on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly ob- servable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.

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Fair value accounting and procyclicality: accounting for securitization

Corporate Ownership and Control ◽

10.22495/cocv11i1c6art1 ◽

2013 ◽

Vol 11 (1) ◽

pp. 535-547

Author(s):

Masaki Kusano

Keyword(s):

Financial Crisis ◽

Executive Compensation ◽

Fair Value ◽

Fair Value Accounting ◽

Short Term ◽

Leverage Ratio ◽

Parsimonious Model ◽

The Relationship

The purpose of this study is to examine whether fair value accounting promotes procyclicality by focusing on securitization transactions before the financial crisis. This study demonstrates the relationship between securitization accounting and procyclicality using a parsimonious model. The findings are as follows. Sale accounting increases the capital ratio compared with that before a securitization transaction. Banks’ executives have incentives to increase both assets and debt within the limits of their target capital ratio (leverage ratio) for executive compensation and market reputation; assets (lending) will be increased. When banks conduct securitization transactions and adopt sale accounting to enhance short-term profits, the capital ratio increases under the certain condition. Thus, banks will increase assets (lending) within the limit of their target capital ratio (leverage ratio). As banks increase and expand their lending during economic booms, the economic booms are accelerated. It is expected that both sale accounting and fair value accounting promote procyclicality during economic booms.

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The role of using fair value on relevance and representation faithfulness of accounting information in accordance with the Common Conceptual Framework (FASB-IASB)

Restaurant Business ◽

10.26643/rb.v118i12.13092 ◽

2019 ◽

Vol 118 (12) ◽

pp. 142-165

Author(s):

Dr. Nada Kaki Bira ◽

Layla Naji Majeed Al Fatlawi

Keyword(s):

Conceptual Framework ◽

Accounting Information ◽

Fair Value ◽

Fair Value Accounting ◽

Global Trend ◽

The Common ◽

Relationship Of ◽

The Impact ◽

The Relationship

The global trend towards the use of fair value accounting is increasing, so the current study aimed to maximize the impact of fair value application on achieving relevance and representation faithfulness of accounting information in accordance with the common conceptual framework. To achieve the objective of this study, the researcher has determined in the theoretical framework the relationship of fair value with the characteristics of relevance and representation faithfulness of accounting information and the extent of achieving these characteristics, as well as conducting a field study by preparing a questionnaire distributed to a sample of academics (50) and auditors (50) with a total number of selected participants (100) of academics and auditors.

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Pengaruh Fair Value Accounting Dan Dewan Komisaris Terhadap Earning Management Yang Dimoderasi Oleh Peran Syariah

JURNAL EKSPLORASI AKUNTANSI ◽

10.24036/jea.v2i1.212 ◽

2020 ◽

Vol 2 (1) ◽

pp. 2280-2298

Author(s):

Restu Hanin Annisa ◽

Salma Taqwa

Keyword(s):

Earnings Management ◽

Sampling Method ◽

Stock Exchange ◽

Total Sample ◽

Fair Value ◽

Real Earnings Management ◽

Fair Value Accounting ◽

Significance Level ◽

Level Of Significance

The purpose of this study is to determine the effect of fair value accounting and board of commissioners on earnings management. The renewal of this study where the research also aims to determine the role of sharia in moderating the influence of fair value accounting and the board of commissioners on earnings management. Researchers tested banking companies listed on the Indonesia Stock Exchange in 2015-2018 with a total sample of 152 samples using a purposive sampling method. The results showed that fair value accounting and the board of commissioners had no effect on earnings management, where the probability value of both was greater than the level of significance (0.005). In addition, the results of the study stated that the role of sharia can reduce the effect of fair value on earnings management with a significance level of 10% (0.10). However, the role of sharia cannot actually reduce the influence of the board of commissioners on earnings management with a probability level greater than 0.005. Recommendations for further research are expected to be able to trace real earnings management because in this study only using accrual earnings management, then it is expected that the next researcher broadens the sample used and adds other variables that are considered to influence earnings management.

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PENGARUH AKUNTANSI NILAI WAJAR TERHADAP MANAJEMEN LABA: PERAN MODERASI STATUS PERUSAHAAN DALAM INDEKS SAHAM SYARIAH INDONESIA

Jurnal Ilmiah Akuntansi ◽

10.23887/jia.v2i2.15637 ◽

2018 ◽

Vol 2 (2) ◽

Author(s):

Maisya Pratiwi ◽

Dodik Siswantoro

Keyword(s):

Earnings Management ◽

Stock Exchange ◽

Random Effect ◽

Financial Sector ◽

Fair Value ◽

The Other ◽

Stock Index ◽

Earning Management ◽

Fair Value Accounting ◽

Positive Effect

ABSTRAK Tujuan dari penelitian ini adalah untuk mengetahui pengaruh nilai wajar (fair value) terhadap manajemen laba. Selain itu, penelitian juga bertujuan untuk mengetahui status perusahaan dalam Indeks Saham Syariah Indonesia (ISSI) dalam memoderasi pengaruh nilai wajar terhadap manajemen laba. Peneliti menguji perusahaan sektor non keuangan yang terdaftar di Bursa Efek Indonesia sebanyak 192 perusahaan selama tahun 2012-2016. Metode analisis data yang digunakan adalah model regresi random effect. Hasil penelitian menunjukkan bahwa nilai wajar tidak berpengaruh signifikan terhadap manajemen laba. Namun ketika nilai wajar dibagi berdasarkan hierarkinya, hasil penelitian menyatakan bahwa hanya nilai wajar 2 dan 3 memiliki pengaruh signifikan terhadap manajemen laba. Selain itu, hasil penelitian menyatakan bahwa perusahaan yang terdaftar dalam Indeks Saham Syariah Indonesia dapat mengurangi pengaruh nilai wajar terhadap manajemen laba, terutama pengaruh nilai wajar hierarki 2 dan 3 terhadap manajemen laba dibandingkan dengan nilai wajar hierarki 1. Kata kunci: Nilai Wajar; Manajemen Laba; Saham Syariah ABSTRACT This study aimed to examine the effect of fair value accounting on earnings management. The study also aimed to determine the companies’ status in Indonesia Sharia Stock Index (ISSI) in moderating the effect of fair value on earnings management. We analysis 192 the non-financial sector companies listed on the Indonesia Stock Exchange from the years of 2012-2016. The result shows that fair value has no significant effect on earnings management. But, when fair value is divided based on fair value hierarchies, the result shows that only hierarchy 2 and 3 fair value has significant effect on earning management. In addition, the other result shows that the companies listed in the Indonesia Sharia Stock Index (ISSI) reduce the positive effect of fair value on earnings management, especially the effect of hierarchy 2 and 3 fair value on earnings management. Keywords: Fair Value; Earning Management; Sharia Stock

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