THE IMPACT OF IFRS CONVERGENCE ON EARNINGS QUALITY OF
INDONESIAN MANUFACTURING FIRMS
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Institusion
Universitas Atma Jaya Yogyakarta
Author
Simarmata, Peniel Jefferson
Subject
International Business
Datestamp
2015-08-12 11:50:04
Abstract :
The number of studies investigating the relationship between IFRS convergence and earnings quality in Indonesia is still very small. IFRS is presumed to be high-quality accounting standards, which should be more useful for decision makers. This research examines any significant differences in the quality of earnings between before and after the full implementation of IFRSbased PSAK effective as of 1 January 2012. The proxies for earnings quality utilized in this research include discretionary accruals and earnings smoothness. The sample used in this research consists of manufacturing companies listed in Indonesia Stock Exchange from 2010 until 2013. Secondary archival data in the form of company financial statements is used in this research. This research utilizes the One Sample Kolmogorov-Smirnov normality test. The Wilcoxon Signed Ranks Test is utilized to test the hypothesis. Results from the data analysis tests indicate no significant difference for the measure of discretionary accruals, but significant difference for earnings smoothness. The full implementation of IFRS convergence effective as of 2012 does not have significant impact on limiting the practice of management discretion on accruals. However, the convergence has significant impact on the scope of accounting choices and income items? recognition evident in the significant difference in the measure of fluctuating reported earnings.
The number of studies investigating the relationship between IFRS convergence and earnings quality in Indonesia is still very small. IFRS is presumed to be high-quality accounting standards, which should be more useful for decision makers. This research examines any significant differences in the quality of earnings between before and after the full implementation of IFRSbased PSAK effective as of 1 January 2012. The proxies for earnings quality utilized in this research include discretionary accruals and earnings smoothness. The sample used in this research consists of manufacturing companies listed in Indonesia Stock Exchange from 2010 until 2013. Secondary archival data in the form of company financial statements is used in this research. This research utilizes the One Sample Kolmogorov-Smirnov normality test. The Wilcoxon Signed Ranks Test is utilized to test the hypothesis. Results from the data analysis tests indicate no significant difference for the measure of discretionary accruals, but significant difference for earnings smoothness. The full implementation of IFRS convergence effective as of 2012 does not have significant impact on limiting the practice of management discretion on accruals. However, the convergence has significant impact on the scope of accounting choices and income items? recognition evident in the significant difference in the measure of fluctuating reported earnings.
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