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Earnings management using classification shifting of revenues

Malikov, K and Manson, S and Coakley, J (2017) 'Earnings management using classification shifting of revenues.' The British Accounting Review. ISSN 0890-8389

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Abstract

This paper examines a novel form of classification shifting as an earnings management tool using a sample of 12,804 UK listed firm-year observations for the 1995–2014 period. It proposes a new approach to classification shifting whereby firms have scope to misclassify revenues from non-operating activities as operating revenues. The results establish that firms engage in classification shifting of non-operating revenues to inflate operating revenues. They indicate that firms in the period following mandatory IFRS adoption are associated with an increase in this practice, consistent with IFRS offering greater scope for manipulation. Further tests reveal that classification shifting of revenues is more pervasive for firms that report operating losses or have low growth.

Item Type: Article
Uncontrolled Keywords: Classification shifting of revenues, Operating revenues, Non-operating revenues, IFRS
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 17 Nov 2017 14:36
Last Modified: 30 Nov 2017 22:15
URI: http://repository.essex.ac.uk/id/eprint/20686

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