Economics at your fingertips  

Accounting losses and earnings conservatism: evidence from Australian Generally Accepted Accounting Principles

Harishankar Balkrishna, Jeffrey J. Coulton and Stephen L. Taylor

Accounting and Finance, 2007, vol. 47, issue 3, 381-400

Abstract: We provide evidence on three important aspects of Australian financial reporting; namely, the characteristics of losses, the extent to which Australian firms’ earnings are conditionally conservative (i.e. bad news is reflected in earnings more quickly than good news) and the extent to which losses reflect incrementally greater conditional conservatism. We find evidence that loss incidence in Australia is frequent, with around 40 per cent of the sample firm‐years from 1993 to 2003 being losses. Losses are also surprisingly persistent, and the probability of loss reversal declines monotonically as the history of losses extends. Although conditional conservatism is also shown to be a pervasive aspect of Australian Generally Accepted Accounting Principles, we demonstrate that it is more evident among loss observations. This result is robust across different methods of capturing conditional conservatism, and supports the conclusion that the relatively high frequency of losses is, at least in part, a reflection of conservative reporting.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2019-08-08
Handle: RePEc:bla:acctfi:v:47:y:2007:i:3:p:381-400