Economics at your fingertips  

Method-Shifting in Aggressive Earnings Reporting: The Case of the US Software Industry's Response to New US Regulation

Ke Zhong, Robert B. Welker and Donald W. Gribbin

Journal of Business Finance & Accounting, 2010, vol. 37, issue 7-8, 792-814

Abstract: Under rationality, firms should shift to alternative earnings management methods to achieve their earnings management goals whenever the alternatives provide greater benefit. New accounting regulation can alter the net benefit derivable from existing earnings management methods and thus may provide the impetus for method-shifting. This study investigates whether firms circumvent regulatory-imposed restrictions on their use of specific methods for accelerating earnings by shifting to alternative methods. Specifically, the study examines whether the US's adoption of a reporting standard that placed restrictions on the recognition of software revenue prompted US software-firm managers to method-shift to expense components for accelerated earnings reporting. A comparison of discretionary revenue and expense accruals and discretionary R&D expenses before and after the adoption of the standard confirmed a reduction of accelerated revenue recognition after the adoption and supported the hypothesized method-shift to expense components for accelerated earnings reporting. Copyright (c) 2010 Blackwell Publishing Ltd.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) link to full text (text/html)
Access to full text is restricted to subscribers.

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=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-02-11
Handle: RePEc:bla:jbfnac:v:37:y:2010-07:i:7-8:p:792-814