Deferral of currency variation losses as an earnings management tool

Abstract

Earnings management has become an important topic in accounting and finance in recent decades. This practice is possible due the existence of alternative accounting criteria for recognition, measurement and/or demonstration of earnings, creating opportunities for managers to choose one of the available options in order to reflect information in the desired form. This can sometimes distort the analysis of the company's performance. There are various ways to manipulate accounting information. This paper investigates whether there was earnings management in Brazil through deferral of losses due to exchange rate variations in 1999 and 2001, as well as through the respective amortization of these losses in following years. We analyze the companies that carried out such deferral in one or both years, and the respective amortization from 1999 to 2003, utilizing histograms and nonparametric methods, and find strong indications that the companies that chose such deferral did so to manage their earnings, in order to avoid showing decreased earnings or even losses.

Gerenciamento De Resultado Contábil E Ruptura Dos Covenants

“…Conforme Santos e Paulo (2006), em decorrência da importância dessa informação contábil, nasce o incentivo para que os agentes gerenciem resultados a fim de que possam apresentar informações contábeis mais inspiradoras e, consequentemente, desempenho empresarial motivador. Para Nardi e Nakao (2009), essas informações sob a teoria de Agência podem ser gerenciadas de acordo com a necessidade/vontade do gestor, de modo a aumentar ou diminuir resultados contábeis.…”