Detecting income-smoothing behaviors of Turkish listed companies through empirical tests using discretionary accounting changes

The effect of non-recurring item transactions on the possibility of firms to smooth income: the case of Indonesian listed firms

“…Atik (2009) provide evidence that companies with declining profitability tend to smooth their income. Presumably, fluctuations in income streams have a more severe impact on low profitability companies; hence, they have a stronger motivation to smooth income.…”

“…It has been detected in varying degrees across different samples. Atik ( 2009) has referred to income smoothing practice as one of the common abuses in financial reporting that users should be wary of and he has described it as a manipulation of financial information. Hence, the concern about income smoothing practices need for appropriate research.…”

“…All these types of smoothing could be generally described as follow; a naturally smoothed income stream occurs when a firm's income generating process inherently produces a smoothed stream of reported income. For example, one would expect the income generating process of public utilities to be such that income streams would be naturally smoothed (Atik 2009;Rezvan et al 2011). …”

“…One form of creative accounting is the income smoothing (IS) practice in which company's management takes steps to reduce and store earnings during the good years and defer them for use during the businessdownturn years or vice versa or in other words income smoothing is deliberate dampening of fluctuations about some level of earnings considered to be normal for the firm (Atik 2009;Stolovy and Bartov 2004;Charfeddine and Bouaine 2012.). Therefore s moothing of reported income may be defined as the intentional dampening or fluctuations about some level of income that is currently considered to be normal for a firm.…”

“…Real smoothing involves decisions that affect cash flows and dissipate firm value. Examples include changing the timing of investments and providing promotional discounts or vendor financing to risky customers to pump up sales toward the end of the quarter (Atik 2009). Meanwhile, artificial smoothing represents accounting manipulations taken by management using flexibility in the accounting standards to alter the reported number.…”