Earnings and Balance Sheet Conservatism in Malaysia: The Effect of Malaysia's Convergence to International Financial Reporting Standards (IFRS)

Marzuki, Marziana Madah; Wahab, Effiezal Aswadi Abdul

doi:10.21315/aamjaf2016.12.2.7

Cited by 2 publications

(4 citation statements)

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“…Agar laporan keuangan perusahaan-perusahaan di Indonesia dapat dibandingkan dengan laporan keuangan negara-negara lain, maka PSAK diputuskan untuk konvergen dengan IFRS (International Financial Reporting Standards) supaya meningkatkan arus investasi asing. Namun, dampak yang ditimbulkan dari konvergennya PSAK dengan IFRS adalah menjadikan akuntan semakin konservatif (Marzuki & Wahab, 2016). Hal ini dikarenakan IFRS menganut prinsip nilai wajar dalam mengakui dan mengukur nilai aset dan liabilitas, sehingga kerugian akan dinilai sesuai dengan nilai pasar yang akan mengakibatkan konservatisme akan semakin meningkat.…”

Section: Pendahuluanunclassified

“…Francis (2004) dan Vichitsarawong (2010) memasukkan konservatisme sebagai alat pengukuran untuk transparansi laporan keuangan. Menurut (Marzuki & Wahab, 2016) konservatisme akuntansi dianggap sebuah atribut yang baik untuk laba akuntansi perusahaan karena dapat digunakan untuk menghindari kondisi ekonomi yang bersifat tiba-tiba menurun atau kebangkrutan.…”

Section: Pendahuluanunclassified

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The Effect of Financial Distress, Company Size, Earning Persistence, and Profitability on Accounting Conservatism

Satria Rachman,

Zakaria,

Handarini

2022

JAPA

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This study aims to investigate the effect of financial distress, firm size, earning persistence, and profiability on accounting conservatism. This research is a quantitative research and uses secondary data which consists of financial reports. The dependent variable in this research is accounting conservatism. The independent variables in this research are financial distress, firm size, earning persistence, and profiability which measures by ROA. The unit of analysis and population which use in this research are companies which categorized in sector Consumer Non-Cyclical subsector beverages and processed food listed on Indonesia Stock Exchange for periods of 2017 – 2021. This research uses pusposive sampling method amounting 76 observation datas in type of unbalanced panel data. The results in this research are financial distress and profitability partially have a negative effect on accounting conservatism. Whereas, firm size and earning persistence partially do not affect the accounting conservatism. Based on those results, a companies which have a high level of financial distress are tend to loosen their accounting conservatism because the high level of financial distress is a bad news for investors and creditors whilst managers will attend to cover up this issue by loosen the accounting conservatism. Companies which have a high level of profitability will tend to loosen the accounting conservatism to manage their existence on public. Companies which have a low level of profitability are tend to strengthen the accounting conservatism as the evaluation material of the issue on low level profitability. For investors and creditors, this research is expected to be a refference for business decision. For manager, this research is expected to be a refference on implementation of accounting conservatism policy.

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Section: Pendahuluanunclassified

The Effect of Financial Distress, Company Size, Earning Persistence, and Profitability on Accounting Conservatism

Satria Rachman,

Zakaria,

Handarini

2022

JAPA

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“…The positive effect of IFRS on conditional conservatism has been tested in various institutional settings, such as Turkey (Balsari et al , 2010), New Zealand (Zhang, 2011), Chile (Bertin and Tomás Arias Moya, 2013) and Malaysia (Madah Marzuki and Abdul Wahab, 2016). All previous studies agree that IFRS have enhanced conditional conservatism as a good proxy of earnings quality.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Previous studies have examined the effect of IFRS only on conditional conservatism in Europe (Andre et al , 2015), Greece (Karampinis and Hevas, 2011), New Zealand (Zhang, 2011), Chile (Bertin and Tomás Arias Moya, 2013) and Turkey (Balsari et al , 2010). Studies have examined the effect of IFRS on both types of conservatism, but these studies were conducted in Malaysia (Madah Marzuki and Abdul Wahab, 2016) and Europe (Piot et al , 2010).…”

Section: Introductionmentioning

confidence: 99%

International financial reporting standards and conservatism in the Association of Southeast Asian Nations countries

Marzuki¹,

Wahab

2018

ARA

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Purpose The purpose of this paper is to investigate whether the convergence of IFRS in ASEAN countries resulted in an improvement in financial-reporting quality, and in particular with regards the degree of conditional conservatism of financial reporting. Then, the authors investigate whether the convergence to IFRS and the degree of conditional conservatism is influenced by corruption as a proxy for the strength of ASEAN jurisdiction legal and enforcement systems. Design/methodology/approach The sample of this study is based on 22,085 firm-year observations from three ASEAN countries, namely, Malaysia, Thailand and Singapore from 2008 to 2014. This study employs a panel least square regression to test the effect of IFRS on two measures of conservatism which are asymmetric timeliness and accrual-based loss recognition. The conservatism data are extracted from ORBIS, while data for corruptions are extracted from Corruption Perception Index (CPI) that was released by Transparency International. Findings This study finds Convergence of IFRS enhance conditional conservatism. The findings are robust for two measures of conservatism which are asymmetric timeliness and accrual-based loss recognition. The result on unconditional conservatism finds that IFRS reduce unconditional conservatism, which supports that the code-law structures of the ASEAN countries as characterized by unconditional conservatism is reduced after IFRS convergence. A further test indicates that corruption reduces conditional conservatism in more corrupt countries. Research limitations/implications This study focused on three ASEAN countries only, as they have consistent convergence dates to the IFRS. Therefore the result may not be generalized to other ASEAN countries. Practical implications The study provides implications to the regulators that IFRS enhance financial-reporting quality and reduce the randomness of decisions that are based on financial information as has been introduced by unconditional conservatism. Therefore it is important for the regulators to incorporate IFRS compliance into laws and regulations. Currently, IFRS compliance is not incorporated into laws and regulations for ASEAN countries, except for Malaysia. In Malaysia, Section 7 of the Financial Reporting Act 1997 (FRA) empowers the Malaysian Accounting Standards Board (MASB) to issue approved accounting standards for application in Malaysia. Under section 26D of the FRA, financial statements that are prepared or lodged with the Central Bank, Securities Commission or Registrar of Companies must comply with the standards issued by the MASB. Originality/value This paper extends the literature on the effect of IFRS on conservatism as it provides robust effect of IFRS on both conditional and unconditional conservatism. In addition, this study extends the literatures on the effect of corruptions in the relationship between IFRS and conditional conservatism.

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Earnings and Balance Sheet Conservatism in Malaysia: The Effect of Malaysia's Convergence to International Financial Reporting Standards (IFRS)

Abstract: The objective of this paper is to examine the impact of International Financial Reporting

Cited by 2 publications

References 44 publications

The Effect of Financial Distress, Company Size, Earning Persistence, and Profitability on Accounting Conservatism

The Effect of Financial Distress, Company Size, Earning Persistence, and Profitability on Accounting Conservatism

International financial reporting standards and conservatism in the Association of Southeast Asian Nations countries

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