K-IFRS에 따른 자산재평가 기업의 재평가 전 이익조정에 관한 연구

Abstract

As K-GAAP adopted asset revaluation in 2008, many companies achieved the reduction effect of leverage ratio. For the purpose of improving financial structure. revaluation policy was adopted earlier than K-IFRS, which became obligatory in 2011. In total, 137 manufacturing firms announced the results of asset revaluation in 2009 and 2010. That is, among 770 manufacturing firms in Korean stock exchange market, about 17.7% companies carried out asset revaluation during this period. According to K-IFRS on asset revaluation, revaluation surplus is included in net asset. It is not certain, however, that revaluation has any effect on earnings now and in the future, because revaluation surplus is not recorded as components of net income. In addition, revaluation surplus is transferred to earning surplus only after the relevant assets are used or sold. Since revaluation surplus is deferred in this way, asset revaluation makes a difference in the reporting time of earnings. The purpose of this study is to test the relation between asset revaluation and earnings management prior to revaluation. It investigates whether asset revaluation is used for earnings management or not. The suggested hypothesis is that there will be no significant relation between asset revaluation and earnings management prior to revaluation. In other words, asset revaluation won't make any difference on the behavior of earnings management. To test the hypothesis, the behaviors of two groups, asset revaluation firms and non-revaluation firms, on earnings management, were compared. If the behaviors of two groups are not significantly different, it implies that there is no relation between asset revaluation and earnings management. For this purpose, this paper used discretionary current accounting accruals as a measure of earnings management. According to Dechow and Dichev (2002)ʼs current accounting accruals model, discretionary current accounting accruals was calculated by the degree of current accounting accruals not being realized into operating cash-flows, Then, discretionary current accounting accruals a year before revaluation. were compared between asset revaluation firms and non-revaluation firms. Discretionary current accounting accruals are considered to be decided by the CEOʼs discretion. In addition, loss reporting was compared between these two groups of firms. If firms are reluctant to report loss in general,loss reporting ratio will be significantly different between two groups. Test period is from 2009 to 2010. Revaluation samples are 134 firms, which were selected from public manufacturing firms. Asset revaluation firms must disclose revaluation-related information in-cluding revaluation date, objects, revaluation surplus, etc. Land, buildings, machinery was on the list of revaluation assets, of which land accounts for 91.3% (121 cases out of 134). Large portion of land is due to the fact that revaluation surplus effect of land is powerful than that of others, having a stronger impact on financial status. On the other hand, there were 23 cases of machinery, 20 cases of buildings, and 23 cases combined on the list of revaluation. The empirical results are as follows. First, there was no difference in discretionary current accruals for revaluation firms and non-revaluation firms. Earnings management measured by discretionary current accruals is not significantly different between two groups of firms, which means there was no earnings management prior to revaluation. Second, the ratio of loss reporting was higher in revaluation firms than in non-revaluation firms. It implies that loss-reporting firms are less likely to carry out revaluation. Thus, it is considered that not reporting loss is not the motivation of earnings management related to revaluation. Third, the analysis of revaluation firms shows that the larger discretionary current accruals are, the higher revaluation surplus ratio is, two years before revaluation. Revaluation surplus ratio was calculated by revaluation surplus divided by total asset. The results are considered to represent the size effect. Fourth, there was a negative relation between revaluation surplus ratio and loss ratio of non-revaluation firms. It represents that there is no relation between loss reporting and revaluation. The empirical results imply that there is no relation between asset revaluation and earnings management or loss reporting before revaluation. The firms which tend to manage earnings are not likely to try asset revaluation. As revaluation surplus is included in net asset, asset revaluation will not be used as a means of earnings management. Since this study investigated the first revaluation effect after adopting revaluation policy as K-IFRS, all sample firms reported revaluation surplus. If firms report revaluation loss afterwards, the results might be different. Revaluation loss is included as components of net income unlike revaluation surplus. If the similar examination is carried out on KOSDAK market, the results might be different as well. Further study on market reaction on revaluation will be required.