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The effect of consistency in accounting choices on financial statement comparability: Evidence from South Korea

Yong-Shik Kim
사람과세계경영학회 (People&Global Business Association)|2020.09|Global Business and Finance Review|제25권 제3호|pp. 19-33|DOI https://doi.org/10.17549/gbfr.2020.25.3.19

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키워드

ConsistencyIncome smoothingComparabilityConceptual frameworkAccounting changes

초록

Purpose: To empirically document the proposition “Comparability is the goal; consistency helps to achieve the goal” (IFRS Conceptual Framework 2.26), we investigate whether accounting changes affect financial statement comparability and whether income smoothing through accounting changes has different effects on financial statement comparability. Design/methodology/approach: We conduct pooled OLS regressions with standard errors corrected for both firm and year level clustering to test all the analyses.We also use the propensity score matching method to construct a sample with accounting changes (treatment sample) and a sample without accounting changes (control sample). Findings: We find evidence consistent with our hypotheses that accounting changes reduce financial statement comparability.We also find that income smoothing improves financial statement comparability, but income smoothing through accounting changes reduces financial statement comparability. Research limitations/implications: There is a small number of firms that made accounting changes, so it would be worthwhile for future research to analyse a larger sample with various types of accounting changes. Originality/value: The main contribution of the study is that we empirically document one aspect of the conceptual framework that consistency helps to improve comparability

Abstract

Purpose: To empirically document the proposition “Comparability is the goal; consistency helps to achieve the goal” (IFRS Conceptual Framework 2.26), we investigate whether accounting changes affect financial statement comparability and whether income smoothing through accounting changes has different effects on financial statement comparability. Design/methodology/approach: We conduct pooled OLS regressions with standard errors corrected for both firm and year level clustering to test all the analyses.We also use the propensity score matching method to construct a sample with accounting changes (treatment sample) and a sample without accounting changes (control sample). Findings: We find evidence consistent with our hypotheses that accounting changes reduce financial statement comparability.We also find that income smoothing improves financial statement comparability, but income smoothing through accounting changes reduces financial statement comparability. Research limitations/implications: There is a small number of firms that made accounting changes, so it would be worthwhile for future research to analyse a larger sample with various types of accounting changes. Originality/value: The main contribution of the study is that we empirically document one aspect of the conceptual framework that consistency helps to improve comparability

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관련 논문AI추천

The effect of financial statement comparability on analysts’ reliance on common information기은선, 심준용사람과세계경영학회 · Global Business and Finance Review2017 · 제22권 제3호The Effects of IFRS Adoption on Accounting Quality : Early Evidence in Korea백정한, 최종서, 하순영한국국제회계학회 · 국제회계연구2013 · 제52호The Impact of K-IFRS Adoption on the Value Relevance of Accounting Information지현미사람과세계경영학회 · Global Business and Finance Review2017 · 제22권 제2호Does Adoption of K-IFRS Increase Upward Bias in Analysts’ Earnings Forecasts?박창균, 이의섭한국재무관리학회 · 재무관리연구2019 · 제36권 제1호감사인 교체연도의 재무제표 비교가능성연경석, 최승욱경영경제연구소 · 아태비즈니스연구2021 · 제12권 제3호Impact of Accounting Conservatism on the Informativeness of Current Stock Prices for Future Earnings김응길, Junyong Shim사람과세계경영학회 · Global Business and Finance Review2023 · 제28권 제5호

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