Impact of IFRS Adoption on Earning Management A review of Four selected Private Commercial Banks in Ethiopia
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Date
2021-07
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A.A.U
Abstract
The general objective of this study is to measure the Impact of IFRS Adoption on Earning
Management measured by discretionary accruals in terms of quantitative terms. Among all
the business sectors in Ethiopia banking sector is the one where IFRS adoption is fully
implemented. To achieve the objective four Selected Ethiopian private commercial banks
Audited Financial statements for the period of 8 years are assessed. To assess quantitative
data quantitative method of research is implemented and Explanatory research design is
employed. For data collection the population considered in this study is the number of
private commercial banks in Ethiopia and random sampling is taken to get the information
required for the study. This study measured the impact of IFRS on the level of earning
management after its adoption where discretionary accruals are taken as a proxy. The
researcher chose Modified Jones Model and came up with a result that shows there is a
positive relation between IFRS and Discretional accruals which is used as a proxy to
measure earning management. The adoption of IFRS brough an increase in discretionary
accruals which led to a conclusion IFRS adoption have an increasing impact over earning
management. Since earning management is mostly appreciated by Bank Management and
CEO’s the researcher put recommendation for investors and shareholders to force the
management of commercial banks to give due consideration on their decision regarding
discretionary accruals which could also increase the level of earning management on its
annual auditing and to have a specific Audit other than generally used financial statements
audit to detect the level of earning management and to bring the actual figure of the income.
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Keywords
Discretionary Accruals, Earning management, Commercial Banks