Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim
This paper examines issues related to the reporting of extraordinary items in the financial statements of Malaysian companies. The first issue concerns the change of accounting standards on extraordinary items, which has limited the scope of extraordinary items. It is found that there are signifi...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Faculty of Accountancy
2005
|
| Subjects: | |
| Online Access: | https://ir.uitm.edu.my/id/eprint/11691/1/AJ_WAN%20ADIBAH%20WAN%20ISMAIL%20NARJ%2005%20%282%29%201.pdf |
| _version_ | 1825733959702544384 |
|---|---|
| author | Wan Ismail, Wan Adibah Kamarudin, Khairul Anuar Ibrahim, Muhd Kamil |
| author_facet | Wan Ismail, Wan Adibah Kamarudin, Khairul Anuar Ibrahim, Muhd Kamil |
| author_sort | Wan Ismail, Wan Adibah |
| collection | UITM |
| description | This paper examines issues related to the reporting of extraordinary items in
the financial statements of Malaysian companies. The first issue concerns the
change of accounting standards on extraordinary items, which has limited the
scope of extraordinary items. It is found that there are significant changes on
the incidence of reported extraordinary items during the period after the adoption
of the new standard. The findings supported the argument that the new
standards on extraordinary items had consequently reduce significantly these
items from financial statements. This paper hypothesizes that extraordinary
items classification choice is a means used by companies to smooth income.
Two types of statistical tests performed have confirmed the proposition that the
disclosure of extraordinary items is subject to this type of manipulation during
the period before the adoption of the new standard. Although it is proved that
the broad definition of extraordinary items allows companies to manipulate
income, evidence gathered from multivariate regressions demonstrates that
extraordinary items are of value-relevance for investors in valuing a firm's equity.
Thus, investors take into account the extraordinary items even though it is
disclosed 'below the line'. |
| first_indexed | 2024-03-06T01:24:42Z |
| format | Article |
| id | oai:ir.uitm.edu.my:11691 |
| institution | Universiti Teknologi MARA |
| language | English |
| last_indexed | 2024-03-06T01:24:42Z |
| publishDate | 2005 |
| publisher | Faculty of Accountancy |
| record_format | dspace |
| spelling | oai:ir.uitm.edu.my:116912016-09-22T06:18:54Z https://ir.uitm.edu.my/id/eprint/11691/ Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim Wan Ismail, Wan Adibah Kamarudin, Khairul Anuar Ibrahim, Muhd Kamil Malaysia This paper examines issues related to the reporting of extraordinary items in the financial statements of Malaysian companies. The first issue concerns the change of accounting standards on extraordinary items, which has limited the scope of extraordinary items. It is found that there are significant changes on the incidence of reported extraordinary items during the period after the adoption of the new standard. The findings supported the argument that the new standards on extraordinary items had consequently reduce significantly these items from financial statements. This paper hypothesizes that extraordinary items classification choice is a means used by companies to smooth income. Two types of statistical tests performed have confirmed the proposition that the disclosure of extraordinary items is subject to this type of manipulation during the period before the adoption of the new standard. Although it is proved that the broad definition of extraordinary items allows companies to manipulate income, evidence gathered from multivariate regressions demonstrates that extraordinary items are of value-relevance for investors in valuing a firm's equity. Thus, investors take into account the extraordinary items even though it is disclosed 'below the line'. Faculty of Accountancy 2005 Article PeerReviewed text en https://ir.uitm.edu.my/id/eprint/11691/1/AJ_WAN%20ADIBAH%20WAN%20ISMAIL%20NARJ%2005%20%282%29%201.pdf Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim. (2005) National Accounting Research Journal <https://ir.uitm.edu.my/view/publication/National_Accounting_Research_Journal/>, 3 (1). pp. 49-70. ISSN 1675-753X |
| spellingShingle | Malaysia Wan Ismail, Wan Adibah Kamarudin, Khairul Anuar Ibrahim, Muhd Kamil Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title | Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title_full | Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title_fullStr | Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title_full_unstemmed | Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title_short | Income smoothing and market perception of accounting numbers : an empirical investigation of extraordinary items / Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim |
| title_sort | income smoothing and market perception of accounting numbers an empirical investigation of extraordinary items wan adibah wan ismail khairul anuar kamarudin and muhd kamil ibrahim |
| topic | Malaysia |
| url | https://ir.uitm.edu.my/id/eprint/11691/1/AJ_WAN%20ADIBAH%20WAN%20ISMAIL%20NARJ%2005%20%282%29%201.pdf |
| work_keys_str_mv | AT wanismailwanadibah incomesmoothingandmarketperceptionofaccountingnumbersanempiricalinvestigationofextraordinaryitemswanadibahwanismailkhairulanuarkamarudinandmuhdkamilibrahim AT kamarudinkhairulanuar incomesmoothingandmarketperceptionofaccountingnumbersanempiricalinvestigationofextraordinaryitemswanadibahwanismailkhairulanuarkamarudinandmuhdkamilibrahim AT ibrahimmuhdkamil incomesmoothingandmarketperceptionofaccountingnumbersanempiricalinvestigationofextraordinaryitemswanadibahwanismailkhairulanuarkamarudinandmuhdkamilibrahim |