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IFRS Convergence And The Impact To Earning Quality And
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IFRS Convergence And The Impact To Earning Quality And Firm Value Empirical Study In Manufacturing. by revising Statement of Financial Accounting Standards SFAS adjusted to IFRS effective in stages since. IFRS convergence issue has attracted the attention of some researchers to test the impact of IFRS. convergence on the quality of accounting numbers and examine the economic consequences for the adoption of. IFRS Previous studies in several countries have shown inconsistent results Iatridis 2010 who examined the. impact of the implementation of IFRS on financial reporting information quality and its effect on profit. management and relevant value Results show that the implementation of IFRS proven to reduce the scope for. profit management faster in the recognition of its loss and has a better relevancy score Furthermore Gordon et. al 2010 examined comparative quality attributes and its informative earnings under US GAAP and IFRS at. 161 companies in 25 countries The results showed that there was no significant difference between quality. attributes earnings accrual quality earning persistence cash persistence cash predictability earning. predictability smootness timelines dan conservatism under US GAAP and IFRS except for the value. Gassen and Sellhorn 2006 who examined the application of IFRS in the stock market of Germany. documented evidence of a significant difference between quality attributes of such profits after the adoption of. IFRS namely the companies that adopt IFRS has the persistence of higher profits have lower predictability. earnings and more conservatively In addition adopters of IFRS have a lower information asymmetry or. experiencing decreased of bid ask spread and more liquid Kim 2013 has examined the impact of IFRS. adoption on the quality of accounting numbers quality accrual and the value of companies in South Korea. stock market Research results show that there is no increase in the value of the company measured by Tobins. Q after the adoption of IFRS On the other hand Loureiro and Taboada 2012 documented the evidence of. stock prices increased for companies that adopt IFRS voluntarily Likewise Landsman et al 2012. documented the increasing evidence of abnormal stock returns and stock trading volume after the adoption of. IFRS in the 16 countries that have adopted IFRS, This study aimed to examine and obtain empirical evidence about the impact of the application of IFRS. accounting standards based on the quality of earnings and corporate value for companies listed on the Indonesia. Stock Exchange To achieve these objectives this study will analyze differences in the quality of earnings and. the value of the company before and after the convergence of IFRS in Indonesia The problem of this research. can be formulated as follows 1 Is there a difference between the quality of earnings before and after the. convergence of IFRS in Indonesia 2 Is there a difference between the value of the company before and after. the convergence of IFRS in Indonesia,II FRAMEWORK THEORY AND HYPOTHESES FORMULATION. 2 1 Convergence of IFRS and Quality of Earnings, Terminology of earnings quality has different attributes of measurements coming from various. researchers Suwardjono 2005 463 explains that the quality of the accounting profit is shown by the. proximity or correlation between accounting profit and economic profit Francis et al 2004 divides the. earnings quality attributes into seven attributes into two groups namely attributes of earnings quality of the. market market based attributes and accounting based earnings quality attributes accounting based attribute. The quality of accounting based profit consists of Accrual quality predictability persistency and smoothness. While the quality of market based earnings consists of value relevance timeliness and conservatism. In this study earnings quality was measured by accruals quality attributes Accrual provides. information about cash flows that will come Francis et al 2004 uses accruals quality as one measure of. earnings quality by connecting between the accrual of cash flows Therefore the concept of quality of accruals. examines the extent of closeness between the accrual of cash flows If its proximity growing distant would. cause major distortion of cash recognition making earnings do not reflect the actual reality low accrual. quality and vice versa the closer it gets then it would show reality of the actual cash The higher the value of. accruals quality will show low earnings quality conversely the lower the value of accruals quality will generates. high earnings quality, Research on the relationship between the convergences of IFRS with accruals quality has been. documented by several researchers Iatridis 2010 found evidence of declining earnings management scope. measured by the quality of accrual after the adoption of IFRS in UK Correspondingly Ward 2009 found. evidence of a significant and negative impact between IFRS convergence towards discretionary accruals which. means that the convergence of IFRS can lower discretionary accruals of the company Similarly Gassen and. Sellhorn 2006 who examined the application of IFRS adoption in Germany found evidence that IFRS is. lower than the GAAP coming from the quality aspects of accrual Further research by Gordon et al 2010 who. examined the comparison of earnings quality attributes based on IFRS and GAAP in the US stock market did. not find evidence of differences between IFRS and GAAP from accrual quality aspects. Corresponding Author Syarifuddin 13 Page, IFRS Convergence And The Impact To Earning Quality And Firm Value Empirical Study In Manufacturing.
Based on the theoretical framework mentioned above the hypothesis proposed in this study is as. follows Hypothesis 1 There is a significant difference between the quality of earnings as measured by the. quality of accrual before and after the convergence of IFRS in Indonesia Adoption of IFRS can reduce. absolute discretionary accruals,2 2 Convergence of IFRS and Company Value. The value of the company is often associated with the share price meaning that if the stock price is. higher then the value of the company was also higher due to the increased value of the company it can deliver. prosperity to the shareholders to the maximum The impact of the enactment of IFRS accounting standards. based on the value of the company has been documented by several previous investigators Kim 2013 has. examined the impact of IFRS adoption on the quality of accounting numbers the quality of accrual and the. value of companies in South Korea stock market Research results show that there is no increase in the value of. the company measured by Tobins Q after the adoption of IFRS. On the other hand Loureiro and Taboada 2012 documented evidence of rising stock prices for. companies that voluntarily adopt IFRS in the EU Correspondingly Landsman et al 2012 documented the. increased evidence of abnormal stock returns and stock trading volume after the adoption of IFRS in the 16. countries that have adopted IFRS Thus in this study it is presumed that the convergence of IFRS influence on. the value of the company The hypothesis is as follows. Hypothesis 2 There is a significant difference between the value of the company before and after the. convergence of IFRS in Indonesia IFRS convergence can enhance shareholder value. III RESEARCH METHODS,3 1 Population and Sample, The populations in this study were all companies listed on the Indonesian Stock Exchange Indonesian. Stock Exchange IDX in the period 2007 2010 Sample election of companies in this study was using. purposive sampling method namely sampling technique by using specific criteria Criteria for selection of. samples used in this study are as follows 1 The Company is a sample of manufacturing companies that have. been listed in the Indonesian Stock Exchange period 2007 2010 2 The company regularly publishes financial. reports from 2007 2010 with annual reporting period ended on December 31 3 the company actively trades in. 3 2 Types and Sources of Data, The data used in this research was secondary data financial reports and other data from manufacturing. companies listed in the Indonesian Stock Exchange in 2007 2010 obtained from web site Bursa Efek Indonesia. Indonesian Stock Exchange IDX,3 3 Variables Research and Measurement. Variables used in this study and its measurement are described as follows 1 Quality of Earnings. proxied with the quality of accruals Accrual quality measurement in this study refers to the measurement model. of Dechow and Dichev 2002 with modifications to the model of McNichols 2002 as follows. TCA 0 1 CFi t 1 2 CFit 3 CFi t 4 Salesit 5 PPEit it 1. TCA Net income of the company in t operating cash flow of the company in t. CFi t 1 The company s operating cash flow last period divided by total assets. CFi t The company s operating cash flow in year t divided by total assets. CFi t 1 The company s operating cash flow next year. Salesit Difference in sales company i year t last year. PPEit The fixed assets of the company in t,All the items are scaled by total assets.
2 The value of the company is the market value of a company measured by the ratio of Tobins Q as. Q The value of the company,MVE Market value of equity. Corresponding Author Syarifuddin 14 Page, IFRS Convergence And The Impact To Earning Quality And Firm Value Empirical Study In Manufacturing. BVD Book value of debt,BVE Book value of equity,3 4 Data analysis technique. To examine the impact of IFRS convergence on the quality of earnings and the value of companies. listed on the Indonesia Stock Exchange it was tested using a different test T test for sample related Paired. Sample T test used to test whether there are differences in the average of two related samples Ghozali 2006. The purpose of this test was to determine whether there are differences in the quality of earnings and. the value of the company before and after the convergence of IFR in Indonesia This test will conclude whether. there are differences in the quality of earnings and corporate value for the companies listed on the Indonesian. Stock Exchange before and after the convergence of IFRS in Indonesia. IV RESULTS AND DISCUSSION,4 1 Description of Research Samples. This study used a sample of manufacturing companies listed on Indonesian Stock Exchange during the. observation period 2007 2010 that is two years before the convergence of IFRS and two years after the. convergence of IFRS in Indonesia Based on the criteria and sampling procedures used in this study obtained as. many as 98 companies with the number of observations for 4 years Thus the overall total sample in this study. was 98 x 4 years 392 samples divided into 196 samples before the convergence of IFRS and 196 samples. after the convergence of IFRS,4 2 Descriptive Statistics.
4 1 The following table presents the descriptive statistics for the accrual of quality variable measured. by Total Current Accrual TCA, Table 4 1 Descriptive Statistics Total Current Accrual TCA. Before and After Convergence IFRS,N Minimum Maximum Mean Std Deviation. TCA GAAP 196 0 5225 1 5096 0 014923 0 1705594,TCA IFRS 196 0 8947 1 0289 0 027136 0 2046278. Valid N listwise 196,Source Output SPSS 16 data processed 2015. From Table 4 1 above it shows that the variable of accrual quality as measured by the Current Total. Accrual TCA in the period prior to the convergence of IFRS GAAP TCA has a minimum value of 0 5225. the maximum value of 1 5096 the average value of 0 014923 and standard deviation value of 0 1705594 While. TCA in the aftermath of the convergence of IFRS IFRS TCA has a minimum value of 8947 maximum value. of 1 0289 the average value of 0 027136 and the value of a standard deviation of 0 2046278 From these values. it shows that the average value of TCA is positive it indicates that the average TCA in this study is income. increasing, Next Table 4 2 below presents the descriptive statistics for the variable of company value NP.
Table 4 2 Descriptive statistics Company Value CV before and after Convergence IFRS. N Minimum Maximum Mean Std Deviation,NP GAAP 196 0 1812 11 3418 1 409916E0 1 4991236. NP IFRS 196 0 2793 15 4844 1 737374E0 2 0723135,Valid N listwise 196. Source Output SPSS 16 data processed 2015, From table 4 2 above it shows that the variable of company value NP in the period prior to the. convergence of IFRS NP GAAP has a minimum value of 0 1812 the maximum value of 11 3418 the average. value of 1 409916 and standard deviation value of 1 4991236 While the value of the company NP in the. aftermath of the convergence of IFRS NP IFRS has a minimum value of 0 2793 the maximum value 15 4844. the average value of 1 737374 and standard deviation value of 2 0723135 From these values it shows that the. average of NP is positive it indicates that the average company acting as the sample of this research have. increased in value,Corresponding Author Syarifuddin 15 Page. IFRS Convergence And The Impact To Earning Quality And Firm Value Empirical Study In Manufacturing. 4 2 IFRS Convergence effect on the Quality of Earnings. 4 3 The following table presents the results of testing the differences in quality of earnings as measured. by absolute value of the total current accrual TCA before and after the convergence of IFRS in Indonesia. Table 4 3 Different Test Results Mean Total Current Accrual TCA. Before and After Convergence IFRS,Mean N Std Std Error Sig 2 tailed.
Deviation Mean,TCA GAAP 0 014923 196 0 1705594 0 0121828. 0 027136 196 0 2046278 0 0146163 0 539,Source Output SPSS 16 data processed 2015. According to Table 4 3 obtained average values of TCA at 0 014 923 For period prior to the. convergence of IFRS TCA GAAP is smaller than the average value of TCA after the convergence of IFRS. TCA IFRS which is equal to 0 027136 However based on the results of the test the average difference Paired. Sample T test obtained significance value of 0539 or above 0 05 Interpretations of the results of these tests. show that there is no significant difference between earnings quality as measured by the absolute value of the. total current accrual TCA before and after the convergence of IFRS in Indonesia It can be concluded that the. results of this test showed that the convergence of IFRS in Indonesia does not have a significant effect on. earnings quality of companies listed on the Indonesia Stock Exchange as measured by the quality of accrual the. absolute value of the total current accrual TCA, The hypothesis proposed that there are differences in the quality of earnings before and after the. convergence of IFRS as measured by the absolute value of the total current accrual TCA is not acceptable. This study was not able to prove that there is a difference in the quality of earnings before and after the. convergence of IFRS in Indonesia Results of this study are not consistent with the results obtained from studies. conducted by Gassen and Sellhorn 2006 Iatridis 2010 found no evidence of an increase in the quality of. financial reporting as measured by earnings management after the adoption of IFRS. 4 3 Convergence of IFRS Effect on the Company Value. Table 4 4 presents the results of testing the difference in value of the company NP before and after. the convergence of IFRS in Indonesia, Table 4 4 Different Test Results Mean Value Company NP Before and After Convergence IFRS. Mean N Std Deviation Std Error Sig 2 tailed,NP GAAP 1 409916E0 196 1 4991236 0 1070803.
NP IFRS 1 737374E0 196 2 0723135 0 1480224 0 000,Source Output SPSS 16 data processed 2015. Based on the table 4 4 obtained average value of the company NP of 1 409916 For the period before. the convergence of IFRS NP GAAP is smaller than the average value of the company NP after the. convergence of IFRS NP IFRS which is equal to 0 027 136 However based on the results of the test the. average difference Paired Sample T test obtained significance value of 0 000 or below 0 05 Interpretations. of the results of these tests show that there are significant differences between the value of the company before. and after the convergence of IFRS in Indonesia It can be concluded that the results of this test showed that the. convergence of IFRS in Indonesia had a significant effect on the value of manufacturing companies listed on. Indonesia Stock Exchange, The hypothesis proposed that there were differences in the value of the company before and after the. convergence of IFRS accepted This study proved that there is a difference in the value of the company before. and after the convergence of IFRS in Indonesia Results of this study are consistent with results obtained from. studies conducted by Landsman 2010 Loureiro and Taboada 2012 who found evidence of an increased value. of the company after the adoption of IFRS,Corresponding Author Syarifuddin 16 Page. IFRS Convergence And The Impact To Earning Quality And Firm Value Empirical Study In Manufacturing. V CONCLUSION LIMITATIONS AND SUGGESTIONS, Based on the results of this study it can be concluded that Firstly results of empirical testing the. difference in average earnings quality as measured by the absolute value of the total current accrual TCA. before and after the convergence of IFRS in Indonesia shows that there is no significant difference between. earnings quality companies listed on the Indonesia Stock Exchange as measured with the absolute value of the. total current accrual TCA before and after the convergence of IFRS in Indonesia It can be concluded that the. results of this test showed that the convergence of IFRS in Indonesia does not have a significant effect on. earnings quality companies listed on the Indonesia Stock Exchange as measured by the quality of the absolute. value of the total current accrual TCA Second the empirical test results in the difference in average value of. the company before and after the convergence of IFRS in Indonesia shows that there are significant differences. between the value of companies listed on the Indonesia Stock Exchange before and after the convergence of. IFRS in Indonesia The findings of this study support the hypothesis that there are significant differences. between the value of the company before and after the convergence of IFRS in Indonesia It can be concluded. that the results of this test showed that the convergence of IFRS in Indonesia had a significant effect on the. value of manufacturing companies listed on Indonesia Stock Exchange. Recommendations of this study are 1 In this study observation period was relatively short sample. studied ie two years before the convergence of IFRS and two years after the convergence of IFRS in Indonesia. Therefore further research is recommended to use broader observation period for example three years before. and three years after the convergence of IFRS 2 In addition this study is limited to manufaitur company listed. on the Indonesia Stock Exchange It is therefore advised for further studies examining non manufacturing. companies for example banking companies service companies and others 3 earnings quality attribute studied. is limited to proxy the quality of accruals Therefore for further research should expand the size of earnings. REFERENCES, 1 Francis J R R LaFond P Olsson dan K Schipper 2004 Costs of Equity and Earnings Attributes The.
Accounting Review Vol 79 No 4 967 1010, 2 Gassen J dan Sellhorn T 2006 Applying IFRS in Germany Determinants and consequences. Betriebswirtschaftliche Forschung und Praxis 58 4, 3 Ghozali Imam 2006 Aplikasi Analisis Multivariate dengan Program SPSS In Indonesian Badan Penerbit. Universitas Diponegoro Semarang, 4 Gordon EA Bjorn NJ dan Cheryl LL 2010 Could IFRS replace US GAAP A comparison of earnings attributes. and informativeness in the US market Working Paper. 5 Iatridis George 2010 International Financial Reporting Standards and quality of financial statement information. International Review of Financial Analysis 19 2010 193 204. 6 Kim Yeon Jeong 2013 Changes in Firm s Market Value and Discreationary Accruals with the Adoption of IFRS. in South Korea International Journal of Economics and Statistics Issue 4 Volume 1 2013. 7 Kusuma Indra W 2007 Pengadopsian International Financial Reporting Standard Implikasi untuk Indonesia In. Indonesian Universitas Gadjah Mada, 8 Landsman Wayne R Maydew Edward L dan Thornock Jacob R 2012 The Information Content of annual. earnings Announcement s and Mandatory Adoption of IFRS Journal of Accounting and Economics 53 2012. 9 Loureiro Gilberto dan Taboada G Alvaro 2012 The Impact of IFRS Adoption on Stock Price Informativeness. Working Paper, 10 Pagalung 2006 Kualitas Informasi Laba Faktor Faktor Penentu Dan Economic Consequencesnya In.
Indonesian Universitas Gadjah Mada Yogyakarta, 11 Pagalung 2006 Earning quality Determinant factor and economic consequence Seminar Nasional Akuntansi 1X. 12 Suwardjono 2005 Teori Akuntansi Perekayasaan Pelaporan Keuangan In Indonesian Jogjakarta BPFE.


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