Earnings management using classification shifting: An examination of core earnings and special items

• 成果类型: Article
• 署名作者: McVay, Sarah Elizabeth
• 署名单位: New York University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2006.81.3.501
• 发表日期: 2006
• 页码: 501-531
• 关键词: research-and-development; PRICES FULLY REFLECT; stock-prices; pro forma; information-content; Analyst forecasts; VALUE-RELEVANCE; disclosure; accruals; STREET

摘要

This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates core earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.