Managing earnings using classification shifting: Novel evidence from Jordan

open access journalIn response to McVay calls for more research to provide additional cross-sectional tests of classification shifting, the current paper examines whether Jordanian public companies engage in earnings management through classification shifting. Using a sample consisting of 112 public firms from Jordan during the 2010-2014 period, this study applies McVay (2006) Model to investigate the relationship between the non-recurring items (NREC) and the variation in unexpected core earnings (UCE). This analysis was supplemented with employing Fan et al., (2010) Model as a robustness check. Our empirical results reveal that managers in Jordan misclassify their recurring expenses to inflate their core earnings. More precisely, we find that non-recurring items (NREC) are significantly and positively associated with the variation in unexpected core earnings (UCE); thus, classification shifting is a common practice among Jordanian firms. Additionally, we find out stronger evidence on classification shifting when our sample was restricted to those firms with a more significant opportunity to misclassify recurring items (firms with positive NREC). This study contributes to the body of accounting literature by providing the first empirical evidence in the Middle East region overall on the use of classification shifting by Jordanian firms. We are also the first to apply McVay (2006) and Fan et al., (2010) models in the Middle East region. Our findings have important policy implications for standard setters, regulators, auditors and investors in their attempts to constrain earnings management practices and improve the financial reporting quality in Jordan

Attention Clusters: Purely Attention Based Local Feature Integration for Video Classification

Recently, substantial research effort has focused on how to apply CNNs or RNNs to better extract temporal patterns from videos, so as to improve the accuracy of video classification. In this paper, however, we show that temporal information, especially longer-term patterns, may not be necessary to achieve competitive results on common video classification datasets. We investigate the potential of a purely attention based local feature integration. Accounting for the characteristics of such features in video classification, we propose a local feature integration framework based on attention clusters, and introduce a shifting operation to capture more diverse signals. We carefully analyze and compare the effect of different attention mechanisms, cluster sizes, and the use of the shifting operation, and also investigate the combination of attention clusters for multimodal integration. We demonstrate the effectiveness of our framework on three real-world video classification datasets. Our model achieves competitive results across all of these. In particular, on the large-scale Kinetics dataset, our framework obtains an excellent single model accuracy of 79.4% in terms of the top-1 and 94.0% in terms of the top-5 accuracy on the validation set. The attention clusters are the backbone of our winner solution at ActivityNet Kinetics Challenge 2017. Code and models will be released soon.Comment: The backbone of the winner solution at ActivityNet Kinetics Challenge 201

THE INFLUENCE OF SPECIAL ITEMS TO CORE EARNINGS IN EARNINGS MANAGEMENT AT MANUFACTURING COMPANIES LISTED IN JAKARTA STOCK EXCHANGE

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. Keywords: earnings management; earnings components; special items

The predictive ability and classification shifting of discontinued operations under IFRS-5 : a dissertation submitted to the Graduate Research School of Massey University and Business School in partial fulfilment of the requirements for the degree of Doctor of Philosophy in the School of Accountancy Massey University, Albany, New Zealand

Considerable attention has been directed towards the impact of International Financial Reporting Standards (IFRS) by the business community and regulators. IFRS-5 Non-current Assets Held for Sale and Discontinued Operations requires the separate reporting of discontinued operations in the statement of comprehensive income. This is based on the (untested) assertion that cash flows from discontinued operations are different from continuing flows. Thus, there is a need to provide empirical evidence to support the assumption. This thesis examines the usefulness of separate reporting of discontinued operations in two important attributes: predictive ability and classification shifting. Motivated by the concerns that discontinued operations are not useful to predict future profitability and are used to manipulate core earnings, this thesis investigates these two aspects for Australian listed companies that have adopted IFRS since 2005. Existing literature documents evidence that discontinued operations should be ignored to predict future profitability (Fairfield, Sweeney, & Yohn, 1996) and managers engage in classification shifting using discontinued operations (Barua, Lin, & Sbaraglia, 2010) under the United States’ Generally Accepted Accounting Practices (US GAAP). As discontinued operations are defined and measured differently under US GAAP and IFRS, this thesis investigates the usefulness of separate reporting of discontinued operations under IFRS by examining predictive ability and classification shifting of discontinued operations. The findings show discontinued operations, particularly when splitting it into gains and losses from discontinued operations, are useful to predict a company’s future profitability. Furthermore, results show losses from discontinued operations are opportunistically used to manipulate core earnings, to avoid reporting losses and earnings decreases under IFRS, when firms report discontinued operations frequently, and the amount of losses is high. These results could be used for the International Accounting Standards Board (IASB) in deciding whether to report discontinued operations separately in statements of comprehensive income

Infrastructure in South Africa: Who is to finance and who is to pay?

Against the backdrop of shifting views on the role of government in the provision of infrastructure, this paper distinguishes between the payment for and financing of the South African Government’s infrastructure investment programme. The paper also presents a classification system that enables a systematic mapping of all prospective projects, with reference to considerations of efficiency and equity. This mapping should assist in macro planning and in any analysis of the financial implications of project financing and cost recovery at all levels of government. The government’s financing strategy is questioned and alternatives are identified. The prospects for mobilising funds other than tax revenue are assessed, namely government loans, private equity, development finance and donor funds. Four investment projects are considered with a view to testing the classification system and evaluating the chosen financing options in terms of economic criteria.Infrastructure financing, government loans, benefit taxation, guarantees, private-public partnerships, South Africa

MODEL STRATEGI MANAJEMEN LABA PADA PERUSAHAAN PUBLIK DI BURSA EFEK INDONESIA: SUATU PEMERIKSAAN PERGESERAN KLASIFIKASI SERTA DAMPAKNYA TERHADAP KINERJA SAHAM, PEMILIHAN METODA AKUNTANSI, DAN PENGATURAN WAKTU TRANSAKSI

This research have a purpose to prove various earnings management strategy phenomenon seen income statement and also how reaction of investor to earnings management strategy classification shifting, accountancy method choice, and transaction time planning anticipated to influences earnings management in manufacturing business which enlist in Indonesia Stock Exchange. The samplse in this research are 44 manufacturing firms listed in Indonesia Stock Exchange, which are selected by using purposive sampling. Those selected firms announced their financial statement during 2002 until 2006. Assumption classics test is done in this research, by using normality test with Jarque-Bera (JB) Test of Normality, heteroscedasticity test with White-Heteroscedasticity test, autocorrelation test with Durbin-Watson test, and multicollinieritas test with Variance Inflation Factor (VIF) and Tolerance. The hypothesis is tested by OLS (Ordinary Least Square) model regression. The results shown that investor does not react to earnings management strategy classification shifting. Hypothesis two of this research accepted. Earnings management strategy accountancy method choice and transaction time planning influence accrual discretionary. Keywords: earnings management strategy; classification shifting; stock performance, accounting method choice, transaction time planning