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Earnings management using revenue classification shifting – evidence from the IFRS adoption period

Minyoung Noh (Hawaii Pacific University, Honolulu, Hawaii, USA)
Doocheol Moon (College of Business, Yonsei University, Seoul, South Korea)
Laura Parte (Universidad Nacional de Educacion a Distancia, Madrid, Spain)

International Journal of Accounting & Information Management

ISSN: 1834-7649

Article publication date: 7 August 2017



This paper aims to provide evidence of an unintended observable consequence of International Financial Reporting Standards (IFRS) adoption by examining opportunistic use of earnings management through revenue as well as expense items classification shifting in the year of transition.


To document classification shifting, the authors take advantage of the Korean mandatory IFRS adoption in 2011, when broad discretion was given to publicly traded companies’ managers to present operating profits.


It is found that companies strategically use both revenues and expenses to manage core earnings at the time of transition by shifting other income as a common tactic to improve their operating performance and special expenses just to meet or beat earnings targets.


Given the concerns of the Securities and Exchange Commission (SEC) about classification shifting behavior and the debate over whether the SEC should mandate the use of IFRS for US companies, the findings of this study are timely and contribute to authors’ understanding of the unintended consequences of mandatory IFRS adoption.



The authors are grateful to Won Wook Choi, Jee Hong Kim, Ho Young Lee, Kyung Tae Lee, Zining Li, Sung Kyu Sohn, Stephani Mason, Dae-Hee Yoon and workshop participants at Yonsei University, the 2014 CAAA Annual Conference, the 2014 AAA Annual Meeting and the 2014 JCAE Conference for their useful comments or discussions.


Noh, M., Moon, D. and Parte, L. (2017), "Earnings management using revenue classification shifting – evidence from the IFRS adoption period", International Journal of Accounting & Information Management, Vol. 25 No. 3, pp. 333-355.



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