Accounting manipulation has been the subject of accounting discussions across the world, especially during times of financial crises. This article investigates the different trends of the probability of accounting manipulation within the agribusiness industry with respect to US and EU-based companies. We will be referring to the Beneish Model (1999, 2013), while using the Orbis Bureau Van Dijk database. We will be testing the existence of earnings management (EM) and comparing the final scores from US and EU companies along a trend line in order to assess whether there is a relation between accounting standard adoption (US GAAP or IFRS) and EM propensity. Main findings have shownthat EU-based companies adopting IFRS appear to be more inclined to earnings management; while, on the contrary, the probability of earnings management tends to be lower for US-based companies adopting US GAAP on average. This could be explained by considering the different provisions under IFRS and US GAAP for agribusiness companies. In fact, accounting for EU agricultural producers is based on IAS 41-Agriculture, whereas companies adopting US GAAP should follow the Financial Accounting Standards Board Codification 905 guidance. Such preliminary analysis has allowed us to argue that, ceteris paribus, IFRS adoption leaves more room for earnings manipulation than US GAAP.

Earnings Manipulation in the Agribusiness Industry: Evidence from US and EU Listed Companies

DE LUCA, Francesco
;
2016-01-01

Abstract

Accounting manipulation has been the subject of accounting discussions across the world, especially during times of financial crises. This article investigates the different trends of the probability of accounting manipulation within the agribusiness industry with respect to US and EU-based companies. We will be referring to the Beneish Model (1999, 2013), while using the Orbis Bureau Van Dijk database. We will be testing the existence of earnings management (EM) and comparing the final scores from US and EU companies along a trend line in order to assess whether there is a relation between accounting standard adoption (US GAAP or IFRS) and EM propensity. Main findings have shownthat EU-based companies adopting IFRS appear to be more inclined to earnings management; while, on the contrary, the probability of earnings management tends to be lower for US-based companies adopting US GAAP on average. This could be explained by considering the different provisions under IFRS and US GAAP for agribusiness companies. In fact, accounting for EU agricultural producers is based on IAS 41-Agriculture, whereas companies adopting US GAAP should follow the Financial Accounting Standards Board Codification 905 guidance. Such preliminary analysis has allowed us to argue that, ceteris paribus, IFRS adoption leaves more room for earnings manipulation than US GAAP.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11564/663102
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