Research On Other Comprehensive Income,Internal Control And Earnings Management

With the increasing complexity of business transactions or events,the status of fair value measurement has become increasingly important,resulting in a large number of items of gains and losses associated with changes in the fair value of assets that are directly credited to owners' equity,reducing the transparency of the earnings report.In order to improve the quality of accounting information and the completeness of information disclosure,the concept of comprehensive income and other comprehensive income is put forward internationally.In the context of international convergence of financial reports,China introduced the concept of other comprehensive income in 2009,explicitly requiring that the total other comprehensive income should be presented in the income statement.In 2014,the Ministry of Finance revised and promulgated the "Accounting Standards for Business Enterprises No.30-Presentation of Financial Statements",formally adding the other comprehensive income into the body of the accounting standards,and requiring the other comprehensive income in the income statement to be reclassified in future periods Gains and losses are classified into two categories,which can not be reclassified to profit or loss and those can reclassified to profit or loss.The continuous revision and improvement of other comprehensive income's presentation methods can improve the transparency of accounting information to a certain extent.Then,whether the amendment of the standards can restrain the earnings management behavior of listed companies reclassified from other comprehensive income into profit and loss,and whether the revision of the standards have the restraining effect on the earnings management in the listed companies without the effectiveness of internal control.Therefore,this article studies the above problems.Based on the revision of the presentation of other comprehensive income in the 2014 financial statements presentation standards,this paper chooses the financial data of A-share listed companies in Shanghai Stock Exchange from 2012 to 2016 as the research sample,puts forward the hypothesis based on the research questions in this article,and uses logistic regression to examine the relationship between the presentation of other comprehensive income and earnings management,and further consider the impact of differences in internal control.The study finds that when the listed company has the motive of smoothing profits,it will use the other comprehensive income to reclassify profit and loss for earnings management.The 2014 standard requires that the amendment of other comprehensive income presentation can effectively restrain the listed companies from such earnings management Further studies have found that listed companies with internal control flaws and non-existing internal control flaws use other comprehensive income reclassifications for earnings management,but listed companies with internal control flaws have a stronger incentive to carry out earnings management,Found that internal control has an inhibitory effect on such earnings management behavior of listed companies;meanwhile,the revision of financial statement presentation criteria has a more significant inhibitory effect on listed companies that have no defects in internal control.Finally,based on the conclusions drawn from the research,this paper presents relevant policy recommendations from the perspectives of accounting standard committee,regulatory agencies,and investors.