The effect of non-recurring item transactions on the possibility of firms to smooth income: the case of Indonesian listed firms

T Trisanti - Jurnal Akuntansi dan Auditing Indonesia, 2013 - journal.uii.ac.id
Jurnal Akuntansi dan Auditing Indonesia, 2013journal.uii.ac.id
This research examines one of the prevalent examples of creative accounting, which is the
income smoothing. Income smoothing is defined as a deliberate dampening of fluctuations
about some level of earnings considered to be normal for the firm (Chong, 2008). In this
study, incomesmoothing practices of Indonesian listed companies are detected through
empirical tests using non-recurring item transactions as income smoothing instrument.
Income smoothing is accepted as motivation of non-recurring item transactions. The data …
Abstract
This research examines one of the prevalent examples of creative accounting, which is the income smoothing. Income smoothing is defined as a deliberate dampening of fluctuations about some level of earnings considered to be normal for the firm (Chong, 2008). In this study, incomesmoothing practices of Indonesian listed companies are detected through empirical tests using non-recurring item transactions as income smoothing instrument. Income smoothing is accepted as motivation of non-recurring item transactions. The data used are the financial reports of each sample company, which obtained through DataStream from 2009-2013. Sample firms are classified as smoothers and non-smoothers using modified Moses smoothing behavior index (Atik, 2009). Results show that possible motivation of non-recurring items transactions are income smoothing practices. Logistic regression result show that independent variables such as profitability, debt financing have significant influence to income smoothing practices but company size have no significant influences.
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