IFRS 15: Impact on Earnings Management in the Consumer Goods and Energy Sector

Abstract

The European Union made the choice to promote and make mandatory the use of International Accounting Standards (IAS/IFRS) in order to have standardized accounting principles. In particular, revenue has always been an important figure in the income statements not just for its monetary meaning but also for its importance in the decision – making process of the investors. For that matters one of the last big changes made by the IAS/IFRS boards is the accounting standards concerning revenue with the introduction of “IFRS 15: Revenue from contract with customers”. The first chapter of the thesis is focused on the principle of the previous international accounting standard: IAS 18 – Revenue and IAS 11 – Construction Contracts, the revenue recognition under US GAAP and finally the weakness of the latter which could identify the main reason for the new standard. The second chapter is about the new standard: its scope, the changes that have been made, the five-step model, its importance and literature on the adoption and implementation. In the third chapter there is the literature review on the practices of earnings management. In the following chapter there is the empirical analysis of the thesis which concerns the earnings management topic. The objective of the work is to check whether the predictions made by the big four regarding the impact of IFRS 15 on the earning management in the industries of Building and Construction and Energy are correct and therefore have a positive outcome on quality of accounting information.