Discussion of 'Earnings Management Using Asset Sales: An International Study of Countries Allowing Noncurrent Asset Revaluation.'

Article Abstract:

The historical cost model in financial management has long been criticized because of the opportunities it provides for the manipulation of reported corporate earnings through the timing of asset sales. The study contributed by Ervin L. Black, Keith F. Sellers and Tracy S. Manly exhibits three weaknesses, namely, it does not give an allowance for merger and takeover activity, excludes zero asset sale income cases and features differential discard rates in arriving at the UK Australia and New Zealand samples.

Criticism and interpretation, Black, Ervin L., Sellers, Keith F., Manly, Tracy S.

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Earnings management using asset sales: an international study of countries allowing noncurrent asset revaluation

Article Abstract:

Much research has found that corporate managers frequently respond to a broad variety of incentives by routinely manipulating reported financial information. These actions have potentially significant consequences to many including investors, creditors and corporate management. It is within this context that a study was done to examine UK asset revaluers and non-revaluers and to evaluate the effects of accounting standards on earnings management behavior in an international setting.

Asset & Risk Management, Case studies

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Fixed asset revaluation and equity depletion in the UK

Article Abstract:

Accounting standards in the UK allow goodwill to be written off to the balance sheet, and for fixed assets to be revalued by management. The effect of this on different financial indicators is examined.

Standards, Analysis, Valuation, Goodwill (Business), Fixed assets

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