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    Did removing prudence from the Conceptual Framework impact accounting conservatism?

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    Authors
    Conway, Elaine
    Affiliation
    University of Derby
    Issue Date
    2020-04-24
    
    Metadata
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    Abstract
    The International Accounting Standards Board (IASB) removed explicit reference to the concept of prudence within the Conceptual Framework (CF) with effect from September 2010. This paper examines whether practitioner concerns that the removal of prudence might lead to a decrease in accounting conservatism and an increase in earnings management or overstated results were justified. It takes a sample of firms from the UK FTSE350, Australian ASX 300 and the South African JALSH (Johannesburg All Share) and evaluates three popular measures of accounting conservatism over the fourteen-year period of 2003-2016 (seven years pre and post the removal of prudence from the CF). The measures of accounting conservatism used were asymmetric timeliness of earnings, market-to-book ratio and total/non-operating accruals. Using all three measures, there was no evidence that the level of accounting conservatism has reduced during the period following the removal of prudence in the CF in those countries using IFRS. Despite this, the debate around prudence has continued and the IASB has since decided to reinstate it in the 2018 revised CF, effective 1 January 2020.
    Citation
    Conway, E. (2020) 'Did removing prudence from the conceptual framework impact accounting conservatism?' International Journal of Banking, Accounting and Finance, 11(4), pp. 545 - 587.
    Publisher
    Inderscience
    Journal
    International Journal of Banking Accounting and Finance
    URI
    http://hdl.handle.net/10545/625267
    DOI
    10.1504/IJBAAF.2020.110309
    Additional Links
    https://www.inderscience.com/info/inarticle.php?artid=110309
    Type
    Article
    Language
    en
    ISSN
    17553830
    EISSN
    17553849
    ae974a485f413a2113503eed53cd6c53
    10.1504/IJBAAF.2020.110309
    Scopus Count
    Collections
    Derby Business School

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