Accounting losses and earnings conservatism: Evidence from Australian Generally Accepted Accounting Principles

Balkrishna, H; Coulton, JJ; Taylor, SL

Accounting losses and earnings conservatism: Evidence from Australian Generally Accepted Accounting Principles

Balkrishna, H Coulton, JJ Taylor, SL

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2007, 47 (3), pp. 381 - 400
Issue Date:: 2007-09-01

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Field	Value	Language
dc.contributor.author	Balkrishna, H	en_US
dc.contributor.author	Coulton, JJ	en_US
dc.contributor.author	Taylor, SL https://orcid.org/0000-0001-8870-4966	en_US
dc.date.issued	2007-09-01	en_US
dc.identifier.citation	Accounting and Finance, 2007, 47 (3), pp. 381 - 400	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10274
dc.description.abstract	We provide evidence on three important aspects of Australian financial reporting; namely, the characteristics of losses, the extent to which Australian firms' earnings are conditionally conservative (i.e. bad news is reflected in earnings more quickly than good news) and the extent to which losses reflect incrementally greater conditional conservatism. We find evidence that loss incidence in Australia is frequent, with around 40 per cent of the sample firm-years from 1993 to 2003 being losses. Losses are also surprisingly persistent, and the probability of loss reversal declines monotonically as the history of losses extends. Although conditional conservatism is also shown to be a pervasive aspect of Australian Generally Accepted Accounting Principles, we demonstrate that it is more evident among loss observations. This result is robust across different methods of capturing conditional conservatism, and supports the conclusion that the relatively high frequency of losses is, at least in part, a reflection of conservative reporting. © 2007 AFAANZ.	en_US
dc.relation.ispartof	Accounting and Finance	en_US
dc.relation.isbasedon	10.1111/j.1467-629X.2007.00218.x	en_US
dc.subject.classification	Accounting	en_US
dc.title	Accounting losses and earnings conservatism: Evidence from Australian Generally Accepted Accounting Principles	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	47	en_US
utslib.for	150103 Financial Accounting	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	47	en_US

Abstract:

We provide evidence on three important aspects of Australian financial reporting; namely, the characteristics of losses, the extent to which Australian firms' earnings are conditionally conservative (i.e. bad news is reflected in earnings more quickly than good news) and the extent to which losses reflect incrementally greater conditional conservatism. We find evidence that loss incidence in Australia is frequent, with around 40 per cent of the sample firm-years from 1993 to 2003 being losses. Losses are also surprisingly persistent, and the probability of loss reversal declines monotonically as the history of losses extends. Although conditional conservatism is also shown to be a pervasive aspect of Australian Generally Accepted Accounting Principles, we demonstrate that it is more evident among loss observations. This result is robust across different methods of capturing conditional conservatism, and supports the conclusion that the relatively high frequency of losses is, at least in part, a reflection of conservative reporting. © 2007 AFAANZ.

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http://hdl.handle.net/10453/10274