<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>This paper investigates the impact of accounting conservatism on income smoothing as a proxy for accounting manipulation. The study used 993 observations for 133 Algerian companies from 2012 to 2020, where income smoothing was measured by the variations in cash flows relative to earnings. However, conservatism was measured through non-operating accounting accruals, accruals-to-earnings ratio before extraordinary items, and allowances. The results showed that total accruals do not impact income smoothing versus positive impacts from non-operating accruals and allowances to income smoothing. Therefore, the study concluded that accounting conservatism facilitates income smoothing in Algerian companies by extending the discretionary room available for managers to manipulate earnings. These results require accounting regulators to consider the role of conservatism in manipulation when setting or amending accounting standards. They also imply that auditors should give more attention to conservative accounting practices to limit the opportunistic behavior of managers and increase the reliability of financial information.</p>
</abstract>

This paper investigates the impact of accounting conservatism on income smoothing as a proxy for accounting manipulation. The study used 993 observations for 133 Algerian companies from 2012 to 2020, where income smoothing was measured by the variations in cash flows relative to earnings. However, conservatism was measured through non-operating accounting accruals, accruals-to-earnings ratio before extraordinary items, and allowances. The results showed that total accruals do not impact income smoothing versus positive impacts from non-operating accruals and allowances to income smoothing. Therefore, the study concluded that accounting conservatism facilitates income smoothing in Algerian companies by extending the discretionary room available for managers to manipulate earnings. These results require accounting regulators to consider the role of conservatism in manipulation when setting or amending accounting standards. They also imply that auditors should give more attention to conservative accounting practices to limit the opportunistic behavior of managers and increase the reliability of financial information.

Impact of Accounting Conservatism on Income Smoothing: Empirical Evidence from Algeria

University of 20 Août 1955-Skikda, Faculty of Economics, Commerce and Management Sciences

University of Setif 1, Faculty of Economics, Commerce and Management Sciences

Studia Universitatis „Vasile Goldis” Arad – Economics Series

This work is licensed under the Creative Commons Attribution 4.0 International License.

This paper investigates the impact of accounting conservatism on income smoothing as a proxy for accounting manipulation. The study used 993 observations for...

Impact of Accounting Conservatism on Income Smoothing: Empirical Evidence from Algeria

Published Online: Jan 26, 2024

Page range: 37 - 55

Received: Nov 01, 2022

Accepted: Feb 01, 2023

DOI: https://doi.org/10.2478/sues-2024-0002

Keywords
Accounting conservatism, Income smoothing, Accounting accruals, Cash flow from operations, Allowances

© 2024 Bilal Kimouche et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Impact of Accounting Conservatism on Income Smoothing: Empirical Evidence from Algeria

Published Online: Jan 26, 2024

Page range: 37 - 55

Received: Nov 01, 2022

Accepted: Feb 01, 2023

DOI: https://doi.org/10.2478/sues-2024-0002

KeywordsAccounting conservatism, Income smoothing, Accounting accruals, Cash flow from operations, Allowances

© 2024 Bilal Kimouche et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Accounting conservatism, Income smoothing, Accounting accruals, Cash flow from operations, Allowances