Effect of Income Smoothing on Conservatism through Comparing Lack of Time Symmetry in Recognizing Firm's Economic Losses

Theoretically, the more a firm employs profit smoothing, i.e., uses accruals to reduce the variability of profits, the less possibility there is for the timely acknowledgement of future economic losses (i.e., bad economic news) in profits. The aim of this study was to investigate two aspects of accounting information that may be inherently related: profit smoothing practices and conditional conservatism. The statistical population of this research was all firms enlisted in Tehran Stock Exchange that were enlisted between the start of the year 1385 (March 21st 2006) and end of the year 1392 (March 20th 2013) Eckel’s model (1981) was used in this study to classify listed companies as smoothing or non-smoothing, and Basu’s model (1997) was used to quantify the degree of conditional conservatism present in each firm. The results indicated that in smoothing firms' level time asymmetry has been present in recognizing economic losses and in this level of firms the future economic losses would be recognized faster than economic profits

کلیدواژه ها:

Conditional Conservatism ، Profit Smoothing ، Economic Losses