The Practice of Earnings Management: Long Term and Short Term Discretionary Accrual Model (Empirical Studies On index of LQ-45 during 2004 to 2010 period)

Abstract

This research aims to analyze the pattern of earnings management practices by the long term and short term discretionary accrual model in LQ - 45 during 2004 to 2010. The samples are 165 firms by using the purposive sampling method. Based on the results of descriptive statistic analysis, earnings management practices in the long term discretionary accrual models tend to use a pattern of earnings increasing. While the practice of earnings management by short term discretionary accrual models tend to use pattern of earnings decreasing. The pattern of increasing earnings are carried by manipulating the amount of net income and total assets owned, the removal of fixed assets and intangible assets, recognizing the various expenditures as costs, changes in accounting methods to change the method of depreciation of fixed assets. Usage the pattern decrease in earnings figures are carried by manipulating the use of accounting methods: recording of inventory, other current assets recognition less, to reduce accounts receivable, to increase other current liabilities, recognized expenses in the future, the losses in the current period that are still recognized the receivable is recognized as a cost, and the reserve accounts of higher losses. Furthermore, from the results of Wilcoxon test states there are significant differences between long term discretionary accrual models with short-term discretionary accruals in earnings management practice (Prob. value 0,000). The future study, it would be added the other model such as real management and then compare among these models.