The Effects of Expenses Recognition and Matching Principle between Revenues and Expenses on the Value Relevance
Asian Tax Journal Vol. 18 No. 2 (2017), pp. 79-102
Abstract
This study examined the difference in the value relevance of recognition of the expenses by recognizing the speed of recognition as the neutral recognition, the acceleration recognition, and the delay recognition. We also analyzed whether there is a difference in the value relevance of according to the level of matching principle between revenues and expenses on the value relevance. The results of this study are as follows. First, the value relevance between profit and stock price is higher in the order of neutral, accelerated, and delayed. Second, in the group with high level of responding to the revenue cost, the relationship between profit and stock price is higher than other groups. The results of this study are as follows. First, the relationship between earnings and stock price is higher than that of intermediate group. This study contributes to the empirical verification that income level, profit quality and value relevance can be differentiated considering cost recognition point. In addition, we propose a new methodology to measure acceleration recognition and delay recognition of cost. These results will provide useful information to stakeholders in the capital market, as well as follow－up researchers studying the principle of revenue－cost response.
Keywords
- matching principle between revenues and expenses
- expenses recognition
- value relevance
- earnings quality
Related Articles
Effect of Earnings Management on Principle of Matching Costs with Revenue
14(3) 9-28
Market Uncertainty and the Value Relevance of Earnings
23(3) 69-92
A Study on the Relationship between Book－Tax Differences and Investment Levels Using Preliminary Earnings Announcements
24(3) 169-194
The Effect of Audits of Internal Control over Financial Reporting on Earnings Management：The Role of Internal Accounting Personnel
23(2) 125-152
The Effect of Dividend on Value Relevance of Future Earnings
22(3) 39-68