Navigasi - Earnings management is an action taken by the management to increase or decrease the reported profit of the unit under its responsibility that has no relationship with the increase or decrease in the company's profitability for the long term.
Earnings management can be interpreted as an earnings management action that affects reported earnings and provides false economic benefits to the company, so that in the long term it will be very disturbing and even harmful to the company.
According to Sulistyanto (20014:), earnings management is: Efforts by company managers to intervene or influence information in financial statements with the aim of deceiving stakeholders who want to know the performance and condition of the company.
According to Schipper in Gumanti (2001:62), earnings management is "Earnings Management is disclosure management in the sense of purposeful intervention in the external reporting process, with intent of obtaining some private gain"
Based on some of the above understanding, it can be concluded that earnings management is an action taken by managers by manipulating accounting data or information so that the amount of profit recorded in the financial statements is in accordance with the wishes of the manager, both for personal and corporate interests.
There are two concepts of accruals in earnings management, namely: discretionary accruals and non-discretionary accruals. Discretionary accrual is the recognition of profit or expense accruals that are free, not regulated and are the choice of management policy.
Non-discretionary accruals are the recognition of reasonable accruals of earnings, which are subject to a generally accepted accounting standard or principle. Non-discretionary accruals are reasonable accruals, and if they are violated, they will affect the quality of financial statements (unfair), therefore the form of accruals analyzed in this study is a form of discretionary accruals which are abnormal accruals and are management policy choices in the selection of accounting methods.
There are three factors that can be associated with the emergence of earnings management practices, namely:
Accruals Management . This factor is usually related to all activities that can affect cash flow and also profits that are personally under the authority of managers (managers discretion).
Application of a Mandatory Accounting Policy. This factor is related to the manager's decision to implement an accounting policy that must be applied by the company, namely between applying it earlier than the stipulated time or postponing it until the time the policy takes effect.
Voluntary change of assets. This factor is usually related to the manager's efforts to replace or change a certain accounting method among the many methods that can be selected that are available and recognized by existing accounting bodies.