Accruals based Real earnings management in relation to the introduction of IFRS

In 2005, the use of the International Financial Reporting Standards (IFRS) became mandatory for all European listed companies. With a combination of stringent rules and subjectivity, the new accounting standards tried to decrease the use of earnings management. Earnings management can be performed by two methods: accruals-based and real activities. The main question of this thesis is about the influence the introduction of IFRS in 2005 on the use of the two methods for performing earnings management. With data of 95 companies from the French Civil law Countries The Netherlands, Belgium and France, and the use of the Modified Jones model (1995) and the model developed by Roychowdhury (2006) is tried to answer this main question. The results of the research show a significant increase of accruals-based and no significant difference in the use of real earnings management by the introduction of IFRS in 2005.