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Discretionary reporting and analyst forecasts of operating income under IFRS

Author

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  • Ha, Wonsuk
  • Han, Seung-youb
  • Lee, Woo-Jong
  • Lim, Youngdeok

Abstract

Leveraging the unique institutional features of Korea's adoption of International Financial Reporting Standards (IFRS) in 2011, we examine analysts' and investors' reactions to the elimination of standardized OI reporting. We find that financial analysts are less likely to issue OI forecasts immediately after IFRS adoption. Additionally, the accuracy of OI forecasts declines compared with sales or net income forecasts. Consequently, equity investors become less responsive to analysts' OI forecast revisions. However, these adverse effects dissipate after 2012 when regulators intervened and reinstated the OI definition used prior to IFRS adoption. Our findings support the International Accounting Standards Board's recent initiative to include earnings subtotals in financial reporting (i.e., IFRS 18).

Suggested Citation

  • Ha, Wonsuk & Han, Seung-youb & Lee, Woo-Jong & Lim, Youngdeok, 2025. "Discretionary reporting and analyst forecasts of operating income under IFRS," The British Accounting Review, Elsevier, vol. 57(6).
    • Handle: RePEc:eee:bracre:v:57:y:2025:i:6:s0890838925000848
    DOI: 10.1016/j.bar.2025.101634
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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