IDEAS home Printed from
   My bibliography  Save this article

Does IFRIC 15 Matter? The Decision Usefulness of Accelerated Revenue and Earnings Recognition


  • Lau Chee Kwong

    () (Nottingham University Business School, The University of Nottigham Malaysia Campus, Jalan Broga, 43500 Semenyih, Selangor, Malaysia)


The newly issued IFRIC 15 Agreements for the Construction of Real Estate are likely to cause Malaysian property developers to change their revenue recognition policy from a stage-of-completion basis (accelerated) to a completion basis (conservative). In the US, consistent with the approach taken by the Financial Accounting standards Board (FASB), Altomuro, Beatty and Weber (2005) found that reported earnings based on accelerated revenue recognition are value relevant. The subsequent elimination of this industry practice in the US by the Securities and Exchange Commission (SEC) has indeed caused a decline in earnings informativeness. In contrast, this study finds that reported earnings based on the existing accelerated revenue recognition policy are weak and are no better than operating cash flow in predicting the stock returns, market pricing and future operating cash flows of Malaysian property developers. At the same time, the planned new, more conservative revenue recognition policy based on a completion basis may not improve the decision usefulness of financial reporting among property developers, at least not in the short run. Rather, this shift in revenue recognition policy is expected to decrease accrual-based earnings management opportunities, and managers may begin to focus on managing real activities instead (Cohen, Dey, & Lys, 2008).

Suggested Citation

  • Lau Chee Kwong, 2013. "Does IFRIC 15 Matter? The Decision Usefulness of Accelerated Revenue and Earnings Recognition," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(2), pages 49-74.
  • Handle: RePEc:usm:journl:aamjaf00902_49-74

    Download full text from publisher

    File URL:
    Download Restriction: no


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00902_49-74. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division, Penerbit Universiti Sains Malaysia). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.