중단영업손익의 구성항목을 이용한 이익조정

This study examines whether managers engage in classification shifting within an income statement when reporting discontinued operations. Using a methodology similar to McVay(2006), Barua et al.(2010), and Lee et al.(2008) as well as data of Korean firms which provide components of discontinued operations, we find evidence suggesting that managers inflate recurring income subtotals, such as operating income and income from continuing operations, by engaging in classification shifting using discontinued operations. Specifically, our findings indicate that managers shift (1) operating expenses from continuing operations to those from discontinued operations and (2) revenues from discontinued operations to those from continuing operations. We also find evidence suggesting that managers use various components of discontinued operations in order to avoid reporting losses in continuing operations as well as a decline in income from continuing operations from the previous year. Finally, we find that, since the adoption of Korean International Financial Reporting Standards (K-IFRS), the magnitude of classification shifting using discontinued operations has decreased. Overall, our findings can help standard setters and other users of financial statement information better understand firms’ business practices and reporting behaviors.