The Impact of Segmental Reporting Practices on Real Earnings Management: Empirical Evidence from the UK’s Non-Financial FTSE-100 Firms

Abstract

The objective of the current study is to examine the association between real earnings management (REM) strategies and segmental reporting (SR) practices of IFRS-8. A quantitative research methodology based on panel data regression and other relevant methods is adopted in this research. The overall results of the study suggest that IFRS-8's management outlook has enhanced the effectiveness of financial reporting and thereby improved REM practices by providing internal users (i.e., managers) with segmental information which is perceived to be reliable. In accordance with the research findings, standard setters with some insight tend to determine how capital markets see the information provided under new accounting standards such as IFRS-8 in developed countries; thereby ensuring long-term sustainability in a modern, sophisticated financial world. The novel conclusion reached in this study is that a strong, direct link exists between the smooth execution of IFRS-8 SR and practices of REM in real-world business and financial scenarios.