The Effect of Differences in Accounting and Fiscal Profit on Profit Persistence with Accrual Components as Moderation Variables in Banking Companies Listed on the Indonesia Stock Exchange
Introduction
In the world of accounting, the difference between accounting profit and fiscal profit is often a major concern, especially in the context of banking companies. This study aims to understand how these differences affect earnings persistence by using accrual components as moderation variables. The focus of this research is to banking companies listed on the Indonesia Stock Exchange during the 2013 to 2015 period. The data used in this study were taken from the annual reports of each company published through the official website of the Indonesia Stock Exchange (www.idx.co.id ).
The Importance of Understanding Accounting and Fiscal Profit
Accounting profit and fiscal profit are two different measures of a company's financial performance. Accounting profit is calculated based on generally accepted accounting principles (GAAP), while fiscal profit is calculated based on tax regulations. The difference between these two profits can occur due to differences in revenue and cost recognition, which causes differences in the way the company calculates their profits. This study reveals the importance of differences in earnings in the context of earnings persistence.
Research Methodology
The analysis method applied in this study is a quantitative method with multiple regression. Variables analyzed include differences in accounting and fiscal profit that is proxied through three categories: positive differences, negative differences, and small differences. Profit persistence is measured as a dependent variable, while the accrual component functions as a moderation variable. This study involved 27 banking companies listed on the Indonesia Stock Exchange.
Research Result
The results showed that large and large-negative large and large differences have a significant negative effect on the persistence of profit partially. Meanwhile, a small difference in profit shows a significant positive effect. In simultaneous analysis, all independent variables - differences in large, large, negative, and small profitable profits - simultaneously have a significant effect on earnings persistence. Interestingly, the accrual variable is proven to be able to moderate the effect of the three types of profit differences on earnings persistence, indicating that accruals have an important role in increasing the accuracy of profit reporting.
The Role of Accruals in Earnings Persistence
By using accrual as a moderation variable, this research highlights the importance of revenue recognition and costs in managing earnings. Accrual can provide additional information about the company's financial performance, which is not always reflected in cash profit. This shows that companies that manage their accruals well can increase earnings persistence even though there are differences in accounting and fiscal profit.
The Impact of Profit Differences on Earnings Persistence
Profit persistence is the ability of earnings to be maintained in the following periods. In this study, profits resulting from positive and negative differences indicate unstable fluctuations, thus affecting the reliability of reported earnings. On the other hand, a small difference in profit reflects consistency and stability, which shows that the profit is more reliable in the prediction of the company's future performance.
Conclusion
Overall, this study provides valuable insights on the effect of differences in accounting and fiscal profit on earnings persistence, taking into account the accrual component as a moderating factor. These findings are not only relevant for banking companies listed on the Indonesia Stock Exchange, but also for other stakeholders concerned in financial performance analysis. This research is expected to be a reference for further research in the field of accounting and finance, as well as providing enlightenment for practitioners and academics who want to understand the complex relationship between accounting profit, fiscal profit, and profit persistence.
Recommendations for Future Research
This study provides a foundation for further research in the field of accounting and finance. Future research can explore the impact of other factors on earnings persistence, such as the role of management accounting and the impact of financial reporting standards on earnings persistence. Additionally, future research can investigate the relationship between earnings persistence and other financial performance metrics, such as return on equity and return on assets.
Limitations of the Study
This study has several limitations. Firstly, the study only focuses on banking companies listed on the Indonesia Stock Exchange, which may not be representative of all companies in the financial sector. Secondly, the study only uses data from the 2013 to 2015 period, which may not be representative of the current market conditions. Finally, the study only uses a quantitative method, which may not capture the nuances of the complex relationship between accounting profit, fiscal profit, and profit persistence.
Conclusion
In conclusion, this study provides valuable insights on the effect of differences in accounting and fiscal profit on earnings persistence, taking into account the accrual component as a moderating factor. These findings are not only relevant for banking companies listed on the Indonesia Stock Exchange, but also for other stakeholders concerned in financial performance analysis. This research is expected to be a reference for further research in the field of accounting and finance, as well as providing enlightenment for practitioners and academics who want to understand the complex relationship between accounting profit, fiscal profit, and profit persistence.Q&A: The Effect of Differences in Accounting and Fiscal Profit on Profit Persistence
Q: What is the main focus of this study?
A: The main focus of this study is to understand how the differences between accounting profit and fiscal profit affect earnings persistence in banking companies listed on the Indonesia Stock Exchange.
Q: What are accounting profit and fiscal profit?
A: Accounting profit is calculated based on generally accepted accounting principles (GAAP), while fiscal profit is calculated based on tax regulations. The difference between these two profits can occur due to differences in revenue and cost recognition.
Q: What is profit persistence?
A: Profit persistence is the ability of earnings to be maintained in the following periods. It is an important metric for investors and analysts to evaluate a company's financial performance.
Q: What is the role of accruals in earnings persistence?
A: Accruals can provide additional information about a company's financial performance, which is not always reflected in cash profit. Companies that manage their accruals well can increase earnings persistence even though there are differences in accounting and fiscal profit.
Q: What are the implications of this study for banking companies listed on the Indonesia Stock Exchange?
A: This study highlights the importance of managing accruals and revenue recognition in order to increase earnings persistence. Banking companies listed on the Indonesia Stock Exchange should pay attention to these factors in order to improve their financial performance.
Q: What are the limitations of this study?
A: This study has several limitations, including the focus on banking companies listed on the Indonesia Stock Exchange, the use of data from the 2013 to 2015 period, and the use of a quantitative method.
Q: What are the recommendations for future research?
A: Future research can explore the impact of other factors on earnings persistence, such as the role of management accounting and the impact of financial reporting standards on earnings persistence.
Q: What are the implications of this study for financial analysts and investors?
A: This study provides valuable insights on the effect of differences in accounting and fiscal profit on earnings persistence. Financial analysts and investors should take into account these factors when evaluating a company's financial performance.
Q: What are the implications of this study for accounting and finance professionals?
A: This study highlights the importance of understanding the complex relationship between accounting profit, fiscal profit, and profit persistence. Accounting and finance professionals should pay attention to these factors in order to improve their financial reporting and analysis skills.
Q: What are the implications of this study for policymakers?
A: This study provides insights on the importance of financial reporting standards and the impact of accruals on earnings persistence. Policymakers should take into account these factors when developing financial reporting standards and regulations.
Q: What are the implications of this study for the Indonesia Stock Exchange?
A: This study highlights the importance of financial reporting standards and the impact of accruals on earnings persistence. The Indonesia Stock Exchange should take into account these factors when developing regulations and standards for listed companies.