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Variable Considerations in ASC 606, Earnings Management and Business Continuity during Crisis

Author

Listed:
  • Mohammed M. Yassin

    (Accounting Department, Faculty of Business, Al-Zaytoonah University of Jordan, Amman 11733, Jordan)

  • Dea’a Al-Deen Al-Sraheen

    (Accounting Department, Al al-Bayt University, Mafraq 25113, Jordan)

  • Khaldoon Ahmad Al Daoud

    (Accounting Department, Yarmouk University, Irbid 21163, Jordan)

  • Mohammad Alhadab

    (Accounting Department, Al al-Bayt University, Mafraq 25113, Jordan)

  • Farouq Altahtamouni

    (Financial Sciences Department, Applied College, Imam Abdulrahman Bin Faisal University, P.O. Box 1982, Dammam 31441, Saudi Arabia)

Abstract

The Financial Accounting Standards Board (FASB) released Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers”, with the aim of enhancing transparency to provide fairer representation and inhibit the misuse of revenues to manipulate earnings. During COVID-19, variable considerations in ASC 606 were used to manage earnings as a tool to help firms survive. The study aimed to test the mediating role of earnings management in influencing the effect of variable considerations in ASC 606 on the continuity of the firm. An online questionnaire was sent to financial reporting preparers in US public shareholding firms; 403 valid questionnaires were received. The results of PLS-SEM revealed that crises such as COVID-19 have highlighted the way in which variable considerations in ASC 606 were exploited to manage firms’ earnings to ensure their survival. Companies resort to showing their best financial performance, beautifying its financial reports by manipulating profits, using flexibility in accounting policies, but this may negatively affect the country’s entire economy by collapsing companies and creating more financial crises that cannot be easily addressed.

Suggested Citation

  • Mohammed M. Yassin & Dea’a Al-Deen Al-Sraheen & Khaldoon Ahmad Al Daoud & Mohammad Alhadab & Farouq Altahtamouni, 2024. "Variable Considerations in ASC 606, Earnings Management and Business Continuity during Crisis," IJFS, MDPI, vol. 12(1), pages 1-17, January.
    • Handle: RePEc:gam:jijfss:v:12:y:2024:i:1:p:1-:d:1312172
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    References listed on IDEAS

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