ACCOUNTING STANDARDS AND EARNINGS QUALITY

Abstract

According to the legislation in vigor, the companies with joint capital Albanian and foreign capital such as commercial banks, insurance
companies, construction companies, transport companies etc use international accounting standards for financial reporting purpose,
meanwhile the Albanian companies use local accounting standards. This paper will explore if the companies that have used international
and local accounting standards have a higher earning quality. Based on the existing literature, the companies that use international
accounting standards have a lower possibility to decrease the profit, to manage the earning as a tool to avoid the reporting of a loss and
have a greater possibility to recognize the loss at the moment it occurs comparing to the companies that do not use the international
accounting standards. All the above features are related with the improvement of the earning quality. Comparing the quality of financial reporting before and after the use of the accounting standards, the perception of the Albanian professionals is that the earning quality is increased after the use of accounting standards.