INCOME SMOOTHING SEBAGAI ALAT PREDIKSI LABA

Abstract

Income smoothing is a form of earnings management that reflects the economic results, not just as the setting, but also it is a desirable appearance management. It is a management effort to suppress variations in the extent to which profits are made possible by accounting principles. From researches that have been made stating, there is information content in the profit/earnings value. It can be used as predictions for future earnings. Theoretically in predicting future earnings value based on previous year profits, earnings value that are less volatile will be difficult to predict because of the possibility of generating bias numbers will be larger, but not the case at the rate of earnings that does not fluctuate will be easier in making predictions or will provide a better prediction rate. One way that can be done is to reduce the variance of earnings changes by smoothing reported earnings growth.