Annales Universitatis Apulensis Series Oeconomica, 17(1), 2015, 58-81 58 IMPLICATIONS OF IFRS ADOPTION ON EARNINGS QUALITY, EMPIRICAL CASE FOR ROMANIAN ENVIRONMENT Burca Valentin 1 Mates Dorel 2 Abstract: Globalization process has determined visible changes on international accounting regulation, describing a predictive direction of financial reporting development towards IFRS adoption. IFRS is perceived, within the international accounting convergence project, as the unique financial reporting language which lead to more comparable financial information, a higher transparency and an improvement of value relevance. Romanian IFRS adoption case is a specific as the main reasons determining IFRS adoption were mainly defined by the pressure of the international financial institutions and the political factor, not by market-driven motivations. Mandatory IFRS adoption hasn’t generated the expected economic benefits as the incentives for a real adoption did not cover the high implementation costs. Our study is aimed to check earnings quality ex-ante and ex-post IFRS adoption. Overall, there is evidence that earnings quality increase, but not in a spectacular proportion as the differences between local GAAP and IFRS regarding the main controversial accounting topics are significantly reduced along the last ten year. Key words: IFRS, accruals, earnings management, regression. JEL: M40, M41, G33. Introduction Earnings quality subject is still recent as there is a vivid debate around motivations, determinants and consequences of earnings management. Earnings management practices represent a reality we can’t deny because of the gaps between accounting system and the economic system dynamics. A significant part is represented by the practices of manipulating earnings through accounting choice which give managers the opportunity to use multiple accounting choices for treatments. The freedom assured by the overt and covert options allowed by IFRS is clearly affecting the quality of the financial information, leading to moral hazard and adverse selection that hamper efficient investment (Biddle et. al., 2009). Shortly, financial reporting quality can be defined as the extent to which financial statements provide true and fair information about the financial position and economic performance of the reporting entity. Beyond general accounting principles, the central role of the qualitative characteristics, on this direction, is confirmed by Nobes & Stadler (2014) study, which reveal that managements’ accounting decisions are regularly referred to qualitative characteristics such as comparability, faithful representation or understandability. This study is essential, as there are outlined many times contradictory situations between accounting principles and qualitative characteristics (Gunther et. al., 2014). We subscribe to prof. Ristea & Dumitru (2012) definition, who considered the liberty on accounting choice will actually represent a balance between value relevance and credibility. But this would not be enough, as disclosed financial information can be affected be uncertainty, or has 1 PhD Student West University of Timisoara 2 PhD Professor West University of Timisoara