modified jones model vs standard jones model

May 12, 2022
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I have a question regarding earnings management measurement models jones and modified jones model. I’m studying the effect of IFRS 15 on earnings management and I think that to study a change in a revenue recognition standard in relation to earnings management the modified Jones model would be a better model, since the jones model shows that revenues aren't discretionary, while there is a risk that revenues can be realized sooner or later due to discretion. And since IFRS 15 is a revenue recognition standard and some prior studies show that there is more freedom in recognizing the revenue, the modified Jones model would be better. I’ve got the following feedback: “The modified Jones model removes all additional credit sales from the revenues to calculate normal accruals - why exactly would this matter more under IFRS 15 than otherwise?”
And I’m not really sure how to answer this


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