Does Recognition Instead Of Disclosure Matter To The Users Of Financial Statements
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Does Recognition Instead Of Disclosure Matter To The Users Of Financial Statements
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Author : Paquita Y. Davis-Friday
language : en
Publisher:
Release Date : 1998
Does Recognition Instead Of Disclosure Matter To The Users Of Financial Statements written by Paquita Y. Davis-Friday and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
This paper uncovers a potential explanation for the discrepancy between Amir (1996) and Choi, Collins, and Johnson (1997) by examining whether the users of financial statement data treat information differently if it is disclosed instead of recognized in the body of the financial statements. Amir (1996) finds that the liability for postretirement benefits other than pensions (PRBs) is value-relevant conditioned on earnings and pension information while Choi et al. (1997) find that the PRB liability is measured with more error than the pension liability and is therefore less reliable. Since Amir's sample consists only of SFAS 106 adopters and the Choi et al. sample includes both adopters and non-adopters (disclosers), we identify a sample of early adopters who disclose an estimate of their anticipated liability in the Management Discussion and Analysis (MDamp;A) or notes to their financial statements. We test whether accounting information disclosed in the MDamp;A or notes (the estimate of the PRB liability) is valued by the market the same as information recognized in the financial statements (the recognized PRB liability). The results indicate that the recognized PRB liability is capitalized at a higher rate than the disclosed liability. Our evidence suggests that the market treats information disclosed in the notes in this context as less reliable than similar information recognized in the body of the financial statements.
Does Recognition Versus Disclosure Matter
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Author : Kun Yu
language : en
Publisher:
Release Date : 2009
Does Recognition Versus Disclosure Matter written by Kun Yu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Abstract: An important area of research and issue of interest for standard setters is whether information disclosure in the footnotes is a substitute for recognition in the financial statements. SFAS 158, issued in 2006, requires the recognition of pension liabilities that were only disclosed in the footnotes under SFAS 87, for the fiscal year ending after Dec. 15, 2006. I empirically examine whether the recognition of the previously disclosed off-balance-sheet pension liabilities affects investors' valuation and firms' contracting costs. I also incorporate levels of investor sophistication in my analyses. Using a sample of firms with pension liabilities that were disclosed under SFAS 87 and subsequently recognized under SFAS 158 from 1999 to 2007, I find that, without considering investor sophistication, SFAS 158 generally does not increase the value relevance of the previously disclosed off-balance-sheet pension liabilities. However, after taking into account investor sophistication, I show that the disclosed off-balance-sheet pension liabilities are more value relevant for firms with a higher level of investor sophistication in the pre-158 period; more importantly, I find that SFAS 158 significantly increases the value relevance of the previously disclosed off-balance-sheet pension liabilities for firms with a low proportion of sophisticated investors, and the increase in the value relevance is less pronounced for firms with a higher proportion of sophisticated investors. Consistent with the contracting theory, I find that requiring the recognition of previously only-disclosed liabilities affects the debt contracting cost and the cost of capital. However, only sophisticated investors appear to understand the effect of SFAS 158 on the debt contracting cost and the stock price. Overall, the results support that recognition affects investors' valuation and firms' contracting costs. The results also highlight the role of the level of investor sophistication in the value relevance of disclosed vs. recognized financial information.
The Impact Of Recognition Versus Disclosure On Financial Information
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Author : Shana Clor-Proell
language : en
Publisher:
Release Date : 2014
The Impact Of Recognition Versus Disclosure On Financial Information written by Shana Clor-Proell and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
We investigate whether recognition on the face of the financial statements versus disclosure in the footnotes influences the amount that financial managers report for a contingent liability. Using an experiment with corporate controllers and chief financial officers, we find that financial managers in public companies expend more cognitive effort and exhibit less strategic bias under recognition than disclosure. This difference appears to be associated with capital market pressures experienced by public company managers as we find that both the cognitive effort and bias exhibited by private company managers are unaffected by placement. As a result, public company managers make higher liability estimates for recognized versus disclosed liabilities. Their liability estimates are similar to those of private company managers for recognition but lower than private company managers' estimates for disclosure. Our results have implications for auditors and financial statement users in evaluating recognized versus disclosed information for public and private companies.
The Value Relevance Of Financial Statement Recognition Vs Disclosure
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Author : Paquita Y. Davis-Friday
language : en
Publisher:
Release Date : 2000
The Value Relevance Of Financial Statement Recognition Vs Disclosure written by Paquita Y. Davis-Friday and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
This study examines whether the market values financial statement data differently if it is disclosed instead of recognized in the body of the financial statements. We identify a sample of 229 SFAS No. 106 adopters who disclose an estimate of their anticipated liability for retiree benefits other than pensions (PRB) in their financial reports prior to the year of recognition. We then test whether the disclosed estimate of the PRB liability is valued differently by the market than is the subsequently recognized PRB liability. We provide modest and model-sensitive evidence that the recognized PRB liability receives more weight than the disclosed liability in market value association tests.
Principles Of Accounting Volume 1 Financial Accounting
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Author : Mitchell Franklin
language : en
Publisher:
Release Date : 2019-04-11
Principles Of Accounting Volume 1 Financial Accounting written by Mitchell Franklin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-04-11 with categories.
The text and images in this book are in grayscale. A hardback color version is available. Search for ISBN 9781680922929. Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today's college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the "why" as well as the "how" aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.
Enhancing Financial Disclosure Standards In Transitional Economies Ii
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Author : Radhakrishna Narasimham
language : en
Publisher: Asian Development Bank
Release Date : 2010-10-01
Enhancing Financial Disclosure Standards In Transitional Economies Ii written by Radhakrishna Narasimham and has been published by Asian Development Bank this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-10-01 with Business & Economics categories.
Public and private investors want timely, accurate financial information about institutions before investing. This requires adherence to internationally accepted financial disclosure standards. However, implementing these standards is a particular challenge for economies in transition from the Soviet-era central planning approach toward a market economy. The Asian Development Bank provided a technical assistance grant (TA 6505- REG) to build capacity to enhance financial disclosure standards in Armenia, Azerbaijan, and Georgia. The book is a compendium of the project's findings, activities, results, and recommendations. It discusses the rationale for the adoption of International Financial Reporting Standards and the enforcement of International Standards on Auditing by legal entities, and explores their use by small and medium-sized enterprises in the three countries. The book is a valuable guide to accountants, auditors, financial institutions, regulators, investors, governments, researchers, and others interested in financial disclosure practices and progress of these transitional nations.
The Decision Usefulness Of Additional Fair Value Disclosures
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Author : Theresa Herrmann
language : en
Publisher: Springer
Release Date : 2018-12-28
The Decision Usefulness Of Additional Fair Value Disclosures written by Theresa Herrmann and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-12-28 with Business & Economics categories.
Conducting an experiment Theresa Herrmann investigates why nonprofessional investors fail to incorporate disclosures on fair value estimates into their investment decision and what causes this exclusion. Differentiating between different types of disclosures and the development of the fair value (gain vs. loss) the results indicate that with a fair value gain, none of the disclosure information increases decision usefulness, irrespective of the presentation format. When a fair value loss occurs, fair value disclosures presented in a salient presentation format decrease decision usefulness. Thus, investors have varying information needs that are strongly linked to the development of a firm’s key asset.
Financial Reporting And Disclosure Practices
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Author : Peddina Mohana Rao
language : en
Publisher: Deep and Deep Publications
Release Date : 2000
Financial Reporting And Disclosure Practices written by Peddina Mohana Rao and has been published by Deep and Deep Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Disclosure in accounting categories.
Disclosure Overload A Professional User Perspective On The Usefulness Of General Purpose Financial Statements
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Author : Michael S. Drake
language : en
Publisher:
Release Date : 2019
Disclosure Overload A Professional User Perspective On The Usefulness Of General Purpose Financial Statements written by Michael S. Drake and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We survey a broad group of professionals who use financial statements as part of their job to assess the extent to which they believe financial reports suffer from disclosure overload. Consistent with the claims made by regulators, auditors, and preparers, we find that a significant portion of professional financial statement users believe disclosure overload is a problem. However, this group is in the minority, with about twice as many professional users believing that overload is not a problem and that more information should be disclosed in financial statements. This dichotomy presents a difficult challenge to standard setters aiming to improve financial reporting by altering the amount of information provided in financial reports. To that end, we complement existing research on the informativeness of accounting information by measuring perceptions of the usefulness of the various financial statements and their footnotes across a variety of tasks. Finally, we develop a framework that could be useful in developing a theory of disclosure overload.
The Real Effects Of Financial Statement Recognition
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Author : Riddha Basu
language : en
Publisher:
Release Date : 2018
The Real Effects Of Financial Statement Recognition written by Riddha Basu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
We examine whether the recognition versus disclosure of identical accounting information affects the credit rating process and ultimately corporate credit ratings. The primary input into corporate credit ratings is adjusted financial statements, which the rating agencies create by modifying reported financial statements to reflect credit-relevant items not recognized under U.S. GAAP. The rating agencies have claimed that this process means that accounting changes that move previously disclosed information onto firms' financial statements have virtually no effect on firms' adjusted financial statements or their credit ratings. We show that this claim is incorrect using the implementation of Financial Accounting Standards Board Statement No. 158 (“SFAS158”). This standard did not prescribe any new financial information. Rather, it simply required the balance sheet recognition of a previously disclosed item. We find that firms recognizing an additional pension liability due to SFAS158 had lower leverage on the rating agency adjusted financial statements and received higher corporate credit ratings. This counterintuitive result occurs because the rating agency adjustments made pre-SFAS158 were punitive relative to the combination of the SFAS158 changes and the rating agency adjustments made post-SFAS158. The difference in rating agency adjustments pre- and post-SFAS158 was primarily due to rating agency adjustments in the pre-SFAS158 period that did not account for minimum liability adjustments, an aspect of pension accounting eliminated by SFAS158. Overall, our results indicate that SFAS158 generated real changes in rating agency adjustments, and that these changes had real consequences for firms' credit ratings.