Does Recognition Versus Disclosure Matter
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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.
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.
Recognition Versus Disclosure
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Author : Doron Israeli
language : en
Publisher:
Release Date : 2015
Recognition Versus Disclosure written by Doron Israeli and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
The application of International Accounting Standard (IAS) 40, Investment Property, in the European Union created a unique setting to study the implications of a decision to recognize versus disclose financial statements' items because in this setting recognized and disclosed investment-property-related amounts share a common measurement base, i.e., fair value. I utilize this setting to (1) explore factors associated with a firm's choice to recognize versus disclose fair values of investment properties, (2) test whether recognized and disclosed amounts are valued equally by equity investors, and (3) determine whether these amounts exhibit equivalent associations with future financial outcomes. To correct for self-selection concerns and assure I compare analogous amounts, I develop a selection model and construct investment-property-related amounts that differ only in whether their components are recognized or disclosed. I find that (1) contractual and asset pricing incentives help explain the recognition versus disclosure choice, (2) investors place smaller valuation weights on disclosed amounts, and (3) recognized and disclosed amounts exhibit statistically equivalent associations with future changes in net rental income and cash flows from operations. Taken together, the evidence suggests that managers are opportunistic in making the recognition versus disclosure choice and that even when recognized and disclosed amounts share an equivalent measurement base and are equally relevant for future financial outcomes, investors weight disclosed information less heavily in determining a firm's value.
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.
Disclosure Versus Recognition
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Author : Jeremy Michels
language : en
Publisher:
Release Date : 2016
Disclosure Versus Recognition written by Jeremy Michels and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Standard setters explicitly state that disclosure should not substitute for recognition in financial reports. Consistent with this directive, prior research shows that investors find recognized values more pertinent than disclosed values. However, it remains unclear whether reporting items are recognized because they are more relevant for investing decisions, or whether requiring recognition itself prompts differing behavior on the part of firms and investors. Using the setting of subsequent events, I identify the differential effect of requiring disclosure versus recognition in a setting where the accounting treatment of an item is exogenously determined. For comparable events, I find a stronger initial market response for firms required to recognize relative to firms that must disclose, although the large magnitude of the identified effect calls into question whether this difference can be attributed to accounting treatments alone. In examining various reasons for the stronger market response to recognized values, I fail to find support for the hypothesis that this difference is due to differential reliability of disclosed and recognized values. I do find some evidence that investors underreact to disclosed events, consistent with investors incurring higher processing costs when using disclosed information.
Recognition Versus Disclosure Of Fair Values
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Author : Maximilian A. Müller
language : en
Publisher:
Release Date : 2013
Recognition Versus Disclosure Of Fair Values written by Maximilian A. Müller and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Research Standard Setting And Global Financial Reporting
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Author : Mary E. Barth
language : en
Publisher: Now Publishers Inc
Release Date : 2007
Research Standard Setting And Global Financial Reporting written by Mary E. Barth and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Business & Economics categories.
Research, Standard Setting, and Global Financial Reporting aids researchers in conducting research relevant to global financial reporting issues, particularly those of interest to financial reporting standard setters. Research, Standard Setting, and Global Financial Reporting describes the relation between research and standard-setting issues; explains how a variety of research designs can be used to address questions motivated by standard-setting issues, including valuation research and event studies; offers examples of research addressing a specific global standard-setting issue - use of fair value in measuring accounting amounts; offers further opportunities for future research on specific standard-setting topics by providing motivating questions relating to the major topics on the agendas of the FASB and IASB; explains how the IASB aims to achieve its mission of developing a single set of high quality accounting standards that are accepted worldwide; summarizes extant evidence on the relative quality of accounting amounts across global standard-setting regimes and whether global financial reporting is achievable or even desirable. Research, Standard Setting, and Global Financial Reporting examines opportunities for future research on issues related to globalization of financial reporting by identifying motivating questions that are potentially avenues for future research.
Financial Instruments
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Author : International Accounting Standards Committee
language : en
Publisher:
Release Date : 2000
Financial Instruments written by International Accounting Standards Committee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Accounting categories.
Accounting For Biological Assets
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Author : Rute Gonçalves
language : en
Publisher: Routledge
Release Date : 2017-10-16
Accounting For Biological Assets written by Rute Gonçalves and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-10-16 with Business & Economics categories.
This book explores accounting for biological assets under IAS 41 – Agriculture, and explains the recent adjustments introduced by the IASB which allow firms to choose between cost or revaluation models concerning mature bearer plants. Identifying the firm and country-level drivers that inform the disclosure and measurement practices of biological assets, this concise guide examines the value relevance of measuring those assets at fair value. It also analyses how firm and country-level drivers explain the differences in the disclosure level and practices used to measure biological assets under IAS 41. Finally, it evaluates whether there is a difference in the relevance of biological assets among the listed firms with high and low disclosure levels on biological assets. Based on a major international study of a wide selection of firms and country-level drivers, this book is vital for standard setters, stakeholders, students, accountants and auditors who need to understand disclosure and measurement practices of biological assets under IAS 41.
Ifrs 2
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Author : International Accounting Standards Board
language : en
Publisher:
Release Date : 2004
Ifrs 2 written by International Accounting Standards Board and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Accounting categories.