We show that SEO firms engage in real activities manipulation, and the decline in post-SEO performance due to the real activities management is more severe than that due to accrual management. Our ...evidence is important, because it shows that post-SEO operating underperformance is driven not just by accrual reversals, but also reflects the real consequences of operational decisions made to manage earnings. We also show how firms’ choices of real versus accrual-based earnings management activities around SEOs vary predictably as a function of the firm's ability to use accrual management and the costs of doing so.
We examine whether application of International Accounting Standards (IAS) is associated with higher accounting quality. The application of IAS reflects combined effects of features of the financial ...reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do matched sample firms applying non-U.S. domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the postadoption differences. Firms applying IAS generally evidence an improvement in accounting quality between the pre- and postadoption periods. Although we cannot be sure our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate effects of both.
Advances in Accounting Behavioral Research publishes high-quality research encompassing all areas of accounting and addressing a broad range of issues that affect the users, preparers, and assurers ...of accounting information. Further, this research incorporates theory from, and contributes knowledge and understanding to, applied psychology, sociolog.
Standardization and harmonization of accounting practices is a fundamental element of a global business environment. Achieving this is a complex process that involves technical and political ...negotiation. The International Accounting Standards Committee (IASC) was the organization that pioneered this process on a world-wide basis. The IASC prepared the way for the International Accounting Standards Board (IASB) and its International Financial Reporting Standards, which since 2005 have held the dominant influence over the financial reporting of thousands of listed companies in the European Union, as well as in many other countries. The forces and influences that shaped the formation of the IASB were intimately connected with the historical organization and operation of its predecessor, the IASC, and so to understand the standards enforced in financial reporting today, a historical understanding of the IASC is required. Financial Reporting and Global Capital Markets does just this. It examines the history of the IASC from 1973 to 2000, including its foundation, operation, changing membership and leadership, achievements and setbacks, the development of its standards, and its restructuring leading up to the creation of the IASB in 2001. The book also studies the impact of the IASC's standards on national standard setting and on accounting practice in developed and developing countries, as well as the impact on the IASC of the policies and positions of the UN, the OECD, the US Securities and Exchange Commission, the International Organization of Securities Commissions, and the European Commission. It will be of vital interest to all concerned with accounting developments in a global environment, be they academics, policy-makers, or professionals. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/management/9780199296293/toc.html
Marking-to-Market: Panacea or Pandora's Box? PLANTIN, GUILLAUME; SAPRA, HARESH; SHIN, HYUN SONG
Journal of accounting research,
20/May , Letnik:
46, Številka:
2
Journal Article
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Financial institutions have been at the forefront of the debate on the controversial shift in international standards from historical cost accounting to mark-to-market accounting. We show that the ...trade-offs at stake in this debate are far from one-sided. While the historical cost regime leads to some inefficiencies, marking-to-market may lead to other types of inefficiencies by injecting artificial risk that degrades the information value of prices, and induces suboptimal real decisions. We construct a framework that can weigh the pros and cons. We find that the damage done by marking-to-market is greatest when claims are (1) long-lived, (2) illiquid, and (3) senior. These are precisely the attributes of the key balance sheet items of banks and insurance companies. Our results therefore shed light on why banks and insurance companies have been the most vocal opponents of the shift to marking-to-market.
“Sustainability accounting” and related terms are being used with greater frequency at academic conferences and in corporate practice. This raises the question of the relationship between accounting ...and sustainability and the role of accounting for sustainability, as well as what could be understood by sustainability accounting. The paper reviews the literature on sustainability accounting from an information management perspective and distinguishes different interpretations of sustainability accounting.
The term "audit style" is used to characterize the unique set of internal working rules of each Big 4 audit firm for the implementation of auditing standards and the enforcement of GAAP within their ...clienteles. Audit style implies that two companies audited by the same Big 4 auditor, subject to the same audit style, are more likely to have comparable earnings than two firms audited by two different Big 4 firms with different styles. By comparable we mean that two firms in the same industry and year will have a more similar accruals and earnings structure. For a sample of U.S. companies for the period 1987 to 2011, we find evidence consistent with audit style increasing the comparability of reported earnings within a Big 4 auditor's clientele.
This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a ...major milestone toward financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced for banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption.
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