The Economic Consequences Of Recognition Versus Disclosure
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| Author | : Preeti Choudhary |
| Publisher | : |
| Total Pages | : 48 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
I examine how recognition versus disclosure of the fair value of stock compensation affects the compensation decision (the amount and structure of options awarded). The median firm in my sample disclosed fair value option costs equal to about 7% of profits in 1996 and 11% of profits in 2004. When fair value option costs are recognized, I find an average (median) reduction in option grants equal to 9% (0.4%) of absolute net income. The evidence indicates that firms substituted options with restricted stock during fair value recognition; however, I find no evidence of changes in option grants during the fair value disclosure pronouncement. These results suggest that managers and governing boards treat recognition differently from disclosure, such that the inclusion of fair values in summary total figures leads to systematic changes in the structure of contracts, while changes in the valuation method do not lead to such changes.
| Author | : Preeti Choudhary |
| Publisher | : |
| Total Pages | : 103 |
| Release | : 2000 |
| Genre | : |
| ISBN | : 9780549486183 |
| Author | : Shana Clor-Proell |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
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.
| Author | : Ulf Brüggemann |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 162 |
| Release | : 2011-08-31 |
| Genre | : Business & Economics |
| ISBN | : 3834969524 |
Ulf Brüggemann discusses and empirically investigates the economic consequences of mandatory switch to IFRS. He provides evidence that cross-border investments by individual investors increased following the introduction of IFRS.
| Author | : Elizabeth Chuk |
| Publisher | : |
| Total Pages | : 33 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
I examine whether firms alter their behavior in response to changes in accounting standards mandating new financial statement disclosures. While prior research suggests that new recognition rules lead to changes in firm behavior, there is limited evidence that disclosure rules can impact firm behavior. I fill this void in the literature by examining the economic consequences of the mandated disclosures of pension asset composition required under SFAS 132R. Under pension accounting rules, the composition of pension assets is a key determinant of the assumed expected rate of return (ERR) on pension assets. I find that when firms disclose asset composition for the first time under SFAS 132R, firms that are previously using upward biased ERRs respond by (i) increasing asset allocation to high-risk securities and/or (ii) reducing the ERR assumption. While disclosure requirements arguably create less powerful incentives to alter firm decisions than recognition requirements, my findings offer evidence that firms alter their behavior in response to disclosure standards.
| Author | : Christian Leuz |
| Publisher | : |
| Total Pages | : 91 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
This paper surveys the theoretical and empirical literature on the economic consequences of financial reporting and disclosure regulation. We integrate theoretical and empirical studies from accounting, economics, finance and law in order to contribute to the cross-fertilization of these fields. We provide an organizing framework that identifies firm-specific (micro-level) and market-wide (macro-level) costs and benefits of firms' reporting and disclosure activities and then use this framework to discuss potential costs and benefits of regulating these activities and to organize the key insights from the literature. Our survey highlights important unanswered questions and concludes with numerous suggestions for future research.
| Author | : Kun Yu |
| Publisher | : |
| Total Pages | : 436 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
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.
| Author | : Chunqi Zhang |
| Publisher | : |
| Total Pages | : 176 |
| Release | : 2005 |
| Genre | : |
| ISBN | : |
| Author | : David Aboody |
| Publisher | : Now Publishers Inc |
| Total Pages | : 98 |
| Release | : 2010 |
| Genre | : Business & Economics |
| ISBN | : 1601983425 |
Executive Compensation and Financial Accounting provides research perspectives on the interface between financial reporting and disclosure policies and executive compensation. In particular, it focuses on two important dimensions: - the effects of compensation-based incentives on executives' financial accounting and disclosure choices, and - the role of financial reporting and income tax regulations in shaping executive compensation practices. Executive Compensation and Financial Accounting examines the key dimensions of the relation between financial accounting and executive compensation. Specifically, the authors examine the extent to which compensation plans create incentives for executives to make particular financial reporting and disclosure choices. They also examine the extent to which accounting regulation creates incentives for firms to design particular compensation plans for their executives.
| Author | : Jongchan Park |
| Publisher | : |
| Total Pages | : 138 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
