Mandated accounting changes and managerial discretion

Balsam, Steven; Haw, In‐Mu; Lilien, Steven B.

doi:10.1016/0165-4101(94)00374-e

Cited by 57 publications

(41 citation statements)

References 16 publications

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“…It follows, thus, that the timing of gains and losses recognition is important (Balsam, Haw & Lilien, 1995;Francis, Hanna & Vincent, 1996;Gaver & Gaver, 1998). In certain cases, managers may structure their accounting policy choice so as to transfer earnings from "good" accounting years to "bad" years (DeFond & Park, 1997;Han & Wang, 1998;Guidry et al, 1999).…”

Section: Managerial Behaviourmentioning

confidence: 96%

International Financial Reporting Standards and the quality of financial statement information

Iatridis

2010

International Review of Financial Analysis

261

138

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Section: Managerial Behaviourmentioning

confidence: 96%

International Financial Reporting Standards and the quality of financial statement information

Iatridis

2010

International Review of Financial Analysis

261

138

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“…However, Balsam et al (1995) show that firms adopting new FASB standards tend to report incomeincreasing effects for prior years in the income statement (after extraordinary items); and income-decreasing effects directly in retained earnings, thus shielding net income. This evidence suggests that new mandated accounting standards do not account for the greater sensitivity of earnings to bad news than good news.…”

Section: Effect Of Mandated Accounting Changesmentioning

confidence: 99%

The conservatism principle and the asymmetric timeliness of earnings1

Basu

1997

Journal of Accounting and Economics

3,367

215

4,503

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I interpret conservatism as resulting in earnings reflecting 'bad news' more quickly than 'good news'. This interpretation implies systematic differences between bad news and good news periods in the timeliness and persistence of earnings. Using firms' stock returns to measure news, the contemporaneous sensitivity of earnings to negative returns is two to six times that of earnings to positive returns. I also predict and find that negative earnings changes are less persistent than positive earnings changes. Earnings response coefficients (ERCs) are higher for positive earnings changes than for negative earnings changes, consistent with this asymmetric persistence. © 1997 Elsevier Science B.V. All rights reserved.

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“…8 In contrast to many previous income-decreasing standards(Balsam et al 1995), the FASB did not allow firms to take the SFAS OPEB transition obligation directly to retained earnings.…”

mentioning

confidence: 94%