Economic Consequences of Mandated Accounting Disclosures: Evidence from Pension Accounting Standards

2012 ◽  
Author(s):  
Elizabeth Chuk
Keyword(s):  
Accounting Standards ◽  
Economic Consequences ◽  
Pension Accounting ◽  
Accounting Disclosures

Economic Consequences of Mandated Accounting Disclosures: Evidence from Pension Accounting Standards

2012 ◽  
Vol 88 (2) ◽  
pp. 395-427 ◽  
Author(s):  
Elizabeth C. Chuk
Keyword(s):  
Asset Allocation ◽  
Firm Behavior ◽  
Accounting Standards ◽  
Economic Consequences ◽  
Data Availability ◽  
Pension Accounting ◽  
Accounting Disclosures ◽  
Pension Asset ◽  
Accounting Rules ◽  
First Time

ABSTRACT: I examine whether firms alter their behavior in response to changes in accounting standards that mandate 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. This study helps to 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 were previously using upward-biased ERRs respond by increasing asset allocation to high-risk securities and/or reducing the ERR assumption. While disclosure requirements arguably create less powerful incentives to alter firm decisions than recognition requirements, these findings offer evidence that firms alter behavior in response to disclosure standards. Data Availability: The data used in this study are publicly available from the sources indicated in the text.

The Economic Consequences of Accounting Standards: Evidence from Risk-Taking in Pension Plans

2017 ◽  
Vol 93 (4) ◽  
pp. 23-51 ◽  
Author(s):  
Divya Anantharaman ◽  
Elizabeth C. Chuk
Keyword(s):  
Risk Taking ◽  
Control Sample ◽  
Accounting Standards ◽  
Pension Plans ◽  
Economic Consequences ◽  
Employee Benefits ◽  
Net Income ◽  
Pension Accounting ◽  
Accounting Model ◽  
Accounting Rules

ABSTRACT Experts have long conjectured that pension accounting rules, by which pension expense depends on a managerial estimate that is directly tied to the riskiness of plan assets (i.e., the expected rate of return, or ERR, on plan assets), encourage risk-taking with pension investments. The recent passage of IAS 19, Employee Benefits (Revised) (hereafter, IAS 19R) eliminates the ERR and replaces it with a managerial estimate unrelated to plan asset riskiness (the discount rate). We demonstrate that a sample of Canadian firms affected by IAS 19R reduces risk-taking in pension investments post-IAS 19R, compared to a control sample of U.S. firms unaffected by IAS 19R. Therefore, removing firms' ability to recognize immediately in net income the expected higher returns from risk-taking (via a higher ERR) reduces their propensity for that risk-taking—providing some of the first empirical evidence on the economic consequences of eliminating the ERR-based pension accounting model.

scholarly journals The Steep Rise Of Gift Card Purchases By The Consumer Is Changing The Method Of Accounting And Reporting Of Gift Card Income By Corporate Retailers

2011 ◽  
Vol 6 (4) ◽  
Author(s):  
Carla Feinson
Keyword(s):  
State Legislatures ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Annual Reports ◽  
Financial Accounting Standards Board ◽  
Font Size ◽  
Publicly Traded ◽  
Accounting Disclosures ◽  
Reporting Requirements ◽  
Gift Card

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The increasing popularity of gift card purchases by consumers and the corresponding increase in gift card sales in the retail industry has triggered changes in accounting disclosures and reporting requirements. The Financial Accounting Standards board, the Security and Exchange Commission and individual state legislatures have all begun to focused their attention on the various issues that are continually coming to the forefront as a result of the continuing rise in gift card transactions. The promulgations of these authoritative bodies have in turn affected the format and wording of the disclosures that are found in the annual reports or SEC filings of publicly held retail companies. An examination of 75 publicly traded retailers not only shows the similarities and differences of how gift card sales have affected disclosures but also how the very nature of gift card contracts and the ramifications of gift card sales has led to so many specific reporting and accounting difficulties.</span></span></p>

A critique on accounting for murabaha contract

2016 ◽  
Vol 7 (3) ◽  
pp. 190-201 ◽  
Author(s):  
Mezbah Uddin Ahmed ◽  
Ruslan Sabirzyanov ◽  
Romzie Rosman
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Economic Consequences ◽  
Islamic Banks ◽  
Content Type ◽  
Time Value Of Money ◽  
Time Value ◽  
Islamic Financial Institutions ◽  
Financial Transactions ◽  
Value Of Money

Purpose The purpose of this paper is to examine the accounting treatment and reporting of a murabaha contract and its implication to the financial statements of Islamic banks. In addition, the paper also explains the implication of time value of money on the measurement of a murabaha contract and the concept of substance over form in recognising financial transactions. Design/methodology/approach This study reviews the accounting treatment and reporting for a murabaha contract as stated in the Financial Accounting Standards (FAS) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the application of a murabaha contract as a financial instrument based on International Financial Reporting Standards (IFRS). Findings The paper finds that, while IFRS-based financial reporting primarily focuses on economic consequences of financial instruments, AAOIFI further takes into consideration the legal structure of the instruments, which are based on Shari’ah precepts. The paper also finds that IFRS-based financial reporting cannot always capture the distinctive structure of the murabaha and, hence, may lack representational financial reporting. However, the IFRS recognizes the substance of a murabaha contract as financing, and the majority of Islamic banks in Malaysia report it as one of financing and not as a trading contract. For measurement, IFRS adopted the concept of time value of money where the profit allocation is based on amortized cost, which is similar to the measurement of conventional loan transactions that apply the concept of effective interest rate. Meanwhile, AAOIFI uses a straight-line basis to allocate the profit of a murabaha contract. Practical implications The forthright discussion and the observations of the paper are expected to assist regulators and standard setters in developing accounting standards that are in convergence but also cater to the unique characteristics of Islamic financial transactions. Originality/value The paper criticizes both accounting treatment of a murabaha contract based on the AAOIFI and IFRS and then suggests an extension of these treatments to be adopted to improve the reporting.

Smoothing Mechanisms in Defined Benefit Pension Accounting Standards: A Simulation Study*

2009 ◽  
Vol 8 (2) ◽  
pp. 113-145 ◽  
Author(s):  
Cameron Morrill ◽  
Janet Morrill ◽  
Kevin Shand
Keyword(s):  
Simulation Study ◽  
Accounting Standards ◽  
Defined Benefit ◽  
Pension Accounting

scholarly journals Footnotes aren't enough: the impact of pension accounting on stock values

2008 ◽  
Vol 7 (3) ◽  
pp. 257-276 ◽  
Author(s):  
JULIA CORONADO ◽  
OLIVIA S. MITCHELL ◽  
STEVEN A. SHARPE ◽  
S. BLAKE NESBITT
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Defined Benefit ◽  
Financial Accounting Standards Board ◽  
Pension Accounting ◽  
Current Accounting ◽  
Portfolio Managers ◽  
Pertinent Information ◽  
Current Reform ◽  
The Impact

AbstractRecent research has suggested that companies with defined benefit (DB) pensions are sometimes significantly misvalued by the market. This is because the measures of pension cost and pension net liabilities embedded in financial statements can provide a very misleading picture of pension finances, if taken at face value. The more pertinent information on pension finances is relegated to footnotes, which may not receive much attention from portfolio managers. Dramatic swings in the financial conditions of large DB plans around the turn of the decade focused attention on pension accounting practices, and growing dissatisfaction with current accounting standards has prompted the Financial Accounting Standards Board (FASB) to launch a project revamping DB pension accounting. Arguably, the increased attention should have made investors wise to the informational problems, thereby eliminating systematic mispricing in recent years. We test this proposition and conclude that investors continued to misvalue DB pensions, inducing sizable valuation errors in the stock of many companies. Our findings suggest that FASB's current reform efforts could substantially aid the market's ability to value firms with DB pensions.

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