Concepts-Based Education in a Rules-Based World: A Challenge for Accounting Educators

2015 ◽  
Vol 30 (4) ◽  
pp. 251-274 ◽  
Author(s):  
Kenneth N. Ryack ◽  
M. Christian Mastilak ◽  
Christopher D. Hodgdon ◽  
Joyce S. Allen
Keyword(s):  
Data Availability ◽  
Classification Task ◽  
Moderation Analysis ◽  
Bright Line ◽  
Classroom Experiment ◽  
Accounting Judgments ◽  
Lease Accounting ◽  
The U.S

ABSTRACT In this paper we discuss the challenges of teaching U.S. GAAP and IFRS side by side. We then focus on one particular challenge of teaching both the more detailed U.S. standards and the less specific IFRS: the likelihood that students will “anchor” on the precise rules in U.S. GAAP when applying the less specific guidelines under IFRS. As a part of this discussion, we report on a classroom experiment designed to test for the presence of anchoring on U.S. GAAP rules when applying IFRS in a lease classification task. Our results indicate that students do anchor on the U.S. GAAP bright-line values for lease accounting when classifying leases under IFRS, primarily when U.S. GAAP rules provide an acceptable quantification of IFRS' less precise guidelines. We do not find that teaching order (i.e., teaching U.S. GAAP first versus IFRS first) directly affects anchoring or lease classification. However, a moderation analysis suggests the interaction between teaching order and anchoring may affect lease classification. Our results suggest that, where possible, instructors may wish to teach principles-based accounting prior to rules-based accounting to mitigate potential anchoring by students and its effect on their accounting judgments. Data Availability: Contact the authors.

Firm Equity Investment Decisions and U.S. GAAP and IFRS Consolidation Control Guidelines: An Empirical Analysis

2017 ◽  
Vol 16 (1) ◽  
pp. 37-57 ◽  
Author(s):  
Allison K. Beck ◽  
Bruce K. Behn ◽  
Andrea Lionzo ◽  
Francesca Rossignoli
Keyword(s):  
Accounting Standards ◽  
Data Availability ◽  
Marginal Effect ◽  
Investment Behavior ◽  
Strategic Investment ◽  
Equity Investment ◽  
Bright Line ◽  
Accounting Scandals ◽  
Control Concept ◽  
The U.S

ABSTRACT It is asserted in the literature that rules-based accounting standards leave room for transaction structuring and that numerous accounting scandals have been linked to companies structuring transactions to avoid bright-line rules. Prior research suggests that bright-line accounting standards motivated companies to avoid the equity method or consolidation accounting by keeping their equity ownership percentages below the key thresholds of 20 percent and 50 percent. However, in recent years, much has changed regarding U.S. GAAP and IFRS principles, especially in terms of the guidelines surrounding business combinations and the concept of control. Now, given the similarity of the U.S. GAAP and IFRS equity investment accounting standards and their more recent emphasis on the control concept, one would not expect either U.S. GAAP or IFRS firms to engage in transaction-structuring behavior, holding concentrated ownership percentages at, or right below, 50 percent. Our study extends prior research by investigating whether this phenomenon (of investment percentages being concentrated right at 50 percent or just below) exists in today's FASB and IASB reporting environments and if so, why? Using ownership data from 2004–2008, we investigate whether firms engage in strategic investment behavior in the vicinity of the 50 percent ownership threshold within the U.S. GAAP and IFRS reporting environments. Interestingly, our univariate results indicate that despite a shift in the accounting standards to a more principles-based definition of control, U.S. GAAP-compliant and IFRS-compliant companies continue to behave in a manner indicative of purposeful transaction structuring around the 50 percent threshold, as evidenced by an unusually heavy concentration of investment at or below 50 percent. This finding could mean that U.S. GAAP- and IFRS-compliant companies (and their auditors) are continuing to anchor to the old bright-line guidance regarding consolidation accounting. We supplement our univariate tests with a regression analysis to examine potential incentives that could explain this investment behavior. We find that leverage has a significant positive marginal effect—increased leverage is associated with a greater likelihood of choosing to keep the investment level at or below 50 percent. Data Availability: The ownership data for this study were obtained from the Bureau van Dijk OSIRIS Ownership database. Data will be made available in accordance with the American Accounting Association's data integrity policy.

The Role of Web Assurance Seals in Nonprofit Giving

2019 ◽  
Vol 34 (2) ◽  
pp. 131-148
Author(s):  
Joseph Canada ◽  
Erica E. Harris
Keyword(s):  
Nonprofit Organizations ◽  
Positive Relationship ◽  
Data Availability ◽  
Charitable Contributions ◽  
The Public ◽  
For Profit ◽  
Donor Support ◽  
The U.S ◽  
The Web

ABSTRACT Using a sample of the 2,000 largest nonprofit organizations in the U.S., we document that the use of web assurance seals is not as commonplace as for-profit e-commerce websites. In particular, we find that only about 14 percent of sample organizations invest in web assurance seals. Those that do provide web seals are larger, less efficient, and spend more on fundraising and information technology. Interestingly, however, our size result weakens for the very largest organizations in our sample. In addition to our contribution to the web assurance literature, we also contribute to donations research in identifying another feature important to donors in the decision to give. Specifically, we find a positive relationship between web seals and donations, indicating that providing this type of assurance attracts more donor support. We believe this is particularly interesting given the relatively few organizations adopting this type of signal in the marketplace for charitable contributions. Data Availability: Data are available from the public sources cited in the text.

Income Conservatism in the U.S. Technology Sector

2011 ◽  
Vol 25 (2) ◽  
pp. 285-314 ◽  
Author(s):  
Uday Chandra
Keyword(s):  
Financial Statements ◽  
Cash Flows ◽  
Data Availability ◽  
Financial Statement ◽  
Litigation Risk ◽  
Technology Sector ◽  
Technology Firms ◽  
Conservative Accounting ◽  
Accounting Accruals ◽  
The U.S

SYNOPSIS I investigate the extent and nature of income conservatism in the financial statement numbers of firms in the U.S. technology sector. Technology firms are predicted to have greater income conservatism than other U.S. firms because they are subject to both higher shareholder litigation risk and conservative accounting standards such as SFAS 2. In the absence of a generally accepted measure of conservatism, I examine several proxies, including loss incidence and accounting rates of return, operating cash flow and nonoperating accrual levels, and regression coefficients from the earnings-return model in Basu (1997). Relative to other companies, technology firms' earnings are characterized by higher (and intertemporally increasing) levels of both conditional and unconditional conservatism. These differences are both statistically and economically significant. Further analysis suggests that technology firms' higher conservatism results primarily from lower operating cash flows due to R&D expensing and more income-decreasing accounting accruals linked to litigation risk. The results of this study are potentially useful to financial analysts, researchers, regulators, managers, and other users of financial statements. Data Availability: Data are available from public sources.

Cognitive Responses to Partitioned Pricing of Consumption Taxes: Consequences for State and Local Tax Revenues

2014 ◽  
Vol 37 (1) ◽  
pp. 183-204 ◽  
Author(s):  
Cynthia Blanthorne ◽  
Michael L. Roberts
Keyword(s):  
Data Availability ◽  
Sales Tax ◽  
Cognitive Responses ◽  
Consumer Spending ◽  
Structural Variations ◽  
Excise Tax ◽  
Tax Revenues ◽  
State And Local ◽  
Consumption Taxes ◽  
The U.S

ABSTRACT How do taxpayers respond cognitively to add-on sales taxes versus all-inclusive excise taxes? If structural variations produce cognitive differences, then do the differences affect buying behavior? These are important questions because consumer spending drives the U.S. economy and directly determines the amount of tax revenues collected from consumption taxes. If the negative opinion that people have about taxes (Tax Foundation 2009) increases the saliency of the tax, then an add-on sales tax might decrease consumer spending more than an all-inclusive excise tax pricing structure. Instead, results suggest that demand is higher when the add-on component is a sales tax as compared to an excise tax that is embedded into the total price. The effects on demand are even more pronounced and people recall lower prices when the add-on sales tax is presented as a percentage of the base price—as is generally the case in the U.S.—rather than as an additional currency component. Data Availability: Contact the authors.

Values of Participants in Behavioral Accounting Research: A Comparison of the M-Turk Population to a Nationally Representative Sample

2018 ◽  
Vol 31 (1) ◽  
pp. 97-117 ◽  
Author(s):  
William D. Brink ◽  
Lorraine S. Lee ◽  
Jonathan S. Pyzoha
Keyword(s):  
Labor Markets ◽  
Data Availability ◽  
World Values Survey ◽  
Behavioral Accounting ◽  
The World ◽  
Online Labor Markets ◽  
Nationally Representative ◽  
Online Labor ◽  
Amazon's Mechanical Turk ◽  
The U.S

ABSTRACT The external validity of conclusions from behavioral accounting experiments is in part dependent upon the representativeness of the sample compared to the population of interest. Researchers are beginning to leverage the availability of workers via online labor markets, such as Amazon's Mechanical Turk (M-Turk), as proxies for the general population (e.g., investors, jurors, and taxpayers). Using over 200 values-based items from the World Values Survey (WVS), the purpose of the current study is to explore whether U.S. M-Turk workers' values are similar to those of the U.S. population. Results show for the majority of items collected, M-Turk participants' values are significantly different from the WVS participants (e.g., values related to trust, ethics, religious beliefs, and politics). We present select items and themes representing values shown to influence judgments in prior research and discuss how those values may affect inferences of behavioral accounting researchers. Data Availability: Data are available from the authors upon request.

Capital Structure, Earnings Management, and Sarbanes-Oxley: Evidence from Canadian and U.S. Firms

2013 ◽  
Vol 27 (2) ◽  
pp. 301-318 ◽  
Author(s):  
Kelly E. Carter
Keyword(s):  
Capital Structure ◽  
Earnings Management ◽  
Data Availability ◽  
Cost Of Debt ◽  
Equity Financing ◽  
Percentage Points ◽  
Sarbanes Oxley ◽  
The U.S ◽  
Jel Classifications

SYNOPSIS I examine Sarbanes-Oxley's (SOX) effect on capital structure. I find that SOX is associated with higher long-term debt ratios, as firms listed in the U.S. raise their long-term debt ratios by 2 to 3 percentage points. This finding is consistent with the idea that, although the reduction in information asymmetry associated with SOX could prompt managers to increase equity financing, debt is still safer and less costly than equity in the SOX era. Further analysis shows that the increase in debt occurs in the two quarters prior to SOX, suggesting that firms anticipate a higher cost of debt after SOX and acquire debt while it is relatively cheap. Also, firms that heavily (lightly) manage earnings prior to SOX use less (more) debt after SOX. This result is consistent with the view that firms that aggressively manage earnings before SOX reveal intrinsically weaker earnings after SOX, casting doubt on those firms' ability to repay debt and relegating those firms to issue equity for financing purposes. JEL Classifications: G32; G38. Data Availability: Data available upon request.

R2 and Idiosyncratic Risk Are Not Interchangeable

2014 ◽  
Vol 89 (6) ◽  
pp. 2261-2295 ◽  
Author(s):  
Bin Li ◽  
Shivaram Rajgopal ◽  
Mohan Venkatachalam
Keyword(s):  
Stock Return ◽  
Systematic Risk ◽  
Idiosyncratic Risk ◽  
Information Environment ◽  
Data Availability ◽  
Return Volatility ◽  
Stock Return Volatility ◽  
Independent Variable ◽  
Cross Country ◽  
The U.S

ABSTRACT A growing literature investigates the association between stock return variation and several aspects of information and governance structures, in both a cross-country setting and a cross-firm setting within the U.S. Papers use either idiosyncratic stock return volatility or R2 as interchangeable measures of firm-specific return variation but report inconsistent results. An important reason for the differing interpretations is the assumption about whether lower R2 (or higher ) captures firm-specific news or noise. We document that higher (or equivalently, lower R2) resembles noise. In addition, we show, analytically and empirically, that different results obtain when using R2 or because the systematic risk inherent in the R2 metric is also correlated with the independent variable of interest. Therefore, we recommend that when assessing the association between R2 (or ) and some independent variable, researchers (1) control for elements of systematic risk and (2) triangulate their findings with other measures of information environment. Data Availability: The data in this study are available from commercial providers, e.g., WRDS, Compustat, CRSP, I/B/E/S.

XBRL Mandate: Thousands of Filing Errors and So What?

2013 ◽  
Vol 27 (1) ◽  
pp. 61-78 ◽  
Author(s):  
Hui Du ◽  
Miklos A. Vasarhelyi ◽  
Xiaochuan Zheng
Keyword(s):  
Financial Reporting ◽  
Securities And Exchange Commission ◽  
Data Availability ◽  
Regulatory Body ◽  
Data Reporting ◽  
Interactive Data ◽  
Disclosure Requirement ◽  
A Company ◽  
The U.S

ABSTRACT Since the mandate by the U.S. Securities and Exchange Commission (SEC) to begin interactive data reporting in June 2009, according to XBRL Cloud, an XBRL product and service provider, more than 4,000 filing errors have been identified. We examine the overall changing pattern of the errors to understand whether the large number of errors may hamper the transition to interactive data reporting. Using a sample of 4,532 filings that contain 4,260 errors, we document a significant learning curve exhibited by the XBRL filers. Specifically, we find that the number of errors per filing is significantly decreasing when a company files more times, suggesting that the company filers or the filing agents many companies use learn from their experiences and therefore the future filings are improved. Our findings provide evidence to encourage the regulatory body, the filers, and the XBRL technology supporting community to embrace the new disclosure requirement in financial reporting. The significantly decreased error pattern also helps address the information users' concerns regarding the data quality of XBRL filings. Data Availability: Data are publicly available from the sources identified in the study.

Investor Perceptions of Potential IFRS Adoption in the United States

2012 ◽  
Vol 88 (2) ◽  
pp. 577-609 ◽  
Author(s):  
Philip P. M. Joos ◽  
Edith Leung
Keyword(s):  
United States ◽  
Stock Market ◽  
Market Reaction ◽  
The United States ◽  
Data Availability ◽  
Current Debate ◽  
Litigation Risk ◽  
Ifrs Adoption ◽  
Stock Market Reaction ◽  
The U.S

ABSTRACT This paper examines the stock market reaction to 15 events relating to IFRS adoption in the United States. The goal is to assess whether investors perceive the switch to IFRS as beneficial or costly. Our findings suggest that investors' reaction to IFRS adoption is more positive in cases where IFRS is expected to lead to convergence benefits. Our results also indicate a less positive market reaction for firms with higher litigation risk, which is consistent with investors' concerns about greater discretion and less implementation guidance under IFRS for these firms. Overall, the findings are relevant to the current debate on IFRS adoption in the U.S. and highlight the importance of convergence to investors. Data Availability:  All data are publicly available from the sources indicated in the paper (see Appendices A and B).

Auditors' Risk Assessments: The Effects of Elicitation Approach and Assertion Framing

2015 ◽  
Vol 28 (2) ◽  
pp. 75-84 ◽  
Author(s):  
Theodore J. Mock ◽  
Hironori Fukukawa
Keyword(s):  
Experimental Study ◽  
Data Availability ◽  
Risk Assessments ◽  
Audit Evidence ◽  
Auditor Judgments ◽  
The Difference ◽  
The U.S

ABSTRACT This experimental study replicates, using U.S. audit practionioners, Fukukawa and Mock (2011), who investigated the effects of probability-based versus belief-based risk assessments and positive versus negative assertions on auditor judgments. Most results are consistent with the prior study: (1) significant differences between probability-based and belief-based risk assessments are observed; (2) assessed risks are significantly higher and relatively more skeptical when negatively versus positively stated assertions are provided; and (3) when the belief-based assessments are transformed into probabilities using a method proposed by Cobb and Shenoy (2006) and compared with the probability-based risk assessments, the difference is not statistically significant. Some results do not replicate, particularly when the risk assessments after audit evidence is provided are examined. However, in general, the U.S. results are more consistent with expectations. Overall, this study corroborates the key results of Fukukawa and Mock (2011). Data Availability: Contact the first author for data for use by others interested in extending or replicating results.

Sign in / Sign up

Export Citation Format

Share Document