Capital Market Response to SFAS Nos. 8 and 52

1993 ◽  
Vol 8 (3) ◽  
pp. 313-329 ◽  
Author(s):  
Zabihollah Rezaee ◽  
R. Phil Malone ◽  
Russell F. Briner
Keyword(s):  
Capital Market ◽  
Foreign Currency ◽  
Market Reaction ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Market Response ◽  
Financial Accounting Standards Board ◽  
Managerial Decisions ◽  
New Information ◽  
The Capital Market

This study investigates the capital market response to Financial Accounting Standards Board (FASB) policy deliberations on foreign currency translations (FCT) by concentrating on five specific events associated with such deliberations. Examining the possible effects of these events, we argue that a market response to FASB policy deliberations on FCT could result from the effects of new information or from the effects of expected changes in managerial decisions. The tests utilized in this paper are designed to detect effects of both types. Generally, no apparent significant market reaction to three of the five events was observed. We found an apparent weak but significant reaction to one event and inconclusive results for a fifth.

scholarly journals Comprehensive Income Options: A Detriment To Transparency

2010 ◽  
Vol 9 (8) ◽  
Author(s):  
Brian D. Fitzpatrick ◽  
Sudhakar S. Raju ◽  
Anthony L. Tocco
Keyword(s):  
Performance Studies ◽  
Foreign Currency ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
Corporate Managers ◽  
Nonprofessional Investors ◽  
Comprehensive Income ◽  
Other Comprehensive Income

The Financial Accounting Standards Board (FASB) in 1997 compromised its belief that comprehensive income (CI) should be listed either in a combined statement of net income and CI or in a separate statement of CI and allowed corporations to choose using the statement of changes in stockholders’ equity (SCSE).  Of course, the latter option implies just as Jordan and Clark (2002) suggest, that CI is not a measure of financial performance.  Studies incorporating professional analysts by Hirst and Hopkins (1998) and a study of nonprofessional investors by Maines and McDaniel (2000) both conclude that format presentation matters and behaviors can be affected.  We believe that FASB should revisit the format structure of CI and eliminate the SCSE option, which was their initial intent before they compromised with corporate managers in 1997.  In addition, we believe that all items of other comprehensive income (OCI) – foreign currency translation adjustment, pension value adjustments and adjustment to securities-for-sale should be presented on an after-tax basis only in order to prevent investors from being forced to comb through the footnotes.

Does Income Statement Placement Matter to Investors? The Case of Gains/Losses from Early Debt Extinguishment

2014 ◽  
Vol 89 (6) ◽  
pp. 2021-2055 ◽  
Author(s):  
Eli Bartov ◽  
Partha S. Mohanram
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Market Response ◽  
Sample Period ◽  
Experimental Setting ◽  
Financial Accounting Standards Board ◽  
Item Position ◽  
Income Statement ◽  
Quasi Experimental ◽  
Jel Classifications

ABSTRACT Does the placement of a line item in the income statement matter to investors? The passage of Statement of Financial Accounting Standards (SFAS) No. 145 (Financial Accounting Standards Board [FASB] 2002) affords a quasi-experimental setting to answer this question, because pre-SFAS No. 145, gains/losses from early debt extinguishments were reported below the line, while post-SFAS No. 145, they were reported above the line. After controlling for other identified changes that occur during our sample period, we find that, pre-SFAS No. 145, the market does not respond to these gains/losses, whereas post-SFAS No. 145, it does. This suggests that the market response to gains/losses is associated with their placement in the income statement. Our findings contribute to the literature on the importance of income statement presentation by demonstrating that a line-item position in the income statement has important valuation implications. JEL Classifications: G12; G14; M41.

scholarly journals Foreign Currency Translations May Cause Erratic Equity Positions

2011 ◽  
Vol 7 (4) ◽  
pp. 104 ◽  
Author(s):  
James A. Schweikart ◽  
Robert H. Sanborn
Keyword(s):  
Exchange Rates ◽  
Foreign Currency ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Accounting Profession ◽  
New Guidelines

Financial Accounting Standards Board Statement No. 52 (FASB 52) replaced FASB 8 in 1981 and the new guidelines have been accepted widely for providing noncontroversial and adequate disclosure of foreign currency matters. The nine years since the adoption of FAS 52 have seen erratically fluctuating exchange rates, however, and the equity positions of many firms have responded accordingly. This article provides an investigation into the erratic equity positions that may have been caused by the new guidelines, and recommends actions that may avoid future embarrassments for the accounting profession.

“Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism” by Karthik Ramanna: A Comment on Ideological Capture

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Vera Palea
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Financial Stability ◽  
Accounting Standards ◽  
Fair Value ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Fair Value Accounting ◽  
Balance Sheets ◽  
Accounting Practice

Abstract Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opposed to a capital market efficiency perspective. Financialized accounting facilitates the valuation of a range of asset classes to a market value. These asset valuations are speculative in nature. FVA accounting imports speculative capital market risk onto company balance sheets and this can threaten company financial stability and viability for a going concern.

AN ACCOUNTANT'S EDUCATION

2003 ◽  
Vol 30 (1) ◽  
pp. 155-196 ◽  
Author(s):  
George J. Staubus
Keyword(s):  
20Th Century ◽  
Accounting Standards ◽  
Financial Accounting ◽  
University Of Chicago ◽  
Financial Accounting Standards Board ◽  
Decision Usefulness ◽  
Market Simulation ◽  
Broad Field ◽  
The University

This is a review of how various experiences in my career have contributed to my understanding of accounting. I recall the circumstances surrounding several of my efforts towards the development of accounting theories, viz. (1) decision-usefulness theory, (2) activity costing, and (3) market simulation accounting, as well as my excursion into (4) market association research in seeking to validate decision-usefulness theory and (5) a search for the effects of firms' economic environments on the development of enterprise accounting in the 2nd millennium, C.E. I give my impressions of several of the important players in the evolution of accounting thought in the 20th century with whom I was closely associated, such as Vatter, Moonitz, Chambers, and Sterling, as well as other prominent figures in the broad field of accounting. Some of my gains from associations with three institutions—the American Accounting Association, The University of Chicago, and the Financial Accounting Standards Board—are identified. I conclude with a few summary thoughts on what I have learned.

THE EVOLUTION OF THE RELATIONSHIP BETWEEN THE US FINANCIAL ACCOUNTING STANDARDS BOARD AND THE INTERNATIONAL ACCOUNTING STANDARD SETTERS: 1973–2008

2012 ◽  
Vol 39 (1) ◽  
pp. 1-51 ◽  
Author(s):  
Robert J. Kirsch
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Working Relationships ◽  
International Accounting ◽  
International Accounting Standards ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Staff Members ◽  
The Us ◽  
The Relationship

ABSTRACT Utilizing archival materials as well as personal interviews and correspondence with personnel of the Financial Accounting Standards Board (FASB) and International Accounting Standards Committee/Board (IASC/B), including former Board chairmen and staff members, this paper examines the development of the working relationships between the FASB and the IASC/B from their earliest interactions in 1973 through the transformation of the IASC into the IASB and the Convergence Program rooted in the 2002 Norwalk Agreement up to 2008.

Selecting Railway Investments in 1890s America

2017 ◽  
Vol 44 (1) ◽  
pp. 77-93
Author(s):  
Joel E. Thompson
Keyword(s):  
Financial Reporting ◽  
Accounting Information ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Investment Strategies ◽  
Financial Accounting Standards Board ◽  
Accounting Data ◽  
Rational Decisions

ABSTRACT The purpose of financial reporting is to provide information to investors and creditors to help them make rational decisions (Financial Accounting Standards Board [FASB] 2010). Tracing the development of investors' methods should help with understanding the role of financial accounting. This study examines investment practices involving railways in 1890s America. As such, it furthers our knowledge about the development of investment methods and their necessary information. Moreover, it shows that as investment methods grew in sophistication, there was an enhanced demand for greater comparability in accounting data to make meaningful analyses. Competing investment strategies, largely devoid of accounting information, are also discussed.

Viewing the 1996 FAF Restructuring as Policy Making without a Formal Due Process

2002 ◽  
Vol 16 (3) ◽  
pp. 199-214 ◽  
Author(s):  
Paul B. W. Miller
Keyword(s):  
Financial Reporting ◽  
Policy Making ◽  
Due Process ◽  
Accounting Standards ◽  
Sole Source ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Perceived Threat ◽  
Financial Accounting Standards Board ◽  
Public Accounting

In 1996, a major financial reporting controversy emerged, escalated, and was resolved without substantial exposure or a formal due process. Specifically, a committee of the Financial Executives Institute (FEI) sent a letter to the chair of the Financial Accounting Foundation (FAF) asserting that the Financial Accounting Standards Board (FASB) “process is broken and in need of substantive repair.” When Securities and Exchange Commission (SEC) Chair Arthur Levitt determined that neither FAF nor public accounting leaders were dealing with the FEI proposals to his satisfaction, he acted to defeat this perceived threat to FASB's independence, focusing on the composition of the FAF. In response, the FAF trustees resisted because they viewed his intervention as a threat to FASB's independence. When the trustees did not voluntarily change, Levitt proposed reconsidering Accounting Series Release No. 150, which designates FASB as the sole source of GAAP for SEC filings. Eventually, Levitt prevailed. This paper describes this intervention as a case of policy making without a formal due process and adds to the already weighty evidence that accounting standards are political.

Divestiture and Its Market Reaction in a Consolidating Industry: The Global Brewing Industry

2021 ◽  
pp. 1-21
Author(s):  
Ludwig Erl ◽  
Florian Kiesel
Keyword(s):  
Mergers And Acquisitions ◽  
Capital Market ◽  
Market Reaction ◽  
Market Performance ◽  
Abnormal Returns ◽  
Brewing Industry ◽  
Efficiency Gains ◽  
Market Values ◽  
Jel Classifications ◽  
The Capital Market

Abstract This study provides a perspective on the market performance of divestitures in the global brewing industry. In 2018, the five largest players accounted for 60% of the global beer volume. We analyze to what extent the capital market values divestitures in an industry where players usually seek efficiency gains and growth through mergers and acquisitions. Based on a sample of 61 divestiture intent announcements in the period from 1999–2018, this study shows that publicly listed brewing groups experience significant positive abnormal returns of about 1.4%. We measure the influential effect of success determinants concerning the underlying industry, the divested business, the divestiture structure, and the divestor itself. (JEL Classifications: G14, G34, L25, Q14)

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